Azerbaijan, Türkiye team up to boost gas, electricity projects
Review by Caliber.Az

ANALYTICS  01 April 2023 - 11:06

Being a country with a surplus energy balance, Azerbaijan has been recently modernising its generating and transit infrastructure to expand export of energy resources to Georgia, Türkiye, and the EU member states. At the same time, Baku and Ankara are cooperating to ensure the energy independence and security of Azerbaijan’s Nakhchivan Autonomous Republic. The supply of gas to Nakhchivan through the Igdir-Nakhchivan gas pipeline, of which the construction of the Turkish section will begin soon, will be the most important step in this regard.

Azerbaijani Energy Minister Parviz Shahbazov has recently tweeted about the progress of this project after a meeting with Turkish colleagues in Hungary, where a meeting of energy ministers of the Organisation of Turkic States was held. The Azerbaijani Energy Ministry and the Turkish Ministry of Energy and Natural Resources signed a Memorandum of Understanding in Ankara on the supply of natural gas to the Nakhchivan Autonomous Republic more than two years ago. The agreement dated December 15, 2020, envisaged the participation of the state oil companies of the two countries – the State Oil Company of the Azerbaijan Republic SOCAR and BOTAS Petroleum Pipeline Corporation in the construction of an 85-kilometre branch of the Igdir-Nakhchivan gas pipeline with a capacity of 500 million cubic metres of gas per year.

The technical aspects of the gas pipeline project were worked out later. Its route was specified and feasibility studies were developed. The beginning of construction work was periodically announced by the media outlets of both countries in late 2021 and in 2022, in particular, in early 2022, Turkish media outlets mentioned the investments worth 185 million Turkish liras or $9.6 million (in prices for that period) indicated by Ankara. The information about the construction of a gas distribution station in Diluju (Igdir) within this project, through which it will be possible to ensure a stable balance of gas flow through the pipeline to consumers in Nakhchivan went viral.

However, due to several objective circumstances, a decision was made to begin implementing the pipeline project only this year. The realisation of this important project was once again discussed in Hungary, where a meeting of energy ministers of the Organisation of Turkic States has been recently held.

“Together with my colleague Fatih Donmez in Budapest, we assessed our activity on projects that will strengthen energy cooperation between our countries. The gas transit through Türkiye, an increase in the capacity of the Trans Anatolian Natural Gas Pipeline (TANAP) as part of the expansion of the Southern Gas Corridor (SGC), new opportunities for cooperation between SOCAR and BOTAS, as well as Turkish Petroleum Corporation (TPAO) in exploration and production of hydrocarbon fields were discussed during the meeting. The prospects for the implementation of the Igdir-Nakhchivan gas pipeline project were also discussed. The construction of the Turkish section of this gas pipeline is expected to be launched soon,” Shahbazov tweeted.

Why is the Igdir-Nakhchivan gas pipeline project so important for Azerbaijan?

Firstly, its implementation will completely free Nakhchivan of energy dependence, while today it is mainly provided with gas by Iran upon a mutual offset system. Azerbaijan supplies the corresponding volumes of gas to Iran through a gas pipeline in southern Azerbaijan. However, despite the perfect swap schemes over many years, today, due to complex geopolitical differences in the region, Azerbaijan cannot take risks, focusing only on the Iranian vector in Nakhchivan’s gas supply. After the Igdir-Nakhchivan gas pipeline is commissioned, it will be possible to supply 1.5 million cubic metres of gas per day from friendly Türkiye, which will fully provide enterprises and 500,000 people of Nakhchivan with gas.

Secondly, another important advantage of the implementation of the Igdir-Nakhchivan project is the development of its energy capacities in Nakhchivan, which will bring additional income to the region from energy exports in the future. In particular, this refers to a promising project proposed by several Turkish companies and envisaging the construction of a gas turbine power plant with a capacity of 550 MW in Nakhchivan, which will allow exporting electricity from Nakhchivan to Türkiye in the future.

Such a project is real, taking into account that Nakhchivan has been able to greatly provide itself with electricity due to the recent development of renewable energy sources and the construction of hydroelectric power plants. Moreover, this region has a huge potential for the development of the electric power industry and the transit of electricity. The high-voltage power lines and powerful substations, which will connect the autonomy with the energy complex being created in Karabakh and East Zangazur, consisting of small hydroelectric power stations, and solar and wind stations, are planned to be built here.

This system will make it possible to transport electricity in the direction of Türkiye and other regional countries. In particular, the first processes have been launched in the summer of 2022 to build an appropriate transmission infrastructure along the Zangazur corridor which is been created. The 330/110-kilovolt substation "Jabrayil", which is the biggest one in the region, is being built. Later another 255-kilometre transmission line will be laid through the Zangazur corridor to the Nakhchivan Autonomous Republic, where the "Shakhtakhti" substation of a similar capacity will be built. Another substation will be built on the border between Nakhchivan and Türkiye to convert 330 kilovolts to 400 kilovolts, from where a 230-kilometre double-circuit 400-kilovolt power transmission line will stretch to Türkiye.

The first transit energy bridge between Azerbaijan, Georgia and Türkiye was created about seven years ago, its capacity allows for maintaining the level of supplies from 700 MW or more. Azerenergy company has managed to supply electricity through the Turkish energy system to Greece, Romania, Bulgaria and Hungary upon swap system since May 2019. During the COVID-19 pandemic, these operations were suspended, but Azenergy's subsidiary in Türkiye, GlobalPower, resumed swap supplies to Bulgaria and Greece in 2021. Over time, this trend will become a key one. Azerbaijan, in partnership with Türkiye, plans to expand exports to other EU member states in 2024.

After the commissioning of the mentioned substations and power lines, Azerbaijan and Türkiye will receive the second powerful energy bridge for the transit of electricity with transhipment through Nakhchivan. Moreover, Nakhchivan not only will serve as a transit territory but will also be able to add excess electricity generated in the alternative energy segment for export. President of Azerbaijan Ilham Aliyev noted in early 2023 that Nakhchivan plans to build a solar station with a capacity of 500 MW shortly.

Five small and medium-sized hydroelectric power stations operate here today, as well as two solar power plants in the Babak and Julfa districts. Several other renewable energy facilities are also planned to be built. This potential not only will fully cover Nakhchivan’s internal needs soon but will also allow exporting excess "green" electricity. Moreover, taking into account a powerful transit infrastructure between Azerbaijan and Türkiye, the construction of a gas turbine power plant with a capacity of 550 MW, operating on gas that will begin to flow from Igdir, will also be commercially justified in Nakhchivan.

The key participants in these processes do not intend to delay the implementation of the mentioned projects.

The large-scale wind and solar energy projects, which will be implemented with international investors in Nakhchivan have been recently discussed at a meeting of energy ministers of the member states of the Organisation of Turkic States in Budapest. The possibility of exporting a huge volume of the generated electricity to the Turkish market was also considered.

Caliber.Az