By Azernews

By Ayya Lmahamad

Azerbaijan, having created a stable market for hydrocarbons, has become an important and reliable exporter of oil and gas.

The country has started commercial gas supplies to Europe through the Trans-Adriatic Pipeline on December 31, 2020. Azerbaijan’s gas deliveries to Europe helped achieve the strategic goal of the Southern Gas Corridor that aims to bring the Caspian Sea gas resources to the European markets.

The Southern Gas Corridor (SGC) is considered to be an impressive technological and diplomatic achievement.

At the initial stage, it is planned that the SGC will supply about 16 cubic meters of gas - 6 billion to Turkey and 10 billion to Europe. The project is also envisaged for a capacity expansion, which means that Azerbaijan, having additional gas reserves in its fields can supply additional volumes and increase gas exports to many parts of Europe.

Azerbaijani gas deliveries via TAP reach 5 billion cubic meters

The head of the Center of Oil Studies, economic expert Ilham Shaban, in an interview with Azernews underlined that Azerbaijani gas deliveries via Trans Adriatic Pipeline (TAP) reached 5 billion cubic meters already in this September. He noted that it was planned that the whole volume of natural gas to be delivered via this pipeline this year would amount to 5 billion cubic meters.

“On April 16 this year, Azerbaijan has temporarily suspended deliveries under the Shah Deniz 1 project, between the Shah Deniz consortium and Turkish BOTAS. Due to this, Azerbaijan has signed a temporary contract with Italian buyers to supply additional volumes of gas via TAP. And thanks to this the production volumes from Shah Deniz field have not decreased,” the expert stated.

He said that although on one side there was a decrease in the Turkish market in terms of supply volumes, on the other side there was an increase in the European market.

Shaban underlined that in the end, it did not affect the total volume of production at Shah Deniz field, which year after year shows growth.

“Within the Shah Deniz 1 project, we usually sold gas under long-term contracts at a lower cost than from the Shah Deniz 2 project. Now it turned out that we could sell these volumes in the European market more expensive. Thus, on the one hand, we had more production volumes and on the other hand higher price than expected,” he added.

Speaking about the possibilities of turning Azerbaijan into the regional gas hub, Shaban stated that first of all the country already proved itself as a regional oil hub.

“We have already proven over the past 11 years how the transit volumes of oil are steadily going via the Baku-Tbilisi-Ceyhan pipeline. And over the past five years, since 2016, Turkmenistan, Kazakhstan, Russia send some of their oil volumes via this pipeline. That is, Azerbaijan has turned into a regional oil hub,” Shaban emphasized.

He noted that it is early for now to talk about turning the country into the regional gas hub, however, he added that there are good prospects for that.

Additionally, it is worth noting that the International Energy Agency reported earlier that with the increase in the SGC's capacity, the transportation of gas through the corridor could double, and this would allow Azerbaijan to become a regional gas hub.

The announcement that the Azerbaijani gas deliveries via TAP have reached 5 billion cubic meters is very important news, which shows that the flow of Azerbaijani gas through the SGC has surpassed previous forecasts.

Azerbaijan reliable energy partner for Europe

It is worth noting that Azerbaijani gas is a new, reliable and long-term source for Europe. Proven natural gas reserves in Azerbaijan amount to 2.6 trillion cubic meters.

In addition to providing energy security and diversification in several markets, the volumes of gas delivered through TAP support the transition to green energy, especially in Southeastern Europe.

It is also possible to say that Azerbaijani gas will help Europe’s transition to secure energy. Natural gas is an important source of energy and is considered a cleaner “transition fuel” on the way to the “green” future, as it results in fewer CO2 emissions.

At the same time, the SGC allows EU citizens to have greater access to supply diversity in the energy market. The SGC will diversify supplies and increase energy security, especially for the import-dependent target markets of Italy, Bulgaria and Greece.

In the meantime, the diversification of gas deliveries to Europe via the SGC strengthens Azerbaijan's position in the European market.

Technical characteristics

The Joint Declaration on SGC was signed between the European Commission and Azerbaijan in 2011.

The SGC is an initiative of the European Commission for a natural gas supply route from Caspian and Middle Eastern regions to Europe. The route from Azerbaijan to Europe consists of the South Caucasus Pipeline, the Trans-Anatolian Pipeline (TANAP) and TAP and has an initial output volume of 16bcm of gas.

With a length of 3,500 km, the SGC is one of the world’s largest infrastructure projects that will transport gas from Azerbaijan’s giant Shah Deniz field to European markets.

The main supply source of the corridor is the Shah Deniz field, which is among the world’s largest gas-condensate fields, located in the Caspian Sea.

The SGC was built not only within the budget but also with significant cost savings. According to SOCAR, the savings of the SGC project in 2013-2020 amounted to $12 billion. The cost of the SGC, including the upstream part for Shah Deniz Stage-2, was $33 billion, while in 2013 the costs were projected at $45 billion. Moreover, it is expected that the capital expenditures of the SCG project will be fully recovered within 8-10 years.