“Taking into account that there are now new challenges and new demands, of course, we are already in negotiations with other potential consumers,” Aliyev said June 1.
Azerbaijan is aiming to increase gas production and export capacity to meet growing demand, but this will require new investment and contracts, Azerbaijan officials said during Baku Energy Week June 1-4.
The country is already increasing exports to Europe.
Energy Minister Parviz Shahbazov said June 2 that supplies via the Southern Gas Corridor to the EU should reach 10Bcm by the end of 2022.
Azerbaijan supplies Italy, Greece and Bulgaria via the Southern Gas Corridor. The project includes three stages – the South Caucasus Pipeline, The Trans Anatolian Natural Gas Pipeline, or TANAP, and the Trans-Adriatic Pipeline, or TAP.
Shahbazov said that Azerbaijan shipped 6.8 Bcm of gas to Turkey and Europe via TANAP and TAP in the first five months of 2022.
“It is expected that by the end of the year this figure will reach 16Bcm, and the export of Azerbaijani gas to Europe will exceed 10Bcm,” Shahbazov said.
Project partners are now in talks to expand supplies via the route. Optimizing capacity could add an additional 1 Bcm/year. In the longer term, capacity at TANAP could rise to 31 Bcm/year, at TAP to 20 Bcm/year.
“The role of the Southern Gas Corridor will grow, exports will be increased, and to achieve these goals, work is underway to attract financial institutions and related investments,” said Gary Jones, BP president of Azerbaijan, Georgia and Turkey.
Professor Brenda Shaffer, expert on Caspian energy and European energy security policy, said the Southern Gas Corridor is a scalable project, that can be expanded at a low cost to accommodate close to twice the current gas supplies.
“The tightness of the European natural gas market is not a temporary development but will last for several years and create a stable demand source for additional gas supplies,” Shaffer said.
Azerbaijan officials said that demand for the country’s gas is growing rapidly, but potential customers should understand that it’s not possible to extract much larger volumes of gas at short notice.
“For that, we need contracts. We need to start and speed up negotiations,” Aliyev said.
He added that overall gas exports will rise to 24 Bcm in 2022, up almost 10% on last year and expects exports to increase further in 2023.
To meet growing demand Azerbaijan needs to boost gas production.
S&P Global Commodity Insights sees Azerbaijan needing some time to increase production.
“We do expect a further expansion of Azeri production, but this requires investment and will not be possible before 2025,” said James Huckstepp, manager for EMEA gas analytics at S&P Global.
Most of Azerbaijan’s gas production comes from the BP-operated offshore Shah Deniz project located in the Caspian Sea. Stage 1 of the project includes capacity of 10 Bcm, and stage 2 – 16Bcm. BP said previously that an optimization plan could raise production by 1 Bcm/year. In the longer term, output at Shah Deniz could expand to 31Bcm.
Other new capacity could come from the Absheron, Babak and Umid projects.
Representatives from several European countries, including Romania, Serbia, Hungary and Italy travelled to Azerbaijan to discuss growing demand for gas in early June, in light of recent Gazprom cut offs and the threat that further sanctions could hit gas imports.
Hungarian Minister of Foreign Affairs and Trade Peter Szijjarto said June 2: “We want Azerbaijani gas to become the main gas in Europe. However, to implement this idea, it’s necessary to develop the infrastructure and potential of the Caspian region.”
Italy’s Undersecretary at the Ministry of the Ecological Transition Vannia Gava said that the country will continue to work on supply diversification and improving infrastructure.
“We want to increase the capacity of Trans Adriatic Pipeline (TAP) to 20 Bcm. This will play an important role in terms of ensuring supplies to Greece and Italy,” she said.
Russia’s invasion of Ukraine has triggered major concerns around supply security in EU countries. In recent weeks, Russian gas supplier Gazprom has cut off supplies to several European countries, after they refused to comply with a new ruble-payment mechanism introduced as part of Russian counter sanctions.