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The Baku Energy Week, which opened after a two-year pause due to the pandemic, brought together three major events—the 27th international Caspian Oil & Gas exhibition, the 10th Caspian Power energy exhibition and the Baku Energy Forum.

The outcome of Baku Energy Week shows that Baku has become a good platform for dialogue on global oil and gas market issues, sharing experiences, networking, signing memorandums, agreements and contracts.

Also, the forum kinds of continues the mission of the traditional Caspian Oil & Gas conference in a broader perspective. The decision was made taking into account the monitoring of the energy sector in the region and market needs.

In fact, the replacement of regular contracts on the exploration and development of oil and gas fields with those for the construction of energy facilities concluded during the Caspian Oil & Gas confirms the gradual shift of focus from oil and gas to the energy sector in general. In short, Azerbaijan looks quite serious about the green energy projects. It is expected that renewable energy sources will soon supply not only the areas liberated from the Armenian occupation, but also offshore facilities in the Azerbaijani sector of the Caspian Sea.

Gas dialogue

There were a total of 249 companies from 30 countries participating in fairs and the forum. "We were missing this great event. This is the region's leading international energy event," President of Azerbaijan Ilham Aliyev shared his impressions at the opening ceremony of the exhibition.

As expected, Russian energy resources, specifically their role in the global energy market, were one of the key topics of discussions during the Baku Energy Forum. Amid the sanctions war between the West and Russia the issues of diversification of supply sources, decarbonisation of the economy and carbon neutrality, increasing the share of renewable energy sources, alternative gas supply routes and expansion of Azerbaijan's gas export capacity to Europe, etc. were among the key issues raised at the forum. Discussions were attended by the representatives of the European Union, the US State Department, Russia, Iran, Kazakhstan and other participating countries.

"This year, Baku Energy Week brings together major players in the global energy market, international companies for new cooperation in building a more sustainable and secure energy force… We must strengthen cooperation for energy security, diversification and acceleration of the transition to green energy in the region. In order to successfully meet the challenges of energy security in the future, it is important to give precedence to the introduction of new technologies and digital solutions in this area", President Aliyev said in his welcoming address.

He proudly underlined Azerbaijan’s accomplishments in increasing gas production and exports. "Last year Azerbaijan exported 22 billion cubic metres (bcm) of natural gas. This year, this figure is expected to be 24bcm. Next year it will be even more," Aliyev said. The Trans Adriatic Pipeline (TAP), which takes Azerbaijani gas to Europe, has a capacity of 10bcm. "...We are thinking of expanding the pipeline, because there is a demand for it,” the president said.

US Deputy Secretary of State for Energy Diplomacy Laura Lohman said Azerbaijan is an important partner in ensuring energy security in the region. "The US is also committed to continuing to work with Azerbaijan on a strategy to build reliable energy sources that support our important climate goals," she said.

Cristina Lobillo Borrero, EC Director for Energy Policy Strategy and Coordination, pointed to the relevance of the Baku Energy Week and its importance in deepening mutually beneficial cooperation: "There could not have been a better opportunity for it. Our energy market is facing a number of challenges, including the COVID pandemic, as well as soaring energy prices, geopolitical tensions and the need to decarbonise our economy.”

The EU representative reiterated the EU's intention to move away from dependence on Russian energy resources and pointed to the importance of switching to renewable energy sources (RES).

Azerbaijani Energy Minister Parviz Shahbazov said that currently Azerbaijani gas accounts for 13 to 90% of the total gas consumption in the various countries. In the short term, the government's priority is to expand its export infrastructure to be able to supply gas to the Balkans.

Plans of Caspian neighbours

Meanwhile, amid new Western sanctions, this year's oil and gas exhibition in Baku was particularly important for Russian companies seeking new markets. In addition to company executives, Veronika Nikishina, Director General of the Russian Export Centre (REC), Dmitry Makhonin, governor of the Perm region, and Azer Talibov, Board Chairman for Roseximbank, also visited Azerbaijan to participate in the exhibition.

Nuri Guliyev, head of REC's representation in Azerbaijan, noted that about 20 oil and gas companies demonstrated their achievements under the Made in Russia brand in Baku. "These are key companies, and many of them have yet to export their products to Azerbaijan. Despite the geopolitical situation, the companies represented at the exhibition have not dropped out of their logistics chain. They have enough of their own components to supply quality and reliable products," Guliyev said.

Major petrochemical companies from Belarus, including Grodno Azot, Mogilevkhimvolokno, Mozyr Oil Refinery, Naftan, Polotsk-Steklovolokno and Seismotekhnika, presented their products and services to regional consumers.

Kazakhstan's energy minister, Bolat Akchulakov, said his country aimed to increase oil exports in the long term, while the issue of gas exports is much more complicated.

According to the forecasts of the Ministry of Energy, it is expected to produce about 87 million tons of oil in 2022. After 2024, this indicator may reach 100 million tons. Most of Kazakhstan's oil is exported to Europe and China.

Kazakhstan produces 55-56bcm of gas annually. At the same time, most of the associated gas is re-injected to support oil production, while the rest is used to satisfy the growing domestic consumption needs. "With all these factors in mind, we can say that the role of gas in Kazakhstan's exports will not reach the same level and importance as that of oil," Akchulakov said.

Iranian Oil Minister Javad Owji, after rebuking the US for sanctions against Iran, said they were ineffective and failed to stop the development of the country's oil and gas infrastructure. "Today, Iran is transporting gas through pipelines to all the neighbouring countries. We are able to meet all the gas needs of our neighbours; we have all the necessary infrastructure to do this. In general, we are always ready to cooperate with all the countries," said Mr. Owji.

He noted the growing global demand for natural gas and expressed Tehran's readiness to meet these needs through pipeline supplies and LNG. "We have prepared programmes to develop the oil and gas fields, as well as the refining sector, and invite investors from the neighbouring countries and beyond to invest in Iran," Mr. Owji said.

He also mentioned the successful swap supplies of Turkmen gas to Azerbaijan via Iran under the agreement signed last December. He said that Iran was ready to apply the same scheme for Armenia as well.

As it turned out, it was no coincidence that Mr. Owji raised the issue of gas swap at the Baku forum. On June 3, he signed a memorandum with the Azerbaijani Economy Minister Mikayil Jabbarov to expand cooperation in the gas sector between the two countries.

According to Azerbaijani Ambassador to Iran Ali Alizadeh, under the new memorandum Baku and Tehran have agreed to increase swap gas supplies from Turkmenistan via Iran to Azerbaijan.

Iranian media point out that the parties agreed to double the annual transit volume of Turkmen gas from the December agreement (up to 2bcm). At the same time, Iran is taking back some of the transit gas as a swap fee.

If it were not for the official statements made back in February 2022 about the possibility of expanding gas cooperation between Baku, Tehran and Ashgabat and the existence of ready proposals for increasing supplies, the signing of the memorandum could have come as a surprise.

Simple calculations suggest that the memorandum's provision to increase the Turkmen gas swap supplies will allow Azerbaijan to free up some of its own gas and increase exports through the Southern Gas Corridor to Turkey and to Europe, which urgently needs alternative fuel supplies.

Priorities in Shusha

Another important result of the Baku Energy Week was the signing of agreement on energy and mining cooperation with Serbia.

The details of the document are not known in entirety. It is known however that the intention of the signatories is to ensure the rational use of the energy and natural resource potential of the two countries.  The agreement encourages mutual investments in the energy sector, as well as in exploration of mineral resources, regulatory cooperation, energy efficiency and the creation of joint ventures.

The document also reflects Baku's and Belgrade's commitment to support the implementation of the Southern Gas Corridor.

The most significant innovation of the Baku Energy Week was that its final stage went down in history as a special session held in the heart of Azerbaijan, Shusha. Thus, Azerbaijan's cultural capital could well become another platform for energy dialogue. This is not surprising either, as the authorities plan to transform the Garabagh and East Zangezur economic regions into a green energy zone. The signing ceremony for agreements on the development of green energy projects in the liberated territories of Azerbaijan coincided with this session, which is indicative of the seriousness of the government in terms of its energy objectives and priorities for the near future.

The Baku Energy Week once again confirmed that in the current situation Azerbaijani gas is in high demand in the European market. Serbia is waiting for it next year, Bulgaria expects to bring the volume of purchases to the contracted level in September 2022, Romania considers Azerbaijan a very important and reliable partner of Europe in gas supplies and wants to become part of the South Gas Company and buy the Azerbaijani gas. However, increasing export volumes requires the increased export infrastructure capacity. Therefore, European partners should speed up their decision to do so.

On the other hand, although the world cannot give up oil and gas supplies overnight, it is already in the active search for alternatives. The development of green energy will increase every year, and Azerbaijan will become one of the active participants in this process considering its available potential.