Azerbaijan, Turkmenistan Negotiate Gas Swap Resumption Amidst Temporary Disruption

Azerbaijan and Turkmenistan are currently in discussions regarding the resumption of gas swaps following a temporary disruption.

“The supply of Turkmenistan’s gas, which is swapped to Azerbaijan via Iran, has been temporarily cut off,” the Iranian Oil Ministry’s website SHANA quoted the National Iranian Gas Company (NIGC) as saying on January 6.

“Ashgabat and Baku are negotiating on this issue,” the report said, adding that “the gas supply will be restored as the two countries reach an agreement.”

Since January 2022, Iran has been supplying Turkmen gas to Azerbaijan in accordance with a trilateral swap agreement signed on November 28, 2021, in Ashgabat. According to the terms of the agreement, Iran annually delivers 1.5 to 2 billion cubic meters (bcm) of Turkmen gas to Azerbaijan. The supply, which commenced on January 3, 2022, involves 5-6 million cubic meters (mcm) of gas per day. Iran receives Turkmen gas in the east of the country and further delivers an equivalent amount to Azerbaijan.

In early June 2022, Azerbaijani Economy Minister Mikayil Jabbarov and Iranian Oil Minister Javad Owji signed an agreement to double the volume of gas swap between Azerbaijan and Turkmenistan. Additionally, in late November, a high-ranking Azerbaijani delegation held discussions on economic and energy cooperation with Turkmen officials. Simultaneously, SOCAR, Azerbaijan’s energy giant, announced the opening of its office in Ashgabat.

In July 2021, Azerbaijani and Turkmen ministers agreed to collaborate on the Dostlug (“Friendship”) offshore oil and gas field in the Caspian Sea. The joint development of this field could potentially facilitate gas exports to European countries through the Trans-Caspian underwater gas pipeline, connecting to the Southern Gas Corridor.

Turkmen Deputy Prime Minister Shakhym Abdrakhmanov affirmed in November 2022 that Turkmenistan remains committed to the project of building a Trans-Caspian pipeline to supply gas to Europe. The pipeline aims to supply up to 30 billion cubic meters (bcm) of Turkmen gas annually through Azerbaijan, Georgia, and Türkiye to the European market for at least 30 years.

Turkmenistan possesses one of the world’s largest natural gas reserves. The majority of these reserves are located in the South Yolotan-Osman field, also known as Galkynysh, which is one of the largest gas fields globally.

In 2023, Turkmenistan targeted an extraction of more than 80 billion cubic meters of natural gas, which marked a decrease from the 82.7 billion cubic meters extracted in 2022. Forecasts indicated Turkmenistan’s intention to export approximately 40 billion cubic meters of gas, with over 30 billion earmarked for China. The country also sustained gas supplies to Russia, Uzbekistan, and Azerbaijan, alongside a contractual commitment with Iran for annual swap deliveries. 

Meanwhile, the overall proven gas reserves of Azerbaijan stand at 2.6 trillion cubic meters, according to the estimations of the Azerbaijani authorities. In addition to Shah Deniz and Absheron, other notable fields with untapped potential are the Babak field with estimated reserves of 400 billion cubic meters and the Umid field with at least 200 billion cubic meters. 

Azerbaijan needs extra volumes of gas to meet its own domestic demand amidst its growing gas export to Europe. In July 2022, Baku signed a memorandum of understanding with the EU to double the volume of gas it sends to Europe through the Southern Gas Corridor to an annual 20 billion cubic meters by 2027, to help diversify gas supplies to the continent.

Currently, the European market accounts for the largest share of daily gas exports from Azerbaijan. European consumers are supplied about 27 million cubic meters of Azerbaijani gas per day. President Aliyev said Azerbaijan’s proven gas reserves make it possible to send more blue fuel to European consumers.