Progress for the SGC: Azerbaijan Doubles Gas Exports to Europe
Author: Toghrul Ali
Feb 21, 2023
Amid the growing uncertainties and concerns about European energy security and diversity, the Southern Gas Corridor’s (SGC) role has become increasingly important. Based on the Memorandum of Understanding signed between Azerbaijan and the European Commission on July 18, Azerbaijan plans to double its natural gas exports to the continent by 2027 by expanding the Trans-Anatolian Natural Gas Pipeline’s (TANAP) capacity from 16 to 32 billion cubic meters (bcm) and the Trans-Adriatic Pipeline’s (TAP) capacity from 10 to 20 bcm.
This MoU was re-emphasized during the 9th Ministerial Meeting of the SGC Advisory Council and the first Green Energy Advisory Council, both hosted by Azerbaijan on February 3. The SGC Advisory Council meeting was co-chaired by Kadri Simson, the European Commissioner for Energy, and Parviz Shahbazov, the Azerbaijani Minister of Energy. Top regional, U.S., and European officials, along with representatives from international financial institutions and renewable energy companies, were also in attendance.
The SGC, a natural gas supply route that has transported natural gas from the Caspian Sea to European markets since 2020, involves a series of pipelines including the South Caucasus Pipeline, the TANAP, and the TAP. These pipelines run from Azerbaijan to Italy, while passing through Georgia, Türkiye, Greece, and Albania. In October, an interconnecting pipeline between Greece and Bulgaria (IGB), which is considered as an extension of the SGC, was inaugurated. The IGB will transport 1 billion cubic meters of natural gas from Azerbaijan to Bulgaria, with a potential of providing surrounding Balkan countries with a reliable natural gas supply to reduce their dependency on Russia.
In fact, some countries have already started exploring these opportunities, with the Romanian and Azerbaijani state-owned gas companies signing an agreement during the week of the 9th SGC Advisory Council meetings. According to the agreement, 1 bcm of Azerbaijani gas exported to Bulgaria will enter the Romanian market from 2023. Hungary is another country that has been closely engaged in talks with the Azerbaijani side on importing natural gas from the Caspian Sea. At a time when Europe is left scrambling for alternative sources of energy, such developments can boost the energy security of southern and southeastern European countries that have been historically dependent on Russia.
Several developments within the last year have shown that the energy cooperation between Azerbaijan and Europe isn’t limited to oil and natural gas. Namely, the December 2022 agreement signed by Azerbaijan, Georgia, Romania, and Hungary on a strategic partnership in sustainable energy and its transmission has established the pathway for green energy cooperation between Europe and the Caspian Sea region. According to the agreement, a submarine cable under the Black Sea will carry electricity produced in Azerbaijan and Georgia directly to the European market. The European Union (EU)-funded $2.5 billion project forms part of the EU’s wider plans for energy diversification and green transition, as Georgia and Azerbaijan are aiming to attract more foreign direct investment in hydrogen, wind, and solar power generation.
As mentioned above, specifically the Gulf Cooperation Council (GCC)-based renewable companies have shown considerable interest in the South Caucasus countries' green energy potential. During the first Green Energy Advisory Council, Saudi Arabia-based ACWA Power signed agreements with the Azerbaijani Ministry of Energy to build wind power plants and energy storage systems in the country. The Caspian Sea region’s increased collaboration with these renewable companies, as well as with the EU, can bring the technical know-how necessary to extract Azerbaijan’s vast offshore wind energy and Georgia’s promising hydrogen energy potential.
In 2021, Azerbaijan’s share of the EU’s aggregate gas imports of approximately 350 bcm was slightly above 2%, while 45% – or 155 bcm – came from Russia. Although the Azerbaijani gas is unable to fully fill in the gap created by Western sanctions on Russian energy supplies, it can play an important role in helping the EU solve its gas crisis. As can be seen from the MoU signed between the two parties, the EU is likely to build upon its energy relationship with Azerbaijan established in 2020. Potential construction and development of several proposed pipelines, such as the Ionian-Adriatic Pipeline and the Bulgaria-Serbia Interconnector, can serve to distribute Caspian natural gas in the southern and southeastern parts of Europe.
Looking ahead, projects such as the Black Sea electricity cable, can establish a corridor for sustainable energy between the Caspian Region and Europe, while also diversifying the Azerbaijani and Georgian energy mixes. The Caspian Region’s vast hydrocarbon reserves, paired with its promising potential for renewable energy, can benefit Europe’s goal of diversifying access to energy sources, in addition to thwarting Russia’s energy weapon.