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Azerbaijan's rising influence in EU natural gas imports: Analyzing impact & future trends

21 June 2024 [08:30] - TODAY.AZ
Ulviyya Shahin

In the previous year, Azerbaijan exported 11 billion cubic meters of natural gas to the European Union (EU), as detailed in the European Commission's report for the last quarter of 2023.

As a result, Azerbaijan's share of the EU's natural gas imports rose from 3% (8 billion cubic meters) to 7% in 2021.

The EU imported 290 billion cubic meters of natural gas and consumed 330 billion cubic meters last year, reflecting decreases of 13.4% and 7.3% compared to the previous year, respectively.

The EU reduced its natural gas imports from its primary supplier, Russia, by 3.5 times, from 150 billion cubic meters to 43 billion cubic meters in 2023. This reduction was driven by sanctions imposed due to the Russia-Ukraine war and unusually high seasonal temperatures.

In 2023, the EU's natural gas production fell by 19.1% from the previous year to 38 billion cubic meters, accounting for 11% of its consumption. The Netherlands (12 billion cubic meters) and Romania (9.3 billion cubic meters) were the largest producers within the EU. Additionally, the EU's storage capacity utilization increased by 18 percentage points from the previous year, reaching 79% compared to 49% in 2021.

Certainly, the reasons that can justify the numbers given here still raise certain questions. For example, the increasing share of Azerbaijan's gas exports in ensuring the energy security of the European Union, or the reduction of dependence on Russian gas against the background of the EU's growing reliance on Azerbaijan and other sources. All these facts are real facts reflected in the recent meetings of President Ilham Aliyev with the leading representatives of European Union countries.

On the other hand, in the backdrop of the ongoing conflict, geopolitical realities, as well as climate policy, the matter of how the European Union's natural gas import will continue, raises some questions.

We decided to refer to the opinion of an economic expert to analyse and study the issue more deeply.

Thus, speaking to Azernews on the issue, economist Natig Jafarly stated that Azerbaijan is particularly important for Eastern and Southern European countries because they are more dependent on Russian gas.

"In terms of volume, Azerbaijani gas is not very large. Europe’s annual consumption is 500 billion cubic meters, and Azerbaijani gas constitutes only a small part of that. However, the most important aspect is that Azerbaijani gas plays a crucial role in the energy security of Eastern and Southern European countries, which are small countries that depend almost entirely on Russian gas. This is also true for the energy security of other small EU countries. It should be noted that after 2027, Azerbaijan will begin supplying 20 billion cubic meters of gas to Europe. This is a larger volume and represents more significant support for the EU’s energy security, as gas consumption in Europe is not decreasing but rather increasing. Before the war, Russia exported 178 billion cubic meters of gas to Europe; now, it has decreased to only 35-40 billion cubic meters, a more than fourfold decrease. One of the gas sources that can replace this and is considered the most reliable partner is Azerbaijan."

"Expectations were low for Azerbaijan because higher gas revenues were anticipated. However, the price of gas did not reach the expected levels. When Azerbaijan started exporting gas, the price of 1,000 cubic meters in Europe was over a thousand dollars. Now, this price has dropped to $300. Despite this, it will still bring additional billions in gas revenues to Azerbaijan," the economist added.

According to N. Jafarly, Azerbaijan is taking steps to transition to a more diversified model, and its outlines are already visible.

"Azerbaijan's gas infrastructure does not consist solely of its own gas. Azerbaijan has a decisive stake in the TANAP and TAP pipelines, and there are discussions about delivering Iraqi gas through these pipelines, as well as gas that may be produced from Egypt in the future, and even from Israel, via Turkey to Europe using infrastructure built by Azerbaijan. If the TANAP and TAP projects operate at full capacity, about 33-34 billion cubic meters of gas can be delivered to Europe, which would significantly address the excess demand of the European Union," he noted.

"Regarding climate change, the European Union has already declared natural gas a climate-friendly energy source. Previously, gas production was considered air-polluting, but the situation has now changed. There is now a consensus in the European Union to allocate both subsidies and support to gas projects, viewing gas as an environmentally friendly energy source," Jafarly concluded.


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