Azerbaijan and EU are close to gas export agreement

Azerbaijan and EU are close to  gas export agreement

Azerbaijan is practically ready to supply 2 billion cubic metres of gas per year to Europe and 10bn cu.m in 2017 or 2018, a senior executive has said.

Rovnag Abdullayev, president of state oil company SOCAR, said supplies could start almost as soon negotiations with Turkey are completed. “We hope that talks with Turkey on gas transit will reach a successful conclusion that will open the route for Azerbaijani gas to Europe. Pretty much straight after a decision on transit issues with Turkey has been reached, we are ready to to supply 2 billion cubic metres to Europe and 10 billion cubic metres in 2017 or 2018 with a subsequent increase in volumes,” Abdullayev told .


Turkey said last month that it wanted to reach agreement by the end of September in the talks on the purchase and transit of gas to be produced at Azerbaijan’s Shah Deniz field. Baku is negotiating with Ankara to sell 6 billion cubic metres (bcm) of gas per year from the second phase of development at the giant Shah Deniz field and to ship 10 bcm to European customers via Turkey. The talks are reported to have got bogged down in legal and jurisdictional issues.


Meanwhile, companies interested in exporting gas produced in the second stage of development of the Shah Deniz field have until 1 October to submit their bids.


Rovnag Abdullayev told the conference on Wednesday that the Azerbaijani side is at present considering all the options to transport its gas to Europe, including the Trans Adriatic Pipeline, the Interconnector Turkey-Greece-Italy, Nabucco and White Stream projects, while work is also under way on the delivery of liquefied gas to Bulgaria and Romania.


The TAP, ITGI and Nabucco projects have been considered the three front-runners in the bid to export Shah Deniz gas. In an interview in June, Rovnag Abdullayev described the White Stream project, which envisages the construction of gas pipelines via Georgia, Ukraine and Romania or Bulgaria as “not very active”. His reference to the project now may signal a revival of interest or may be another reminder to Ankara that Azerbaijan has alternatives to Turkey for the export of its gas.


LNG supplies to Ukraine are another alternative to transit via Turkey being pursued by Baku. It was reported on 21 September that Baku and Kiev had initialled an agreement on the supply of up to 2 billion cubic metres of liquefied natural gas to Ukraine in 2014 and 5 billion cubic metres in 2015.


The European Union is very interested in the export of gas from Azerbaijan and the Caspian region to Europe. The EU’s energy commissioner reiterated Azerbaijan’s importance to Europe both as a supplier of energy and a transit country in a message to the conference.

New gas finds


Rovnag Abdullayev told the conference that the latest discoveries of gas fields in Azerbaijan meant that production would reach 30 billion cubic metres in 2017-18 and 50 billion in 2025.

“Taking account of these production volumes, Azerbaijan’s role in ensuring Europe’s energy security will increase. Forecasts say that by 2020 Europe will import 70% of the gas it needs and by 2030 85%,” he said.


He said that gas production had increased 5.2-fold since 2004 from 5 billion to 26 billion cubic metres. “We are already supplying gas to Turkey, Georgia, Iran, Russia and Greece, although in 2006 we were still importing gas.”


“Azerbaijan is continuing its work to find new gas fields. The Umid field and the Absheron field, recently discovered by French companies Total and Gaz de France, prove that the Caspian region has global reserves of gas and that Azerbaijan can meet not only its own gas needs but also export gas for decades,” Abdullayev told the conference.


He said that drilling and exploration work was being carried out with German company RWE in the Nakhchivan and Babek fields, whose reserves are estimated at 80bn cu.m.

“We are also negotiating drilling in the deepwater Azeri-Chirag-Guneshli bloc, where reserves are estimated at 300bn cu.m of gas. Zafar-Mashal is also a promising field.”


Azerbaijan’s proven gas reserves are 2.5 trillion cubic metres, while actual reserves may be much higher, Abdullayev said.


Meanwhile, the head of the EU office in Azerbaijan, Ambassador Roland Kobia, read out a message from Energy Commissioner Guenther Oettinger at the Gas Infrastructure World 2011 conference in Baku on Wednesday.


“Europe’s cooperation with the Caspian region, especially with Azerbaijan, is deepening. Europe needs more natural gas from more sources and the Caspian region can help us to solve this challenge,” Oettinger says in his message. Europe has now more interest in gas following the tragic events at the Fukushima nuclear power plant, the message continues.


“Therefore Europe needs alternative sources of supply. At the moment, Europe receives natural gas from Norway, Russia and Algeria. However, we want to create new alternative routes, and the Caspian region is important from this viewpoint. We plan to supply 90 billion cubic meters of gas to Europe via the Southern Corridor,” the commissioner says, referring to routes for gas supplies to Europe that will bypass Russia.


“Azerbaijan will be a gas producer, as well as a transit country. We therefore consider the country as the key contributor to the Southern Corridor project.”


The message notes that the Caspian region has more gas reserves than Russia. Regarding Turkmenistan, Oettinger says the country has large gas reserves, but lacks an economically viable route to export these reserves. However, the situation may change. “Europe attaches great importance to the Trans Caspian pipeline, which will allow the delivery of Turkmen gas to European markets,” the commissioner says in his message. “Europe is committed to working with all partners in the Caspian region with a view to realizing the Southern Gas Corridor.” “We will further work to strengthen and develop the Southern Corridor.”


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