BAKU, Azerbaijan, July 27. With Europe losing Russia as its main natural gas supplier, Azerbaijan is in a strong position to increase its market share, James Huckstepp, Manager, EMEA Gas Analytics, S&P Global Commodity Insights told Trend.
“While achieving the full proposed 10 Bcm/yr increase in export capacity to Europe, to 20 Bcm/yr, is ambitious, a partial expansion is likely and could be achieved in less than four years,” he said.
Huckstepp pointed out that the memorandum of understanding between the EU and Azerbaijan signed on July 18 puts a strong emphasis on emissions reductions, and the EU will likely regard any plans and commitments to directly or indirectly reduce emissions from Azerbaijani gas production favorably when supporting the signing of a firm agreement to increase European long-term contract volume offtakes.
On July 18, 2022, a Memorandum of Understanding on Strategic Partnership in the field of energy between the European Union represented by the European Commission and the Republic of Azerbaijan was signed between Azerbaijan and the European Union.
On July 18, 2022, a “Memorandum of Understanding on Strategic Partnership in the field of energy between the European Union represented by the European Commission and the Republic of Azerbaijan" was signed between Azerbaijan and the European Union.
The Sides agreed to support bilateral trade of natural gas, including through exports to the European Union, via the Southern Gas Corridor, of at least 20 billion cubic meters of gas annually by 2027, in accordance with commercial viability and market demand.
According to the document, any further exports of natural gas to the European Union beyond those that are being delivered to date will require significant investments in the expansion of the Southern Gas Corridor pipeline network and the upstream project development.
Moreover, the EU and Azerbaijan will encourage financing of the expansion of the Southern Gas Corridor pipeline network taking into consideration the EU’s climate policies and its REPowerEU strategy, including through cooperation with international financial institutions.
The Sides will also support infrastructure to be conversion-ready with a view to transporting renewable gases, including hydrogen and its derivatives. This entails that new infrastructure should be capable of carrying renewable and low-carbon gases, including hydrogen and its derivatives, as well as making existing infrastructure future-proof and hydrogen ready.
The Sides expressed their aspiration to promote mutually beneficial natural gas trade, anticipating future trade in hydrogen, hydrogen-derivatives and other renewable gases (bio-methane, etc.), and renewable electricity.