Azerbaijan and EU Agree to Strategic Energy Partnership

Azerbaijan’s gas fields and the chain of pipelines that carry the gas through Georgia and Turkey to Greece – where some goes to Bulgaria and the bulk to Albania and across the Adriatic to Italy – are controlled by multi-party international consortia.

It is the companies comprising these consortia that will decide whether to invest the billions of dollars necessary to increase gas production and expand pipeline capacity.

Talks between the various partners on realizing that investment are believed to be under way.

Out of gas

With Europe eager to wean itself off Russian gas, and no end in sight to Moscow’s war on Ukraine, there seems little doubt that the consortia can sell all the gas they can transit.

But energy analysts are asking a more fundamental question: Can Azerbaijan provide? The country has limited scope for increased production and has its own growing demand to meet.

Late last year, to prevent domestic shortages, Baku reached a swap agreement to import gas from Iran, which in return receives the same volume from Turkmenistan.

BP, operator of Azerbaijan’s biggest gas field, Shah Deniz, has warned that the field cannot supply all the gas needed to double exports to Europe, while other smaller fields under development are not expected to produce sufficient quantities.

For many years officials have discussed Azerbaijan transiting gas from its Caspian neighbor Turkmenistan, which holds the world’s fourth-largest reserves.

Turkish Vice President Fuat Oktay announced on June 2 that Ankara is looking at three ways of bringing gas from Turkmenistan to Turkey via Azerbaijan. One would expand the existing Turkmenistan-Iran-Azerbaijan swap, another would see a new pipeline cross part of the Caspian.

Turkey’s intentions, though, are still unclear. Oktay confirmed only plans to bring the gas to Turkey via the Southern Gas Corridor; he made no mention whether it will then be transited to Europe and if so on what terms.

Baku too has remained quiet on the Turkish proposals. Aliyev’s statement following the MoU signing suggested Baku is more interested in securing EU help to boost its renewables program to free up more of its own gas for export.

One thing, however, is abundantly clear: With Europe fearing that Moscow could stop its 150 bcm of gas deliveries as soon as this winter, an extra 10 bcm from the Caspian in five years will make little difference.

(David O’Byrne is an Istanbul-based journalist who covers energy. This piece originally appeared on the Eurasianet.org)