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Azerbaijan Joins Initiative to Supply Gas to More European Markets

By Ilham Karimli April 26, 2023

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Participants of the ceremony for singing a Memorandum of Understanding between energy operators of Bulgaria, Hungary, Romania, Slovakia, and Azerbaijan, April 25, 2023, Sofia, Bulgaria / President.Az

President Ilham Aliyev attended on Tuesday the signing of a memorandum of understanding (MoU) between the transmission system operators (TSOs) of Bulgaria, Romania, Hungary, and Slovakia and the State Oil Company of the Azerbaijan Republic (SOCAR) in Bulgaria’s capital Sofia.

President Aliyev said the MoU’s implementation will definitely strengthen energy security in Europe and allow Azerbaijan to export natural gas to more European countries.

“Azerbaijan is a reliable partner of Europe,” President Aliyev said during the ceremony, as reported by his official press service.

“I'm sure that today's important ceremony will be another step in strengthening our cooperation. Last July, Azerbaijan and the European Commission signed a “Memorandum of Understanding on a Strategic Partnership in the Field of Energy” based on which we plan to double our gas supply to the European Union market by 2027,” he added.

In 2021, Azerbaijan delivered 8 billion cubic meters (bcm) to Europe and is expected to supply 12 bcm this year, which will account for almost half of the country’s total export of 24.5 bcm, the president said.

Azerbaijani gas is currently exported to Georgia, Türkiye, Greece, Bulgaria, Italy, and, starting from this year, Romania. By the end of 2023, Hungary and Slovakia may join the list of buyers if all necessary interconnectors go online, he added.

By signing the MoU, Azerbaijan joined the initiative aimed at the realization of the Solidarity Ring (STRING) transmission corridor – the joint initiative of Bulgartransgaz (Bulgaria), Transgaz (Romania), FGSZ (Hungary), and Eustream (Slovakia) – to offer additional natural gas transmission capacities on the transmission system operators’ (TSO) networks.

In a short time and with incremental capacity improvements to the existing infrastructure, the cross-border energy corridor could transport up to 5-9.5 bcm of gas per year from Azerbaijan to eastern, central and western Europe via the territories of the signatory states.

The total estimated investment cost of the initiative is €730 million ($804 million). With necessary financial support from the European Union (EU), it could be realized by the end of 2026.

The joint initiative also sits well with the EU’s energy priorities, such as the REPower EU Plan and the EU-Azerbaijan strategic cooperation agreement, which was announced and presented to the European Commission by the four TSOs in September 2022.

At the EU’s Central and South Eastern Europe energy connectivity (CESEC) meeting in Brussels on April 19, 2023, the involved gas TSOs introduced the initiative in detail to the European Commission getting the thumbs up for quadrilateral cooperation in the Solidarity Ring’s realization.

President Aliyev said Slovakia, as a member of the Solidarity Ring, will soon become Azerbaijan’s energy partner expanding the geography of the Azerbaijani gas supplies, which is expected to increase from 6 to at least 10 countries.

“I say at least, because I think this is not the end of the story. We plan to expand furthermore our presence in the European gas market … The “Solidarity Ring”, I'm sure, will play an important role in the implementation of our joint ambitious plans,” Aliyev noted.

Since December 31, 2020, Azerbaijan has been supplying natural gas to Europe via the Trans Adriatic Pipeline (TAP), which forms the final segment of the Southern Gas Corridor (SGC). TAP starts at the Turkish-Greek border and runs along 773-kilometer onshore and 105-kilometer offshore routes traversing Greece and Albania toward its final destination in Italy.

The three-segmented SGC spans seven countries and six regulatory systems, linking 11 different investors, and supplying 12 different gas buyers, primarily in Europe. The pipeline’s initial 16 bcm annual transportation volume is shared between Türkiye and Europe, which receive 6 bcm and 10 bcm, respectively. The main source of natural gas for the SGC is Azerbaijan’s offshore Shah Deniz field, with an estimated 1.2 trillion cubic meters of proven reserves.

Currently, the European market accounts for the largest share of daily gas exports from Azerbaijan. European consumers are supplied with about 27 million cubic meters of Azerbaijani gas per day.

Starting in 2023, Azerbaijan is expected to supply 12 bcm of gas per year to the EU. By 2027, the total volume of gas deliveries is forecast to reach 20 bcm annually. President Aliyev said that Azerbaijan's proven gas reserves of 2.6 trillion cubic meters make it possible to send more blue fuel to European consumers.

In the meantime, President Aliyev said Albania could join the buyers of the Azerbaijani gas due to SGC’s crossing the Balkan country’s territory. According to the Azerbaijani president, the negotiations are currently underway with Albania to build a local gas distribution system.