From oil to green energy
Baku's role in global energy transition

ANALYTICS  07 July 2023 - 14:10

The oil and gas crisis is forcing the European Union to accelerate its actions as part of the global energy transition by 2030. That is, accelerating the development of renewable energy sources (RES), expanding the use of electric and hydrogen vehicles, introducing energy efficiency systems, etc. Azerbaijan, which is actively cooperating with the EU on energy security and transition to green energy, follows the same path.

Aspects of oil production regulation and prospects of the energy transition were discussed on July 5-6 in Vienna at the 8th international OPEC seminar "Towards Sustainable and Inclusive Energy Transition", which was attended by Azerbaijani Energy Minister Parviz Shahbazov.

The 8th international seminar of the Organisation of the Petroleum Exporting Countries (OPEC), organised in the Austrian Imperial Hofburg Palace in Vienna, is one of the landmark events on the energy track. The oil cartel organised the first such global seminar in 1969, but after a pause of more than thirty years, the international forums resumed only in 2001.

Subsequently, six more seminars took place at intervals of several years, the most recent of which was organised in Vienna in 2018 under the theme "Oil Cooperation for a Sustainable Future”. The event attracted a record 950 participants from more than 50 countries. The next workshop was scheduled for 2021 but had to be postponed due to quarantine restrictions during the coronavirus pandemic.

And so, the two-day forum on the theme "Towards a Sustainable and Inclusive Energy Transition" kicked off again, with 11 sessions scheduled to discuss various topics related to the global development of the energy industry.

"OPEC+ will continue to address and respond to energy challenges and the organisation's actions will become more effective and transparent," Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman said in his remarks during a special introductory session of the seminar.

Efforts to balance supply and demand in the energy market were the main focus of the first day's discussions, while individual presentations also focused on ensuring the stability of energy markets and the challenges of financing them. Several OPEC and OPEC+ ministers took part in the discussions, including the heads of energy agencies in Saudi Arabia and the UAE and the heads of energy companies such as Italy's Eni, Saudi Arabia's Saudi Aramco, France's TotalEnergies, and Austria's OMV. The report of the chairman of the 28th Conference of the Parties to the UN Framework Convention on Climate Change (COP28) was also heard.

The leitmotif of the speeches of the cartel members and oil-producing countries participating in the OPEC+ agreement was a call for other producing countries, as well as large consumers of hydrocarbons to join the steps taken by the alliance.

The president of this year's OPEC conference, Equatorial Guinea's Minister of Mines and Hydrocarbons Antonio Ondo, voiced a similar opinion: "Increasing the number of OPEC+ participants would add transparency and predictability to the market. Apparently, this position was welcomed by most participants of the seminar: many states, which in the past took a neutral position on the issue of optimising production to stabilise the oil market, are now increasingly inclined to the principled position of OPEC+ to reduce it.”

As the head of the Saudi delegation Prince Abdulaziz bin Salman noted, Russia is very active in this matter: "OPEC was able to verify data on oil production in Russia on the basis of information from seven independent sources, and the organisation will continue to do so every month. Russia's decision to reduce oil exports by 500,000 barrels per day (bpd) since August was voluntary on its part. No one is giving orders to anyone, everyone makes such decisions themselves".    

At the same time, as UAE Energy Minister Suhail Al-Mazroui said, Saudi Arabia announced a voluntary reduction of oil production not for itself and OPEC+ countries, but for the entire oil market.

"The demand for hydrocarbons is increasing, and there is still a long way to go before the demand plateau that is being talked about - the demand for oil is growing, and there is not enough industry investment," the minister stressed.

On July 5, Azerbaijani Energy Minister Parviz Shahbazov also attended the seminar and joined the "Market Stability and Energy Security" ministerial session. The Azerbaijani minister also held a number of bilateral meetings, including a conversation with European Commissioner for Energy Kadri Simson, Chairman and CEO of Total Energies Patrick Pouyanne.

The Azerbaijani minister clearly expressed his position on the key issue of optimising the oil market and attracting investments into this sector.

"We have to think about the future of the organisation and the future of the oil industry. It is necessary to take into account the issues of investments in the industry, as they are decreasing. We need a broader discussion," Shahbazov said, stressing that at the peak of the industry, global investments in the sector were $900 billion a year, while in 2021 they dropped to $300 billion.

Azerbaijan, as a member country of the OPEC+ agreement and a strategic energy supplier to Europe, is ready to contribute to the energy dialogue, the head of the country's energy ministry wrote on his Twitter page.

"During the OPEC seminar we spoke about the need for diversification and investment in exploration and production for sustainable energy security and a fair energy transition," Shahbazov summarised the results of the first day of the seminar.

As one of the key events in the international energy calendar, this OPEC seminar is designed to shape the future of the global energy industry and its transition to sustainability and address the effects of climate change. According to the seminar program, the second day will focus on the global energy transition, eradicating energy poverty and diversifying economies in the face of climate change, and technologies for reducing greenhouse gas emissions. High-level roundtables, ministerial sessions, and exhibitions will be organised to discuss these topics during the seminar.

It should be noted that Azerbaijan has much to be proud of in the development of sustainable and balanced energy, including those based on alternative energy sources. In particular, on December 17, 2022 an intergovernmental agreement "On Strategic Partnership in the Development and Transmission of Green Energy" was signed which provides the development of wind power generation in the Azerbaijani sector of the Caspian Sea and the laying of electric cables on the Black Sea bed towards South Europe.

At the initial stage via this route, it is planned to transmit 3-4 GW of electric energy but in the long-term prospects, the country has the potential to increase alternative generation up to about 25 GW. Azerbaijan also carries out joint research in the field of "green" hydrogen production and its export to Europe by means of the South Caucasus Gas Pipeline System.

Azerbaijan’s efforts in the development of green energy have not gone unnoticed at the international level. Thus, in a recently published report of the World Economic Forum (WEF) "Promotion of efficient energy transition – 2023,” Azerbaijan has risen to 32nd place among 120 countries on the level of measures taken for transition to sustainable and efficient energy system.

WEF report stresses that Azerbaijan is among the countries that have demonstrated the highest progress for the last 10 years in environmental sustainability and energy diversification. As a leading producer of energy resources, the country is strategically leveraging its vast potential by investing heavily in the renewable energy sector - wind and solar energy, reducing dependence on fossil fuels and diversifying its energy portfolio. As a major actor in global energy security, the country has surpassed the global average and, according to WEF experts, is among the nations with the highest progress on the Energy Transition Index from 2022 to 2023.

According to the energy transition index estimates, as of 2023, Azerbaijan ranked 62nd, with a score of 69.6 on the index of productivity in this area, and 50.7 on energy transition readiness. In the aggregate, Azerbaijan took the leading position in the WEF ranking table among the countries of Central Asia, South Caucasus and the CIS region as a whole. For comparison, in this report of the World Economic Forum Georgia was ranked 62nd, Ukraine 64th, Tajikistan 73rd, Kazakhstan 76th and Kyrgyzstan 91st.

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