Gazprombank: Azerbaijan's oil, gas sector to gain momentum in short term

Azerbaijan's oil and gas sector will gain momentum in the short term as natural gas supplies through the Trans Adriatic Pipeline (TAP) are increasing to meet growing demand for gas in Europe.

“The decline in the country’s oil and gas sector slowed to 3.6 per cent in January-February 2023 compared to the same period of 2022 (compared to 4.6 per cent in January 2023). This is connected with an increase in gas production volume by four per cent in annual terms,” Report informs citing the Russian Gazprombank’s review.

Gazprombank’s analyst noted that the dynamics of Azerbaijan's GDP in January-February was mainly connected with the high base effect of 2022, when economic growth amounted to 6.7 per cent year on year.

“The non-oil and gas sector has become a key driver of Azerbaijan's economic growth amid falling oil prices. Growth in the non-oil and gas sector recovered from 1.7 per cent to 4.6 per cent year on year in line with our expectations. This was the main factor that brought the Azerbaijani economy to a positive level in January-February 2023. We think that growth in the non-oil and gas sector will continue recovering due to the implementation of projects in Karabakh,” the statement said.

Gazprombank’s economists think that these projects give a powerful impetus to the development of Azerbaijan's non-oil and gas sector. About 6.5 billion manats ($3.8 billion) were spent to finance these projects in 2022, which is five per cent of GDP.

According to the Azerbaijani State Statistics Committee, the country's GDP for the year increased by 0.4 per cent, amounting to 19.8 billion manats ($11.6 billion) in January-February 2023.

“The main contribution to the GDP was made by industry with a 50.3-per cent-share. We think that the February recovery of the positive dynamics of Azerbaijan's GDP is expected and, therefore, neutral for the country's Eurobonds,” the bank's analysts said.

At present, the capacity of the Trans-Adriatic gas pipeline, which is the European part of the Southern Gas Corridor, through which Azerbaijani gas is transported to southern Europe, is 12 billion cubic metres of gas per year.

Some 1.9 billion cubic metres of gas were sold to Europe in January-February 2023. Gas sales to Europe increased by 0.3 billion cubic metres or 18.7 per cent compared to the same period of 2022.