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Energy Crisis: Europe is Running Eastwards

The Southern Gas Corridor (SGC). Source: tap-ag.com.


 


 


The ongoing conflict in Ukraine and the several packages of sanctions issued by the European Union against Russia create more than a few problems for many European countries. One of the most compelling is the issue of gas deliveries, given that Russia supplies the EU with 40% of its natural gas. This pushes Europe to diversify its gas imports to reduce its dependence on Moscow.


This need became even more evident after the Russian President decided, on April 26, to halt gas supplies to Poland and Bulgaria since the two countries refused to pay in rubles and after Poland applied sanctions on about 50 Russian-related entities and individuals. Andriy Yermak, the chief of staff to Ukraine’s President Volodymyr Zelensky, has defined these actions as blackmail by Moscow to destroy European unity using gas as a potent weapon. Therefore, the EU is striving to diversify its gas imports within its recently launched program RePower Europe, which also aims to produce and save clean energy.


One of the solutions is to work on the already existing agreements with Azerbaijan, one of the significant gas exporters to the EU. Some EU countries are already importing gas supplies from Azerbaijan through the Southern Gas Corridor (SGC), a  major infrastructure that connects Azerbaijan to Southern Europe. The pipeline extends for 3,500 kilometers over six countries and is based on the strong cooperation of several energy companies. The primary legs of the SGC are the TANAP, the Trans Anatolian Pipeline through which Azerbaijani gas is transported to the Greek-Turkish borders, and the TAP, the Trans Adriatic Pipeline, which recently concluded. The latter transports gas across Greece to Albania and Italy. The importance of the TAP is paramount for energy diversification as it offers the potential for further expansion. Currently, the Interconnector Greek-Bulgaria (IGB) is under construction, and future ones are planned to expand the connection grid to other countries like Croatia, Albania, Montenegro, and Bosnia-Herzegovina.


As pointed out during the 27th Baku Energy Forum from June 1 to June 4, more countries are interested in importing Azerbaijani gas. The discussion now revolves around the technical capabilities of the SGC and the TAP in particular. According to TAP’s Managing Director Luca Schieppati, present at the forum, the infrastructure possesses all the requirements needed for further expansion and transporting more significant amounts of gas. Accordingly, other studies are underway to optimize the SGC’s capacities and add one bcm per year. This is imperative for Azerbaijan, given the unexpected increased demand. The Azerbaijani state oil and gas company has already declared its intention to double the export capacity of the SGC’s western section, namely the TAP, to 20 bcm per year. These new plans make several analysts speculate on whether the country will have the possibility of providing this gas since the Shah Deniz field, which currently produces all of Azerbaijan’s gas for exports, cannot provide for the SGC enhanced capacity.


One prospected solution is Turkmen gas. Azerbaijan signed a gas swap agreement last year in the Central Asian country`s capital Ashgabat involving Iran. Accordingly, Turkmenistan has already started sending two bcm per year to northeast Iran, and the latter sends an equivalent amount from its northwest part to Azerbaijan. This ensures that Baku meets its domestic and international demands, as Turkmen gas will be added to Azerbaijan’s existing gas production capacity through its Shah Deniz field. In this regard, Turkey will also play an outstanding role as all significant gas infrastructures run across it. There are also two separate export pipelines to Greece and Bulgaria that have room to spare as they are not operating at total capacity, unlike the SGC. These pipelines could be further exploited to transport gas to Greece and Bulgaria through the LNG terminal located on the north shore of the Sea of Marmara.


 


For the European Union, strengthening ties with Azerbaijan seems the only viable solution to substitute, at least partially, Russian gas. European Commission representatives have already discussed with Azerbaijani government officials several energy issues based on the EU-Azerbaijan Energy Memorandum of Understanding (MoU). The meeting confirmed the already existing bilateral energy relations and the critical role played by Azerbaijan in providing Europe with energy supplies. New perspectives related to increased export volumes from the Caucasian country were also discussed, emphasizing the importance of the SGC and further expansion projects. This is a win-win situation because a significant increase in gas exports will benefit the Azerbaijani economy while also increasing the country's geopolitical significance as a key regional player.


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Tags: Russia European Union Gas Azerbaijan



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