Gazprom Export and SOCAR have reached an agreement to augment natural gas supplies to Azerbaijan up to 1.6BCM, starting from November 22. The new sales and purchase contract, signed last week in Moscow, can be interpreted as a strategic move of Baku in order not to be left in the cold ahead of winter season.
Undeniably, Azerbaijan poses as a game-changer in the European ‘’energy map’’ via the Southern Gas Corridor network and thanks to its ‘’2.6TCM of confirmed gas reserves’’, as put by President Aliyev at Friday’s (November 24) Eastern Partnership summit. However, domestic natural gas shortfall represents a perpetually ill-resolved problem for the country’s economy, often leading towards political and social upheaval as a result of the price hikes. Apart from the ongoing development of Shah Deniz, whose second stage has been presold for westward export due by 2020, SOCAR first Vice President Khoshbakht Yusifzadeh has already elaborated on the state-run company’s target to significantly raise gas output in the years to come through the development of several new gas fields, including Absheron, Umid, Babek and Bulla Deniz.
But until the so-called ‘’next wave’’ of gas from other offshore Azerbaijani fields is secured, SOCAR has throughout 2016 been holding talks with Gazprom representatives on future cooperation, a process topped by the Russian firm’s latest decision to open a representative office in Azerbaijan.
It should be noted that in 2015, within the previously established 5-year contract by Gazprom Schweiz AG, a subsidiary of Gazprom Export, and Azerbaijan Methanol Company (AzMeCo), around 107.4MCM of gas had been delivered to Baku. Russia had, in its turn, also entered into a midterm contract with SOCAR in late 2009 for the supply of Dagestan via the Shirvanovka custody transfer point on the Azeri-Russian border. From 2010 to 2015 Gazprom purchased 5.4BCM of Azeri gas, but deliveries were often interrupted in 2013 and 2014 due to repair and maintenance works, while in 2015 they were totally suspended.
The significance of this fresh SOCAR-Gazprom gas deal is further highlighted by the fact that not even supplies from neighboring Turkmenistan, transported via Iranian territory despite the pricing conflict between Tehran and Ashgabat, can fill the gap for Azerbaijan in due course. That is because Baku only buys minor gas volumes from Turkmenistan during summertime, taking advantage of the low prices, in order to fully utilize the commercial potential of SOCAR storage facilities, and resells them in the winter to profit from the higher seasonal prices. Nevertheless, current state of affairs is subject to change in the aftermath of a strategic partnership agreement, inked in August by Presidents Aliyev and Berdymukhamedov, that paves the way for more direct energy collaboration, even though the stumbling rock of the disputed Kyapaz/Serdar hydrocarbon deposit continues to divide the two Caspian littoral states.
Available online at: http://www.caspianpolicy.org/energy/caspian-energy-insight-november-30-2017/#4
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