BAKU, Azerbaijan, August 5. Azerbaijan plays an important role in the EU’s strategy to diversify its gas supplies in order to mitigate the energy crisis, Mariam Tsulukidze, Senior Researcher at the ISET Policy Institute (ISET-PI), Georgia’s independent economic policy think-tank, told Trend.
“Since the agreement on doubling the capacity of the Azerbaijani gas exports to Europe was signed, one should expect that the EU will actively participate in finding financial sources and investors for the project's expansion. It is hard to predict the exact timeline for achieving the targeted goal, though it is in the EU's interest to accelerate the project to reduce risks associated with the dependence on Russian gas,” she said.
That will be a positive signal to the investors as well to direct their source towards Azerbaijan gas production and exports.
The more pressure on the EU market, the faster Europe will increase its pace to diversify the sources as soon as possible to avoid aggravating adverse implications of the current energy crisis and irreversible economic recession, Tsulukidze noted.
The researcher also added that the importance of the Trans-Adriatic Pipeline (TAP) and the Southern Gas Corridor (SGC) will grow in line with the increased supply of Azerbaijani gas, although the existing pipelines do not have the capacity to transfer more than 12 billion cubic meters of gas to Europe. In this regard, additional investments are needed to increase the capacity and to transfer double of the current account. Moreover, additional investments are required to increase production capacity of the country, since the country's consumption is also increasing in line with demand increase from the EU.
On July 18, 2022, a "Memorandum of Understanding on Strategic Partnership in the field of energy between the European Union represented by the European Commission and the Republic of Azerbaijan" was signed between Azerbaijan and the European Union.
The sides agreed to support bilateral trade of natural gas, including through exports to the European Union, via the Southern Gas Corridor, of at least 20 billion cubic meters of gas annually by 2027, in accordance with commercial viability and market demand.
According to the document, any further exports of natural gas to the European Union beyond those that are being delivered to date will require significant investments in the expansion of the Southern Gas Corridor pipeline network and the upstream project development.
Moreover, the EU and Azerbaijan will encourage financing of the expansion of the Southern Gas Corridor pipeline network taking into consideration the EU’s climate policies and its REPowerEU strategy, including through cooperation with international financial institutions.
The sides will also support infrastructure to be conversion-ready with a view to transporting renewable gases, including hydrogen and its derivatives. This entails that new infrastructure should be capable of carrying renewable and low-carbon gases, including hydrogen and its derivatives, as well as making existing infrastructure future-proof and hydrogen ready.
The EU and Azerbaijan expressed their aspiration to promote mutually beneficial natural gas trade, anticipating future trade in hydrogen, hydrogen-derivatives and other renewable gases (bio-methane, etc.), and renewable electricity.
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