Azerbaijan has become an outsized player in the global gas market and a key to Europe’s future energy security.
Russian energy giant Gazprom, which the Kremlin uses to punish its political enemies, provides one-third of Europe’s natural gas. The company has disrupted flows to Europe and Ukraine several times, making it one of Moscow’s favorite geopolitical weapons.
Gazprom’s influence may even grow in coming years as the company seeks to ramp up gas flow and increase its European market share to 35 percent or higher, the company has told European officials. Research shows that by 2030, 85 percent of European gas consumption will come from imports.
But Europe can reduce Russia’s influence on its energy supply via, of all places, the Caspian region and its key energy player, Azerbaijan.
A nation with strong ties to the West and a long and well-established oil and gas industry, Azerbaijan borders the Caspian Sea and therefore has ready access to its vast energy reserves. In addition, Azerbaijan’s oil and gas pipelines are essential to Europe’s energy security. Azerbaijan’s impact on European energy independence could be huge.
Azerbaijan draws gas from three main offshore oil and gas fields located east and south of Azerbaijan’s capital of Baku: the 330 square miles Shah Deniz field, the country’s largest gas resource, is run by a consortium headed by BP and began production in 2007; the 167 square miles Azeri-Chirag-Guneshli field supplies gas to an international consortium of companies also led by BP; and the Shallow Water Guneshli field developed by the State Oil Company of Azerbaijan (SOCAR), which has significant stakes in all these projects operated jointly with international partners.
An expansion of the Shah Deniz field, called Stage 2, will grow production substantially. The project, now nearly complete, will add 26 gas production wells and two new offshore platforms. It is one of the world’s largest gas developments and will significantly reduce European energy dependence by bringing Caspian Sea gas to European markets starting in 2019.
Europe and these high-production fields are connected by three gas pipelines collectively known as the Southern Gas Corridor.
The South Caucasus Pipeline transports natural gas from the Shah Deniz field to Azerbaijan and then on to Georgia and Turkey, providing those countries with a significant measure of energy independence.
The pipeline is being expanded with a new parallel pipeline across Azerbaijan and Georgia to accommodate more gas from the Shah Deniz field.
Construction on the Trans Anatolian Pipeline began in 2015 and is expected to be completed next year. It will carry energy from the Caspian Sea across Turkey through Greece and Albania and on to Italy. By 2026, the pipeline will carry 31 billion cubic meters of natural gas a year.
It receives Azerbaijani gas at Kipoi, on the eastern border of Greece, then transports it west to Albania and on to Italy where it supplies European homes and businesses.
The Trans Adriatic Pipeline’s reach to Europe has plenty of room for scaling up. Its terminus in Italy allows it to connect to other pipelines and modes of transportation. This means that Azerbaijani gas will be able to reach Austria and Hungary. Another connected pipeline can reach Germany and France. It is possible to imagine Caspian Sea gas powering London homes.
The Southern Gas Corridor forms the strongest counterpoint to Russia’s domination of European energy needs. The Shah Deniz Stage 2 field expansion and the Trans Anatolian Pipeline will carry more than enough gas to supply the capital cities of Azerbaijan, Georgia, Turkey, Bulgaria, Albania, Greece and Italy.
Azerbaijan is increasingly seen as an antidote to Europe’s energy dependence, especially since Iran – another large regional source of oil and gas – is aligning itself with Russia and Armenia in opposition to Europe and the West.
Just last month, Georgia announced it would no longer buy gas from Russia’s Gazprom. Instead, it signed a deal to buy Azerbaijani gas from the Shah Deniz field, which will satisfy 96 percent of its demand, said Kakha Kaladze, Georgia’s energy minister, underscoring the strong pro-Western alliance between Georgia and Azerbaijan.
Spain’s charge d’affaires to Azerbaijan, Jose Luis Diez Juarez, noted that many European nations get their gas only from Russia, elevating the importance of the Shan Deniz Stage 2 project. ‘The strategic importance of this project is great,’ he said.
Azerbaijan may be much smaller than Russia. But thanks to its abundant energy reserves, consistent strategy and European-facing pipelines, it has become an outsized player in the global gas market and a key to Europe’s future energy security.