President Aliyev Says Increasing Gas Exports Requires Investment & Guarantees

President Ilham Aliyev said Azerbaijan might consider increasing natural gas supplies to European markets if good terms are offered.

The remarks came at a meeting with Russia’s top mass media leaders in Moscow on February 23. 

While answering a question about Azerbaijan’s readiness to increase gas supplies to the European markets, President Aliyev said the country has already received such requests from European Commission’s representatives. However, he further stressed that gas volumes supplied by Azerbaijan to Europe have long been contracted. 

“Gas is such a product that you first need to sell and then produce it, so we simply do not have it physically; that is, we were not envisaging that we would need additional [volumes],” the Azerbaijani president told media representatives.

According to the president, Azerbaijan exported 19 billion cubic meters of natural gas last year, with Turkiye and Italy being the largest consumers.

Meanwhile, President Aliyev noted that long-term contracts to supply large volumes of natural gas demand additional investments, including in the Trans Adriatic Pipeline (TAP) expansion, as well as guarantees. He further added that Azerbaijan plans to use at least two new fields to produce gas, which can be supplied to foreign markets. 

Azerbaijan has big plans for one of its biggest gas condensate fields of “Absheron,” whose stage 1 is expected to produce 1.5 billion cubic meters. The other big fields with untapped potential is “Babak” with estimated reserves of 400 billion cubic meters and “Umid” with at least 200 billion cubic meters. 

Azerbaijan has been delivering natural gas to European markets via the Trans Adriatic Pipeline (TAP) since December 31, 2020. TAP starts at the Turkish-Greek border and runs along 773-kilometer onshore and 105-kilometer offshore routes traversing Greece and Albania toward its end destination in Italy.

TAP forms a part of the Southern Gas Corridor (SGC) designed to increase and diversify European energy supplies. The three-segmented SGC traverses seven countries and initially supplies 12 multiple gas buyers, primarily in Europe. The corridor’s 16 bcm annual transportation volume is shared between Turkiye and European Union countries, which receive 6 bcm and 10 bcm, respectively.

Meanwhile, the discussion came a day after German chancellor Olaf Scholtz halted Russia’s Nord Stream 2 gas pipeline certification over President Vladimir Putin’s recognition of separatist regions of eastern Ukraine. Nord Stream 2 is designed to supply 55 bcm of natural gas to Europe.

Deputy Chairman of Russia’s Security Council, Dmitry Medvedev, predicted that the project’s suspension could kick the gas prices high beyond $2,000 per thousand cubic meters.

Before the war in Ukraine, high gas prices have been challenging the European countries given the depletion of reserves in storage and increase in consumer demands, particularly during the cold winter season.

In early February, President Ilham Aliyev said Azerbaijan aimed to supply more gas to foreign markets in 2022 by leveraging its 2.6 trillion cubic meters of proven gas reserves. 

In the meantime, TAP officials are convinced that the annual throughput capacity of TAP could be increased to up to 20 bcm of gas per annum, supplying the energy to more markets in Europe. In case of capacity expansion, some Western Balkan countries, including Montenegro, North Macedonia, Bosnia and Herzegovina, and Croatia, could also receive the Azerbaijani gas. 

The EU has plans for a 5 bcm/year of Azerbaijani gas to be supplied to Western Balkans via the 511-kilometer Ionian Adriatic Pipeline (IAP), which will connect to TAP in Albania and extend to the Croatian grid via Montenegro, with a spur into Bosnia and Herzegovina.