Natural gas today plays a vital, if not decisive, role in the energy transformation of the European Union.
The problem for the EU at this point is that Europe currently imports about 90 percent of the gas it needs (with Russia supplying more than half of this amount) and intends to increase these imports in the coming years, as per the “EU-US LNG Trade” document of the European Commission.
However, the sudden aggravation of the situation on the West-Russia track, with Ukraine at its epicenter, has disturbed the harmony of the supplies, resulting in an acute gas shortage in Europe; gas prices have been growing, and it does not look like they are going to drop back to the 2020 levels.
Of course, the European Commission is monitoring the stability and security of the EU’s energy supply, taking preventive measures in case Russia tries to create gas supply problems for Europe in the current climate of tension.
According to EC Spokesperson Dana Spinant, contacts have been established with many international partners to ensure a sufficient supply of energy, particularly gas, and to meet the needs that may arise in the EU in the coming winter weeks.
In particular, the European Commission discussed the topic of short-term gas supply with producer partners in the United States, Qatar, Egypt, Azerbaijan, and Nigeria. EC President Ursula von der Leyen was in contact with individual partners, while the dialogue with Azerbaijan was maintained by European Commissioner for Energy Kadri Simson.
The European Commission emphasizes the intensity of the discussions between the US and the EU, in the course of which Washington guaranteed the Europeans support as well as a stable supply of liquefied gas to the Old World. Brussels hopes that with 120 LNG tankers sent by the US to the EU in January (the equivalent of about 10 billion cubic meters of gas), the EU will be able to fully ensure its energy security.
It is important to mention here that LNG supplies from the United States to Europe began to increase from the first shipment in April 2016, and in 2021, LNG exports to the EU already exceeded 22 billion cubic meters with an estimated value of €12 billion. In January of this year, LNG exports to Europe reached a monthly high of 4.4 billion cubic meters (€4.1 billion).
For all that, Russia remains the main exporter of natural gas to the European Union. Through an extensive system of gas pipelines, it supplies natural gas, which, according to the world’s leading experts, is much cheaper than liquefied gas for purely technical reasons.
However, the West is serious about limiting its dependence on Russian gas, both pipeline and liquefied. In the medium and long term, the EU still counts on renewable energy sources, which it will produce itself. Brussels stresses that this is not only about the independence of the European Union from external hydrocarbon sources. As a result of the gradual transition to clean energy, Europe intends to attain not only environmental cleanliness, but also economic benefits.
But all this is in the long run. What is the EU to do here and now, when its gas storage facilities are almost empty?
One of the few sources of pipeline gas to Europe is Azerbaijan, and the West has approached it with a proposal to increase gas production in order to expand exports to Europe. Baku already (two years ahead of schedule) delivers 10 billion cubic meters of gas to the European market annually. This is, of course, a significant volume for Greece or Bulgaria, but not for the EU. It is true that Azerbaijan has sufficient reserves to increase supplies, but, unlike oil, gas exports can be increased only if there are concrete consumer requests: as we know, it makes sense to develop promising gas fields only if there are buyers and long-term contracts.
But Brussels, unwilling to burden itself with long-term commitments, switched to swap deliveries at the insistence of the European Commission, which is largely the cause of the current gas crisis.
Understandably, gas suppliers do not want to take on big risks either. Suffice it to recall the amount of effort, time and money Azerbaijan invested in the Southern Gas Corridor project to deliver Azerbaijani gas to Europe. And the many obstacles it had to overcome! In Italy alone, where they are reluctant today to recall the “public discontent” caused by the transplanting of several olive trees, the construction was delayed for almost a year!
The EU’s request to Azerbaijan to increase gas exports certainly sounds attractive and promises large revenues. But will our country’s billion-dollar investments in the development and operation of new natural gas fields be justified, should Brussels declare one day that Europe no longer needs such substantial amounts of gas? This is where the interests of the supplier and the consumer clash in a crucial way.
Nevertheless, given the long-standing and reliable partnership between Baku and Brussels, we should hope that the two parties will eventually come to an agreement and a mutually acceptable solution. And then gas will go from Baku to Europe via the pipes of the four segments of the Southern Gas Corridor.
Translated from Haqqin.az