Gazprom Expands Operations In Caspian, Mulls Baku Office

The world’s largest natural gas producer may be getting larger. Russia’s Gazprom announced it intends to launch a second regional office outside of Russia, in Azerbaijan’s capital city of Baku. 

Gazprom’s board of directors will convene a meeting on October 2 in Saint Petersburg to deliberate the opening of the representative office, according to reports by Interfax news agency. Absentee voting is allowed and will decide whether Gazprom’s satellite location in Azerbaijan will kick off or not. 

Gazprom’s involvement with Azerbaijan’s gas market started in 2000 when Russia began to export to the country. But in 2006, Baku stopped gas purchases from Russia when it tapped into the Shah Deniz offshore gas field in the Caspian Sea, which contains 1.2 trillion cubic meters of natural gas.

In 2010, the roles of seller and buyer were reversed, as Baku started transporting natural gas to Russia via the Baku-Novo Filya pipeline, to supply Russia’s Dagestan region, which lies in the Caucasus region and shares a border with Azerbaijan. Repairs to the pipeline created interruptions in gas supplies in 2013 and 2014, which led to a complete halt in deliveries in 2015.

By September 2015, Gazprom began supplying natural gas to Azerbaijan, located in the South Caucasus region and on the western side of the Caspian Sea,  via a five-year agreement, under which up to two billion cubic meters (bcm) of gas per year were sent via the AzMeCo methanol plant near Baku. In May of last year, SOCAR sent proposals to Gazprom about increasing its annual gas supplies to Azerbaijan as much as five 5 bcm per year, which Gazprom is considering.

If opened, the Baku office would be Gazprom’s second regional headquarters and the company’s first where it can maintain immediate supervision of the gas market in the Caspian basin beyond the borders of Russia. 

Gazprom operates an office in Kazakhstan, called “Gazprom neft – Kazakhstan,” which is responsible for wholesale and retail sales of petroleum products produced at the Omsk oil refinery, located near Russia’s southern border with the Central Asian country.

Russia owns the largest proven natural gas reserves in the world, estimated at nearly 48 trillion cubic meters, according to data compiled by the US government. Gazprom boasts Russia’s and the world’s largest gas producing company, controlling 17 percent of the global market and 72 percent of Russia's total gas reserves. Gazprom topped the 2017 Platts Top 250 Global Energy Company Rankings.  The list included 12 companies from Russia.  

For its part, Azerbaijan owns 2.55 trillion cubic meters of gas, according to US government estimations, putting it at number 14 worldwide.