EU can count on Azerbaijan. But there is one "but"

Few people probably know that Azerbaijani oil has reached Japan. Meanwhile, in mid-May, a tanker with 283,000 barrels of Azerbaijani oil arrived in the land of the rising sun. The Japanese company ENEOS has purchased oil from Azerbaijan to load an oil refinery in Negishi.

This event went unnoticed, apparently because the shipments were one-time, related to problems on traditional supply routes due to the war in the Middle East and the closure of the Strait of Hormuz. At the opening of the Shusha Global Media Forum, a representative of the Japanese news agency recalled this fact and thanked Azerbaijan for its support.

In the total volume of oil consumed by Japan, raw materials sent from Azerbaijan may seem like a drop in the ocean. Nevertheless, in a broader context, this fact is very important, as it proves once again what role Azerbaijan plays in the current difficult geopolitical conditions. A lot has already been said about our country's indispensability in this regard, and European officials do not skimp on epithets, thanking Baku for what it is. In terms of the energy alternative that he has provided to Europe in recent years. Even if not in full, the supply of Azerbaijani energy resources allowed our country's partners to patch the holes in energy security. Azerbaijan is a reliable partner that does not make its obligations dependent on the political situation, which makes cooperation even more valuable.

"The demand for Azerbaijan's energy resources, including renewable energy sources, will grow," President Ilham Aliyev said, answering questions from participants of the Shusha Forum.

The Head of State recalled that in 2026, Azerbaijan began supplying gas to Germany and Austria, and this is part of its strategy to expand its presence in the global and, especially, the European gas market. According to President Ilham Aliyev, the European market is a premium market with the best prices. Therefore, Baku is extremely interested in increasing its export capacity.

Azerbaijani gas supplies to Europe began on December 31, 2020, and in July 2022, Azerbaijan and the European Commission signed a Memorandum of Understanding on strategic partnership in the energy sector. The European Union, inspired by the emergence of an alternative source, wanted to expand supplies. Since the signing of the Memorandum, Azerbaijani gas exports to the European Union have increased by almost 65 percent. This is a very good indicator, proving that the European Union made the right choice in 2022. Currently, 10 EU member states receive Caspian gas, and Baku has repeatedly stressed that it has sufficient potential to expand this geography. It should be noted that Azerbaijani gas goes to European partners through a pipeline system with a total length of 3,500 kilometers.

At the Shusha forum, President Ilham Aliyev announced that negotiations are currently underway with several other EU countries to start supplies and increase them. The Head of State noted that gas from Azerbaijan is fuel from a reliable and predictable source. And the role of this source is much more significant today than, say, ten years ago. It is important that there is a potential for export growth. A few months ago, gas production began from deep-sea formations of the Azeri-Chirag-Guneshli (ACG) field. Production is expected to increase in other fields, but it depends on the work program and the investment portfolio.

Speaking about the investment portfolio, the head of state, I think, was referring to investments of European financial institutions that were previously frozen due to the decarbonization policy. Recent events in the Middle East have shown that the decarbonization course, although it has a positive message, is not very consistent with reality. The modern world cannot do without fossil fuels, which means that Europe should return to investing in hydrocarbon projects. Because Azerbaijan will not invest in the expansion of production, I do not have long-term contracts and financial investments from the European Union itself. In addition, Azerbaijan has recently expanded the geography of supplies, which was not envisaged when concluding previous agreements. For example, Syria has started receiving Azerbaijani gas, and these are additional volumes.

During the recent visit to Baku by the head of the European Commission, Ursula von der Leyen, the EU was asked about the need for long-term contracts. Increasing production requires large investments, and Baku is not satisfied with the option when European partners can announce at any time that they no longer need Azerbaijani gas.

In short, the gas transportation system needs to be expanded if the EU wants to receive more Azerbaijani gas. And this, in turn, requires financial investments.

The development of alternative energy can help allocate additional volumes of gas for export. Azerbaijan has developed a corresponding program, according to which it is planned to receive 8 gigawatts of energy from renewable sources by 2032. This will release several billion cubic meters of gas from domestic consumption, which can be exported. But here again, the issue of expanding the gas transportation infrastructure arises. The Azerbaijani President stressed that it was designed and built based on the scenario that existed before the Russian-Ukrainian conflict.

"The pipeline capacity was determined based on our production profile, forecast indicators and strategy, at what rate to extract gas from the fields. After all, it can be produced in 10 years or in 100 years, and it was important for us to determine which is more profitable - to stretch the process and keep this curve relatively stable for decades, or to invest more and produce more gas. However, since the beginning of the Russian-Ukrainian conflict, the demand for Azerbaijani gas has increased dramatically, and the European Commission has asked us to do everything possible to accelerate production," the head of state said.

It should be noted that over the past two decades, Azerbaijan has managed to move from a regional producer of hydrocarbons to one of the most important guarantors of energy security in the space between Central Asia and Europe. Azerbaijan's success in the energy sector is largely due to the development model in which Baku acts not only as a supplier of resources, but also as an initiator of major international projects. Everyone knows that it was Azerbaijan that became the driving force behind the creation of the Southern Gas Corridor. The project was initially ridiculed, but today it has proved indispensable. After the outbreak of the Russian-Ukrainian war, it turned out that Azerbaijan was practically the only country in the region with the necessary resources, developed export infrastructure and political stability at the same time. As we have already noted, Azerbaijan also has predictability and reliability, qualities that are extremely important for a partner.

Predictability of partners is also important for Azerbaijan. President Ilham Aliyev tried to convey this to the audience by answering questions from participants of the Shusha Media Forum.