Azerbaijan boosting its role in natural gas supplies to Europe
"Blue fuel" reaches Danube banks

ANALYTICS  31 July 2023 - 15:19

Azerbaijan has been stepping up economic cooperation with Eastern and Southern European countries in recent years. The priority of this vector for Baku is quite justified: it is this region that should become the basis of a long-term export strategy for the supply of "blue fuel" through the "Southern Gas Corridor" (SGC). Azerbaijani gas has already been exported to Italy, Greece, and Bulgaria for two and a half years, and from January 2023, supplies to Romania have been established as well. In the near future, the number of EU countries receiving Azerbaijani gas will increase significantly. Hungary has become the next country on this list: recently the State Oil Company of Azerbaijan (SOCAR) started pumping the first 50 million cubic metres of gas into Hungarian gas reservoirs.

The energy crisis in Europe caused by the war in Ukraine and aggravated by the sanctions standoff between the collective West and Russia over the past year and a half has clearly demonstrated the importance of hydrocarbons for the energy security of the Old World.

Over the past year or so, the EU has been doing much to mitigate the effects of the energy crisis: liquefied natural gas terminals are being built in EU ports, natural gas purchases from African countries are being increased, capacity in the nuclear and alternative energy sector is being boosted, etc.

Last April, the EU also established an energy platform designed to jointly procure natural gas and LNG to ensure the security of supply and EU access to cheap energy, aggregation of demand, and more efficient use of gas infrastructure. The result of this work has been the greater filling of Europe's underground gas storage facilities (UGS) ahead of the heating season - today they are already around 80 per cent full.

"Although the volume of accumulated gas does not cover all the needs of the EU countries, this gives us confidence that we will be able to survive the winter without Russian gas if its supply is stopped by Moscow. We are well prepared and ready for any scenario - the EU is united and we have reliable partners we can trust," EU Energy Commissioner Kadri Simson said recently.

It is obvious that one of Europe's most reliable partners in diversifying natural gas supplies is Azerbaijan, which signed a Memorandum of Strategic Energy Partnership with the EU in July 2022. According to this document, Azerbaijan's natural gas exports are to double to more than 20 billion cubic metres by the end of 2027, which will increase gas supply coverage to new countries. To this end, the construction of new interconnectors, modernisation of compressor stations and gas distribution networks in the countries of South-Eastern Europe, where Azerbaijani gas is yet to reach, has recently been accelerated. According to some forecasts, by 2030 Azerbaijan will be able to enhance gas supplies, meeting Europe's gas demand from the current 2% to about 10-15%.

All this has become possible largely thanks to the SGC project implemented jointly with Türkiye and the EU, which created a 3,500 kilometre integrated pipeline system that has become a historic achievement and an important tool for ensuring Europe's energy security and energy diversification in general. Today Azerbaijani "blue fuel" is exported to Italy, Greece, Bulgaria and Romania, and this year these supplies are planned to reach about 12 billion cubic metres. In particular, according to TAP AG, the operator of the Trans Adriatic Pipeline (TAP), which is part of the South Gas Pipeline System, 6.3 billion cubic metres of Azerbaijani natural gas has already been pumped through the TAP system in January-June this year. Five billion cubic metres of them were sent to Italy, 0.4 billion cubic metres to Greece and about 0.8 billion cubic metres to Bulgaria. A total of 25.8 billion cubic metres of gas has been transported through TAP to European countries since the launch of this gas pipeline system on December 31, 2020, until now.

"Over the last year and a half, more than 10 countries have approached Azerbaijan with a request to either increase gas supplies or to start gas supplies. And I am confident that the geography of our exports will expand because the demand for Azerbaijani gas is growing and we want to meet the needs of all our friends, of course, coordinating the requests with the market opportunities," Azerbaijani President Ilham Aliyev said. The head of state added that in case of completion of all works according to the schedule and construction of planned interconnectors and other infrastructure in time, Azerbaijan expects to start gas supplies to Hungary and Serbia this year.

It should be noted that on June 2, 2023, SOCAR and its partner MVM CEEnergy, Hungary's largest wholesale natural gas trader, signed a contract for the transportation of 100 million cubic metres of gas. The subject of the said contract is a one-off transaction and existing infrastructure will be used for deliveries. Initially, the deliveries were expected to start in the fourth quarter of this year, but the realisation of the undertaking has been accelerated.

"There is good news: the Azerbaijani state oil company SOCAR has started pumping the first batch of 50 million cubic metres of gas into Hungarian gas storage facilities in accordance with the contract," Hungarian Foreign Affairs and Trade Minister Péter Szijjártó wrote on his Facebook page on Friday. - For the last year and a half, Europe has been constantly facing a serious energy crisis - prices have soared due to sanctions and the usual delivery routes are not working. Nevertheless, Hungary's energy supply has remained stable throughout".

As the Hungarian Foreign Minister noted earlier, negotiations on further cooperation with Azerbaijan on the gas track are ongoing and the two countries have a common political position on concluding a long-term contract for the supply of one or two billion cubic metres of gas per year. Such opportunities will arise when the Nis-Dimitrovgrad - Bulgaria-Serbia Interconnector Gas Pipeline (IBS) is soon completed and the interconnection of the Serbian and Bulgarian gas transmission systems will make it technically possible to export larger volumes of Azerbaijani gas to Hungary.

Undoubtedly, these endeavours will soon be realised and a long-term supply of Azerbaijani gas to other regions of Europe will be established.

The Memorandum of Understanding on cooperation between SOCAR and its partners, gas transmission system operators - Bulgarian "Bulgartransgaz", Romanian "Transgaz", Hungarian "FGSZ", Slovakian "Eustream" - which was signed in April this year, serves as proof of this. The memorandum defines the areas of cooperation on supplying additional gas volumes from Azerbaijan to Europe through the modernised Solidarity Ring (STRING).

The STRING system was initiated by Bulgaria and supported by the European Commission (EC) in order to boost the security of natural gas supplies to the European Union, particularly to the countries of South-Eastern and Central Europe. The countries participating in the STRING project have underground gas storage facilities and an extensive network of pipelines, thanks to which the implementation of the Solidarity Ring initiative will strengthen European energy security and allow Azerbaijan to increase gas exports to more European countries, including Slovakia, the Czech Republic, Poland and others.

Caliber.Az