This was confirmed on March 10th by a joint statement by the US President Joe Biden and European Commission President Ursula von der Leyen, reiterating both parties’ determination to “build clean energy economies and industrial bases”, including clean hydrogen and continue to work together “to advance energy security and sustainability in Europe by diversifying sources, lowering energy consumption, and reducing Europe’s dependence on fossil fuels”.
Last week, the EU energy chief Kadri Simson encouraged all Member States and all companies to “stop buying Russian LNG, and not to sign any new gas contracts with Russia. The EU has pledged to quit Russian fossil fuels by 2027 and replaced around two-thirds of Russian gas last year.
In this context, the Southern Gas Corridor (SGC), delivering Azerbaijani gas through (Trans-Anatolian Pipeline) TANAP and Trans-Adriatic Pipeline (TAP) to the EU, plays a key role in current diversification efforts. The EU increased gas imports via pipelines from Azerbaijan from 8.1 bcm to 11.4 bcm last year. Only two years after its completion, the expansion of the Corridor seems to be likely as the EU and Azerbaijan stroke a deal in July 2021 to double the volume of gas delivery to 20 bcm by 2027 in addition to plans to tap into Azerbaijan’s renewables potential, such as offshore wind and green hydrogen. While encouraging Azerbaijan’s accession to the Global Methane Pledge, the deal aims at collecting natural gas that would otherwise be vented, flared, or released into the atmosphere.
With the opening of the interconnector Greece-Bulgaria (IGB), at least 11.6 bcm of gas is expected to be delivered from Azerbaijan to the EU this year. The IGB has been dubbed as a game-changer for the EU’s energy security, especially as it enabled supplies to Bulgaria and Romania. A Memorandum of Understanding on gas supplies between Azerbaijan and Hungary was also signed this year, which shows that more interconnectors will be needed in the EU if TANAP would be expanded from 16 to 32 bcm and TAP from 10 to 20 bcm.
Moreover, investments will be needed to increase gas production in existing and new gas fields (Shah Deniz, Azeri Chiraq Guneshli, Absheron, Shafaq-Asiman, Umid-Babek, etc.), especially considering growing energy demand in Azerbaijan and its neighbours. Since the Russia-Ukraine war, 10 European countries turned to Azerbaijan to increase existing supplies or to secure new supplies. To meet such growing demands, Azerbaijan is poised to increase cooperation with neighbouring states, such as Turkmenistan, which is home to 50 trillion cubic metres of gas reserves – the world’s 4th largest reserves.
Following the Azerbaijani-Turkmen decision to jointly develop the formerly disputed Dostluq gas field, a trilateral swap deal between Iran, Azerbaijan, and Turkmenistan, and the 2018 Convention on the status of the Caspian Sea by all the littoral states; Azerbaijan, Turkmenistan, and Turkey stated that they were looking “to form a coordinated and multi-option system for delivering energy resources to global markets” on December 14th last year.
These developments could be harbingers of a new Trans-Caspian Gas Pipeline (TCGP), a 180-mile under-sea pipeline that could be integrated into the SGC. Labelled as an EU Project of Common Interest, which could also be eligible for funding under the 2019 US European Energy Security and Diversification Act, this strategic under-sea pipeline project could bring an end to the EU’s energy crisis by securing a cheap source of natural gas, whose price is independent of LNG prices while counterbalancing Chinese, Russian and Iranian influence in Central Asia and beyond. On the other hand, Azerbaijan began the transit of oil from Kazakhstan this year in addition to Turkmenistan, which highlights the potential to use the Middle Corridor for hydrocarbons.
During the 9th Southern Gas Corridor Advisory Council Ministerial Meeting and 1st Green Energy Advisory Council Ministerial Meeting in Baku in February, EU Energy Commissioner Kadri Simson stated “Azerbaijan can potentially become the exporter of renewables and hydrogen to the EU”. At the end of last year Azerbaijan, Georgia, Romania, and Hungary agreed to establish a green corridor to supply the EU with around four gigawatts of electricity generated by windfarms in Azerbaijan with the support of the European Commission.
Over the last several months, Azerbaijan signed documents that will provide investments to create 22 gigawatts of renewable sources of energy, both onshore and offshore. In April 2021, the World Bank started funding the offshore wind development in Azerbaijan, which has a potential of 157 GW. In addition to the Caspian Sea, which ranks second in world for its wind energy potential, Azerbaijan has an estimated 27GW in wind and solar power onshore.The current construction of wind and solar plants in Alat (230 MW), Khizi and Absheron (240 MW) and Jabrayil (240 MW) as well as new investment plans, including in Nakhchivan Autonomous Republic, are expected to further boost renewables production in the Caspian state all by living up to its vast green potential. While the country, with a population of 10 million, accounts for only 0.15% of total global greenhouse gas emissions, it defines green growth as a key priority for 2030. The EU supports the implementation of Baku’s Paris Agreement commitments through the EU4Climate initiative.
The Russia-Ukraine war may create a window opportunity for the EU to engage in concrete actions rather than high-flying buzzwords, pushing the bloc to do more strategic and visionary planning regarding future projects linked to its energy security, such as TCGP, and finally diversify away from Russian energy sources for good. Azerbaijan has proved to be a stable partner in these challenging times, which manifested the vulnerability of certain EU states against Russian economic and political pressure due to Gazprom’s immense infiltration of their gas markets for the past several decades. Now it’s the time to play fair game by a new playbook and to remap the European energy partners while investing in a stable, predictable, affordable, and sustainable energy future for the EU.