ENERGY FOCUS

On May 31-June 3, Baku hosted the Baku Energy Week (BEW), bringing together a number of landmark industry events that has deservedly made it one of the most prestigious energy events in the Caspian region.

Remarkably, BEW was attended by 326 companies from 37 countries this year.

Among the key issues discussed at BEW events are the oil and gas development, production and transportation of green hydrogen and energy, ensuring Europe's energy security, energy transition and decarbonisation, as well as the digital transformation of the oil and gas industry.

Unsurprisingly, the number of documents signed during the Baku Energy Week and focusing on green energy is steadily increasing. Green energy is slowly but surely catching up with traditional energy resources, although there is still a long haul ahead to have them replaced completely. Nevertheless, the progress in this area has been widely discussed at exhibitions and the Baku Energy Forum (BEF) and was reflected in the contracts concluded therein.

Pan-European supplier

"I would like to underline that I believe that the Baku Energy Week is one of the leading international events in the energy sector," President of Azerbaijan Ilham Aliyev said at the opening ceremony of the event. He added that for thirty years the Caspian Oil & Gas exhibition has provided Azerbaijan with an opportunity to demonstrate its potential to international investors.

Congratulatory messages to the forum participants sent by the US President Joe Biden and British Prime Minister Rishi Sunak also confirmed the importance of the Baku Energy Week.

"Azerbaijan is helping to meet the global need for reliable energy supplies, from developing the Middle East Corridor, including the Southern Gas Corridor, to promoting energy diversification that enhances energy sustainability. I am pleased with Azerbaijan's efforts to meet global climate goals, including initiatives to develop renewable energy sources and enhance energy efficiency," President Biden wrote in his message.

"Amid the two pressing challenges, such as combating climate change and enhancing energy security, it is more important than ever that the Baku Energy Week brings together international thought leaders from the public and private sectors. Azerbaijan, as a reliable energy partner, plays an instrumental role in the global energy landscape," Prime Minister Sunak said.

According to President Aliyev, Azerbaijan pays great attention to energy security. Therefore, it considers it necessary to diversify not only the routes, but also the sources of gas supply; Baku attaches great importance to energy cooperation with the EU. It is also clear that Azerbaijan plans to realise its strong potential in the RES development to become one of the leading countries in this field. Also, President Aliyev called on international financial institutions to continue supporting projects related to natural gas, which plays an important role in the energy transition to clean energy.

In particular, Azerbaijan plans to intensify the commissioning of new prospective structures and fields Absheron, Garabagh and Umid-Babek (Stage 2). According to the estimates of the Ministry of Energy, recoverable gas reserves of Azerbaijan are estimated at 933 billion cubic metres (bcm), while the proven and predicted ones are 1.7 trillion cubic metres (tcm) and about 4tcm, respectively. The first gas from the Absheron field is expected in a few months. Deep gas reserves at the Azeri-Chirag-Guneshli field block are expected to be commissioned at the end of next year.

In addition, the State Oil Company of Azerbaijan (SOCAR) plans to reassess the results of exploration work previously carried out on prospective structures Babek, Nakhchivan, Zafar Mashal and Shafag-Asiman, and then to drill new wells and accelerate the development of these areas with considerable gas reserves.

The goal is to increase gas production and export additional volumes via the Southern Gas Corridor. In parallel, the TANAP and TAP pipelines need to be expanded.

"We are now looking at possibilities. I am sure that we will soon start supplying gas through Bulgaria to neighbouring countries as well. Romania is almost part of the format of our cooperation. If everything goes on schedule and the construction of all interconnectors is done in time, Azerbaijani gas will reach Hungary and Serbia by the end of the year, thereby expanding the geography of our gas supplies," President Ilham Aliyev said confidently.

Another contract

By the way, president's statements about the transportation of Azerbaijani gas to Hungary were formalised during the Baku Energy Week. Thus, SOCAR and Hungarian MVM CEEnergy signed a contract on June 2, 2023, which will ensure the start of gas deliveries (100mcm) in 4Q2023.

For Hungary, this as just the beginning of successful cooperation. During his recent visit to Baku, Hungarian Foreign Minister Peter Szijjártó said that the current deal could form the basis of a long-term contract ensuring the annual export of up to 2bcm of gas from Azerbaijan to Hungary.

Azerbaijan, however, points out that Europe needs to increase the number of interconnectors in order to import additional volumes of gas. The requirement is logical, as the EU is willing to buy the additional volumes of gas that Azerbaijan decided to extract exclusively to meet Europe's growing needs, which requires the availability of appropriate infrastructure.

Meanwhile, the list of potential buyers of Azerbaijani gas continues to grow. For example, the Czech Industry and Trade Minister Josef Sikela said Prague was interested in having access to gas available in Azerbaijan, which is known in Europe "as a reliable energy supplier", and was seeking to conclude medium- and long-term agreements with SOCAR.

The Czech Republic is rebuilding its supply chain, reducing it to zero from Russia. Prague is confident that Azerbaijan can make a big contribution, given the positive cooperation already existing between the two countries.

Green projects

Meanwhile, the scope of works in RES is expanding as well. The goal is to eventually make Azerbaijan one of the important actors in this field, as the existing RES potential of the country is estimated at almost 200 GW.

Over the past two years, Azerbaijan has signed memoranda of understanding and other agreements with various foreign companies, including Fortescue Future Industries (FFI, Australia, 12GW), ACWA Power (Saudi Arabia, 2.5GW), Masdar (UAE, 10GW) and BP (UK), for RES projects.

Masdar will commission the $250m Garadagh Solar Power Plant (GPP) in Azerbaijan this autumn, and ACWA Power plans to launch the Khizi-Absheron wind farm (240MW) in 2025. These are just the projects that are already being implemented. Next in line is BP's construction of the Shafag solar power plant (240MW) in the Jabrayil district of the East Zangezur economic region.

The green energy export routes and their volumes have already been identified. There will be two routes: through a power cable running on the Black Sea bed through Georgia to Europe (4GW) and through the Caspian-European Green Energy Corridor to Nakhchivan and on to Türkiye (1GW).

The feasibility study on the Black Sea export route is already underway. In parallel, the number of project participants is increasing: during the 3rd ministerial meeting of the BEW, Azerbaijan, Georgia, Hungary and Romania agreed on Bulgaria joining the project. The next meeting is scheduled for July 2023. The participating countries will have to identify a consultancy company and decide on a joint venture.

There is also progress in organising energy exports through the Caspian-European Green Energy Corridor. In May 2023, the President of Azerbaijan participated in the opening of the 330-kilovolt Jabrayil hub substation for the Azerbaijan-Türkiye-Europe energy corridor project. It will provide stable and reliable electric power to economic regions Garabagh and East Zangezur. It is also of particular importance thanks to connecting Nakhchivan to Azerbaijan's common energy grid in the future, as well as obtaining an additional and more profitable outlet via Jabrayil-Nakhchivan to Türkiye and then to European markets via the Turkish energy system.

At a special BEW panel session held in Nakhchivan, Azerbaijan's Ministry of Energy signed memoranda of intent with TotalEnergies and Nobel Energy Management to develop projects for wind (WPP) and solar power plants (900MW). At the same time, the infrastructure for 650MW of the proposed project will be constructed in Nakhchivan.

It has been agreed with TotalEnergies to jointly assess the construction of the solar and power plants each with a capacity of 250MW. These projects are to be implemented in Nakhchivan and East Zangezur. The parties will explore the opportunities for the deployment of capacities for energy storage.

Overall, Azerbaijani authorities are involving foreign investors to build a 1,500MW wind and solar power plant in Nakhchivan. Of this volume, at least 1GW will be exported to Türkiye and Europe.

In addition, a document has been signed with China Gezhouba Group Overseas Investment in Baku to jointly assess investment opportunities in solar, onshore and offshore wind energy and integrated smart energy systems, to implement RES projects with a total capacity of 2GW by 2025. The company will also assist the Ministry of Energy of Azerbaijan in developing and implementing an effective legal framework for RES investments. The production of green hydrogen will also be considered. Incidentally, this document is part of a MoU signed in September 2020.

Thanks to the latest agreements and international energy companies, Azerbaijan has now an opportunity to implement more than 28GW of green energy projects. In parallel, by 2030, the Azerbaijani government expects to commission 7GW of renewable energy facilities.

All these agreements are yet another important step towards materialising Azerbaijan's ambitions on RES and will help the country meet its clean energy targets. It is also expected to contribute to significant economic growth, job creation and increased energy security in the region. As always, there are contingencies, and not all the signed agreements will necessarily be implemented. But, as President Ilham Aliyev, if even half of them are implemented, "it will be more than enough, as it will double Azerbaijan's current domestic consumption".