Thursday, December 23, 2010

Azerbaijan: Central Player in Eurasian Energy

While the oil and gas world continues to focus on the Nabucco v. South Stream drama, the government of Azerbaijan continues to place itself in the center of the energy map. Whether the discussion be petroleum or natural gas, Europe or China, the Azerbaijanis are always in the mix.

In October, BP signed a contract with the State Oil Company of the Azerbaijan Republic (SOCAR) to be 50% owners in the exploration and development of the deepwater Shafag-Asiman gas field. Should gas be found, Azerbaijan's importance as a source of natural gas will continue to grow.

Currently, Azerbaijan ships 1.2 million cubic meters of gas to its southern neighbor of Iran in swap deals,but it is prepared to double the supply if a pricing agreement could be reached (, 16 September 2010).

Despite Wikileaks' inaccurate reports about Azerbaijan's reluctance to see Turkey become an energy hub, Azerbaijan and Turkey's energy ties are closer than ever. In June, President Ilham Aliyev signed an agreement that allowed Turkey to buy 6 billion cubic meters of gas a year from the Shah Deniz field, and that authorized the eventual transit of Turkey for gas destined for Europe.

This blog has reported previously on the development of the AGRI project (Azerbaijan-Greece-Romania interconnector) that would ship liquified natural gas across the Black Sea. Less well known is that the Bulgarians have expressed interest in participating in the project (, 07 October 2010).

The Czech Republic is also interested in Azerbaijani gas, according to their Ambassador in Baku. Currently, the Czech's consume 8-8.5 billion cubic meters of gas annually, mostly from Russia and Norway (, 28 October 2010). Azerbaijan, however, covers 25% of the Czech Republic's energy needs (, 29 October 2010).

In the Ukraine, Azerbaijan has signed an intergovernmental memorandum to establish cooperation in supplying that country with liquified natural gas (, 07 December 2010). Separately, Azerbaijan has proposed supplying the Odessa-Brody Pipeline to ship North 8 million tons of oil per year. If this is combined with 5 million tons a year from Venezuela, it would fill the pipeline and allow another independent supply route to Europe (, 09 December 2010). It would also benefit Azerbaijan, since it currently has an oil production capacity that is 10 to 12 million tons per year above the country's transportation capacity (, November 2010).

Syria plans to build a pipeline connecting it to Turkey, and wants to start importing Azerbaijani natural gas commencing in 2011. This is important because, while Syria has oil reserves, it has a limited amount of natural gas (, 06 December 2010). Meanwhile, on the other side of the world, SOCAR has signed a memorandum of understanding with China to supply that country with Azerbaijani crude (, 14 December 2010).

Dr. James J. Coyle is available to speak to your organization or at your event. Please contact him at