Europe nears agreement with Azerbaijan to maintain gas flows

European buyers are close to finalizing a commercial agreement with Azerbaijan to ensure a steady supply of natural gas to the continent as the current transit deal between Russia and Ukraine approaches expiration at the end of the year.

Companies from Hungary and Slovakia are expected to sign a contract for 12-14 billion cubic meters of gas annually from Azerbaijan, utilizing the existing pipeline network that currently transports Russian gas to the EU. This arrangement would effectively substitute for the gas Europe receives under the expiring transit agreement, Caliber.Az reports via foreign media.

European gas prices for December fell by as much as 8.1 per cent upon news of progress in the negotiations but later stabilized. The potential deal, which remains to be finalized, may help maintain price stability following recent market fluctuations. The European Commission has previously indicated that energy security in the region will remain intact after the transit deal ends.

Under the commercial agreement, Azerbaijan's state energy company, SOCAR, would supply gas to Sudzha on the Russian-Ukrainian border. From there, Hungary's MVM Zrt. and Slovakia's Slovensky Plynarensky Priemysel AS would transport it to Europe. Any agreement would require political support from Ukrainian authorities to enable the nation's gas-grid operator to book capacity.

Austria’s OMV AG mentioned that it has diversified its supply contracts, ensuring continued deliveries to its customers even if Russian gas shipments are interrupted.

Before the war, Gazprom supplied Europe with over a third of its gas, prompting the region to diversify its energy sources. The EU now increasingly relies on alternative supplies, including those from Norway, North Africa, and liquefied natural gas from global markets.

The agreement would allow Ukraine to continue receiving transit fees from its pipeline network, which have generated approximately $800 million annually in recent years. For Azerbaijan, this deal strengthens its energy ties with Europe, complementing its existing gas supplies to eight countries via a pipeline through Türkiye.

By Vafa Guliyeva