Expert: EU realizes need for investment in Southern Gas Corridor expansion

JULY 28, 2022

As the war in Ukraine continues for already six months, the role of Azerbaijan as a reliable partner in matters of energy security is growing more and more apparent for Europe.

According to Report, the sanctions imposed by the West on the Russian Federation due to the war in Ukraine lead to a gradual phasing out of Russian gas. In this regard, the West is worried about its energy security and explores alternative ways to supply gas. One of them is Azerbaijan.

The country, which already exports its gas to Italy through the Southern Gas Corridor (SGC), has repeatedly spoken about increasing supplies via this route.

"Azerbaijan has the potential to increase gas exports. The country is actively engaged in dialogue with European colleagues on this issue. We expect gas supplies via the Southern Gas Corridor to double very soon," Azerbaijani Deputy Energy Minister Elnur Soltanov said earlier.

A month later, a memorandum of understanding was signed on strategic cooperation in the energy sector with the European Union.

"The Memorandum of Understanding that we have just signed makes our energy partnership even stronger. I want to emphasise three points from our Memorandum of Understanding. The first is that we will double the supply of gas from Azerbaijan to the European Union. Indeed, with this MoU, we commit to the expansion of the Southern Gas Corridor. This is already a very important supply route for the European Union, delivering currently more than 8 billion cubic metres of gas per year. And we will expand its capacity to 20 billion cubic metres in a few years. From next year on, we should already reach 12 billion cubic metres. This will help compensate for cuts in supplies of Russian gas and contribute significantly to Europe's security of supply. The second point that is very prominent in the MoU is the topic of the renewables. Azerbaijan has a tremendous potential in renewable energy – you just described it, Mr President –, and in particular in offshore wind and green hydrogen. We discussed it extensively in our bilateral meeting. Today, with our MoU, we are laying the ground for solid cooperation in that area. So gradually, Azerbaijan will evolve from being a fossil fuel supplier to becoming a very reliable and prominent renewable energy partner to the European Union. Finally, our cooperation on gas has to be consistent with our responsibilities on climate. This includes, for example, the emissions of methane. Our MoU sets out commitments to reduce methane emissions throughout the entire gas supply chain. And, as we have discussed, Mr President, I strongly encourage Azerbaijan to join the Global Methane Pledge, which is now supported by 119 countries. Azerbaijan has made enormous progress and has a lot to deliver," head of the European Commission Ursula von der Leyen said.

Commenting on this, Matthew Bryza, a senior fellow at the Atlantic Council, and an international expert and former US ambassador to Azerbaijan, noted that it had been clear for many months that key EU leaders would like to expand the SGC.

"To do that there needs to be investments in natural gas infrastructure by EU and its companies not only in the Trans Adlintic pipeline but also in the enlargement of the South Caucasus gas pipeline and TANAP," Bryza said.

"Until that MoU was signed the EU had been resisting in new investments in natural gas infrastructures because of hydrocarbons. Now, the EU is saying we realize we are going to need natural gas for the next few decades: we want to reduce our consumption of natural gas but for now we need to invest in the expanding of SGC," Bryza noted.

He said investments and construction of piplines will not take long at all, just couple of years.

"Will take longer to indentify the gas to put in the SGC. Azerbaijan will not have the significant new volumes for export until maybe 2027-2028," the expert said.

Notesworthy, another step demonstrating the difficult situation for the EU is the recently reached agreement on a political decision to voluntarily reduce demand for natural gas by 15% this winter in order to “save in anticipation of winter to prepare for possible interruptions in gas supplies from Russia, which constantly uses energy supplies as a weapon."

Thus, with the growth of capital investments in gas production and transportation, Azerbaijani gas may become even more significant in ensuring the energy security of the EU.