FROM BLACK GOLD TO GREEN ENERGY

Leading European oil and gas companies are increasingly abandoning the processing of traditional fossil fuels, demonstrating the growing interest in a variety of technologies for processing renewable energy sources (RES). For example, BP has adopted and begun the implementation of a new strategy focused on renewable energy projects. In the next decade, the company plans to cut oil and gas production by 40% and start building giant wind farms off the coast of the United States.

Given the plans of the Azerbaijani government to create a “green energy zone" in Garabagh, BP and other oil giants represented in Azerbaijan have a good chance to expand their business through the implementation of new renewable energy projects.

Focus on green energy

According to BP forecasts, if the average annual temperature rises by 1.5 degrees over the next 30 years, the world will face a 75% drop in oil demand. Therefore, the company decided to change the vector of development towards green energy and reduce production by 1 million barrels per day within the next ten years. At the same time, the sale of oil and gas will continue to be BP's main source of income throughout this decade.

The company plans to increase investments in green energy by 10 times by 2030 – up to $5 billion and launch 50GW of renewable energy sources. This is more than the actual volume of green energy sources in the whole UK. BP also hopes to achieve zero emissions by 2050.

However, BP is not the only oil company stepping up its activities in the production of renewable energy. This trend is also joined by such global market actors as Shell, Total, Eni, Equinor, Exxon Mobil.

At the same time, the French Total pursues an ambitious goal – to become the global (!) leader in renewable energy. In the next decade, the company intends to increase profitable investments in renewable energy and the electric power industry from $2 to $3 billion annually, which is more than 20% of its capital investments. Total also confirmed its objective to bring the company’s portfolio of renewable energy plants to nearly 100 GW by 2030.

Italian Enel plans to increase its RES capacity to 145 GW by 2030. Its closest competitors have more modest plans. Thus, the Spanish Iberdrola is going to increase the total capacity of power plants operating on the basis of RES up to 95 GW.

By the way, the Russian oil and gas company Gazprom also has an impressive portfolio of electric power assets. Gazprom Energoholding owns power plants with a total capacity of about 39 GW. However, these plants mostly work on natural gas.

LUKOil also have plans to focus on the development of renewable energy sources in the future. At the same time, the Russian company views this segment as a long-term strategy and may eventually become one of the key actors in the global renewable energy market.

In general, if the trend continues, it is expected that by 2030 up to 25% of investments of large oil and gas corporations will be directed to renewable energy sources.

Place in the sun

Meanwhile, as a company traditionally engaged in oil and gas production in Azerbaijan, BP has already taken the first steps to develop the renewable energy sector. Thus, as part of the Letter of Intent signed in October 2018 between the Ministry of Energy of Azerbaijan and BP, the parties created a working group and get SNC-lavalin’s Atkins company involved in the assessment of the effectiveness of the construction of small hydropower plants in Azerbaijan. So far, five existing small plants have been assessed and six sites designated for new hydroelectric power plants.

In February 2021, the Ministry of Energy and BP signed a memorandum of cooperation, which provides, among other things, the development of a master plan for decarbonization of respective districts and cities of Azerbaijan. The master plan will cover several projects, including the production of clean energy, use of vehicles with low-carbon emissions, construction of “green” buildings, waste management, clean industry, natural climate solutions, integrated partnerships, and the development of integrated and decarbonized energy and transport systems.

“BP has been Azerbaijan's energy partner for nearly three decades and we believe our successful partnership has tremendous potential at a time when the company seeks to significantly expand its low-carbon energy business and transform its transportation and convenience services,” believes Gary Jones, regional president of BP in Azerbaijan, Georgia and Turkey.

In parallel, BP and nine other foreign companies joined a tender for the construction of RES facilities in Absheron, with the Middle East companies becoming the winners. Now, with the liberation of Garabagh and the government's intention to create a ‘green zone energy’ in the region, BP has a wide range of opportunities to implement infrastructure projects for the development of renewable energy sources.

This was also made clear by the President of Azerbaijan Ilham Aliyev during a recent meeting with British Export Secretary Graham Stewart.

“As you know, both BP and Azerbaijan are actively working on renewable energy sources. There are plans to invest in solar energy production in the liberated territories. We have declared the liberated territory of Garabagh a "green zone" and "smart city". This will be very beneficial for us," President Aliyev said.

The Azerbaijani leader also pointed out that the successful cooperation of the two countries has already brought more than $30 billion of British investments to the Azerbaijani economy. “This is really a lot and contributed to our development. This helps us not only in the development of the oil and gas industry, but also contributes to our common development... Today our cooperation continues very actively. BP has been our strategic partner for 30 years and will remain so for at least another 30 years, because there are new prospects and new contracts,” Aliyev indicated.

Progressing toward master plan

In the meantime, the works to create a "green energy zone” in Garabagh steadily move into the stage of preparing a master plan. Authorities also announced the construction of more than 10 hydroelectric power plants in Garabagh.

“According to the Ministry of Energy, the liberated territories have a potential to develop 5,000 MW of solar energy. This is more than we currently consume in Azerbaijan. Since today we export electricity, our production facilities allow us to overproduce almost 1,000 MW of energy. Through the power lines with Russia, Iran, Georgia, Turkey, we export in all directions. Electricity exports are already generating revenues in the tens of millions of dollars, and will bring in hundreds of millions. It will actually be a reality,” President Aliyev believes.

Ministry of Energy has already attracted the Japanese TEPSCO company to prepare the concept and master plan for the green energy zone in the liberated territories of Azerbaijan to ensure the effective use of the potential of renewable energy sources, energy efficient technologies, and modern approaches to energy management.

Deputy Minister of Energy of Azerbaijan Elnur Sultanov said that the ministry was considering the possibility of creating a "green energy zone” in Garabagh with the help of a consortium operating the development of the Azeri-Chirag-Guneshli (ACG) block of fields.

“The success of the ACG consortium is obvious. We consider a similar concept for creating a "green energy zone” in Garabagh, given the scale and complexity of the project, as well as the great investment needs. Therefore, the issue of attracting leading world companies to the consortium is on our agenda. But it is too early to talk about the progress, since the process is still under review,” Mr. Sultanov said.

British experience

By the way, one of the results of the visit of the British Minister of Export to Azerbaijan was the signing of a memorandum of understanding with the Ministry of Energy of Azerbaijan on cooperation in the field of transition to clean energy.

It is planned to strengthen the relations between the two countries in the field of energy and to study the possibilities for solving the climate change problem. This includes cooperation and organization of exchange of information and experience on RES, energy efficiency, low-carbon technologies, the transition to a liberal energy market and electricity grids.

“Of the $30.6 billion invested by Great Britain in the Azerbaijani economy, $28.8 billion was invested in the energy sector of the country. Our cooperation in the field of decarbonization of integrated energy and transport systems, renewable energy sources, energy efficiency, transition to a liberal energy market and energy networks will contribute not only to relations between the two countries, but also to the process of energy transition,” said the Minister of Energy of Azerbaijan Parviz Shahbazov.

Since the UK is one of the global leaders in terms of investments in the development of renewable energy sources and energy systems that use the energy of waves and tides and other low-carbon technologies, the experience of UK for Azerbaijan can be invaluable. In any case, the Ministry of Energy of Azerbaijan believes that the country, which has firmly established itself as a successful producer and reliable supplier of oil and gas resources, will be among the leading countries in the development of renewable energy sources.