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EU secures large new gas supplies from Azerbaijan

Azerbaijan, first deep gas well drilled

A major international trade in international natural gas trade is happening right now before our eyes. Russia, which has seen gas exports to Europe plummet since the start of the Russia-Ukraine war, is now intent on expanding supplies to Central Asia. Meanwhile, Azerbaijan is making progress in replacing Russian gas to meet the needs of the European Union.

Russia's attack on Ukraine has pushed EU states to reduce their dependence on Russian gas. Moscow's exports to Europe fell from 155 billion cubic meters (bcm) in 2021, the year before the invasion, to just 43 bcm last year.

EU members have so far compensated for the Russian shortfall through a combination of importing greater volumes of LNG by ship and increasing power generation from other energy sources. Brussels also secured a deal with Azerbaijan to double Azerbaijani gas exports to Europe to at least 20 bcm per year by 2027.

Azerbaijan's export expansion plans appear to finally be coming to fruition, as Baku recently signed agreements to transit gas from Turkmenistan to Europe and concluded new deals to expand connections to central and southeastern European states.

Arguably, the most significant development is the decision by a Hungarian state entity, MVM, to buy a 5 % stake in Azerbaijan's giant Shah Deniz gas field , a move announced during Baku Energy Week in early June . MVM has already signed two agreements for the import of Azerbaijani gas.

Now, with a stake in Shah Deniz, MVM becomes the only shareholder that also buys gas from the field, creating an important link between the producer and consumers. By increasing its dependence on Azeri gas imports, Hungary is also signaling a shift away from Russia. Budapest has long depended on Russia as its main source of gas, as Viktor Orban's government has resisted the imposition of EU sanctions against the Kremlin.

Also significant is the news that Azerbaijan has reached an agreement with Albania to supply 200 million cubic meters (mcm) per year of gas starting from 2026. The gas will arrive via the Trans-Adriatic Gas Pipeline (TAP), which currently has a capacity of around 10 billion cubic meters per year, but which needs major expansion to meet Baku's growing export commitments to European states.

To date, the pipeline's owners, including Azerbaijan, have pledged to add only 1.2 billion cubic meters of annual capacity, complaining that they cannot invest the large sums needed without getting advance commitments from gas buyers Europeans to purchase additional volumes. The quantity to be supplied to Albania may be relatively small, but it marks a step towards full implementation of the TAP expansion plan.

Another initiative to facilitate Azerbaijan's gas supplies, called “Vertical Corridor” , is progressing at a faster pace than expected. The corridor involves the expansion of a network of gas pipelines across south-eastern Europe, with Bulgaria serving as a hub connecting Greece, Moldova, Romania, Turkey and Ukraine.

On June 6, Bulgaria signed the first two construction contracts to expand its section of the planned corridor. Moves to expand other sections are expected later this year and early next.

Russia, meanwhile, is trying to recover lost market share in Europe by supplying gas to Central Asia. On June 7, at the St. Petersburg International Economic Forum, the state-controlled Russian energy giant Gazprom signed new supply agreements with Kyrgyzstan and Kazakhstan and held talks with Uzbekistan on future supply plans. gas supply.

The agreement with Kyrgyzstan provides that Gazprom's subsidiary, Gazprom Kyrgyzstan, will be supplied with Russian gas for 15 years, starting in 2025. Gazprom Kyrgyzstan, in turn, has signed agreements for the supply of gas to Electric Stations JSC, the main electricity and heat supplier of Kyrgyzstan, and with Bishkekteploenergo, the municipal heating company of the Kyrgyz capital. Details of the contracts, including volumes and purchase prices, were not immediately disclosed.

To facilitate deliveries to Kyrgyzstan, Gazprom has signed an agreement with its Kazakh subsidiary, NC Qazaqgaz, under which Gazprom will expand its existing gas pipeline network in Kazakhstan. The expansion would also increase gas exports to Uzbekistan, which was once a gas exporter but has now become a net importer. In 2023, Tashkent signed a two-year agreement to import Russian gas, supplies of which began last October.

Russia's current and future gas exports to Uzbekistan were the subject of discussions on June 7 between Gazprom CEO Alexei Miller and Deputy Prime Minister of Uzbekistan Jamshid Khodjaev, together with Energy Minister Jurabek Mirzamakhmudov . As Uzbekistan's gas demand increases, the supply agreement with Russia is expected to be extended.

In the end, the gas produced in the world is always the same, only that it changes destination depending on political convenience.


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The article EU secures large new gas supplies from Azerbaijan comes from Economic Scenarios .


This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/la-ue-si-assicura-nuove-grandi-forniture-di-gas-dallazerbaigian/ on Mon, 17 Jun 2024 06:00:29 +0000.