FREEDOM PROJECT

Apparently, the year 2022 can be righteously called the year of gas cooperation between Azerbaijan and the European Union.

In just nine months, some momentous events have taken place in the European gas sector. These include the signing in July of a strategic energy partnership memorandum between Azerbaijan and the EU and the commercial launch of the Interconnector Greece-Bulgaria (IGB) in Sofia on October 1 attended by a number of world leaders.

The IGB is a strategic pipeline connecting the countries in the South-East Europe and opens way to real energy diversification of natural gas suppliers to the continent.

This spring, Russia halted gas deliveries to Bulgaria after Sofia rejected Moscow's demand to pay in Russian roubles. The Bulgarian authorities believe that with the launch of IGB there is no need to fear the approaching cold weather, the country has gas reserves for the coming winter period and the problem is finally solved.

This is, incidentally, the first gas pipeline in Bulgaria that is not linked to Russian gas.

SOCAR: Mission Bulgaria

The new connection provides Bulgaria with a direct access to the Southern Gas Corridor and natural gas supplies from Azerbaijan via the Trans Adriatic Pipeline (TAP). The country will soon be able to receive liquefied gas from a terminal near Alexandroupolis, Greece via the interconnector.

President of Azerbaijan called IGB a great historic accomplishment assuring that Baku was doing its best to increase gas production and provide its partners with natural gas.

The IGB launching ceremony was preceded by talks between the leaders of Azerbaijan and Bulgaria the day before. Ilham Aliyev and Rumen Radev met on September 30 to discuss ways of expanding bilateral cooperation on gas supplies.

"I am confident that as strategic partners we will take additional steps to ensure energy security, which is the main issue we discussed today. We continue partnership in this area as well. Today we start the deliveries of Azerbaijani gas to Bulgaria. Today, together with President Radev, we also discussed the increase of Azerbaijani gas deliveries to Bulgaria and gave appropriate instructions," President Ilham Aliyev wrapped up his talks with his Bulgarian counterpart.

Aliyev added that this was only the first but promising step of energy cooperation with Bulgaria.

To confirm his words, Aliyev said that along with gas supplies Radev also discussed the opening of the SOCAR office in Bulgaria, export of electricity and mutually beneficial cooperation in this area, crude oil transportation to Bulgaria, SOCAR's possible involvement in the renovation of energy infrastructure in Bulgaria, as well as a number of other issues.

"The time has come to open a SOCAR office in Bulgaria. I am sure we will do so in the near future," Aliyev summed up.

New proposals

Given the emerging geopolitical situation, Azerbaijani and Bulgarian leaders have certainly discussed cooperation in the transport sector as well. Due to the Russian-Ukrainian war and the coronavirus pandemic, transport has become the second most relevant area after gas and promising for beneficial cooperation. Azerbaijan’s geographic location and the extensive network of railways and motorways, modern port infrastructure in the country make the expansion of cargo traffic through the country quite relevant.

"The objective of establishing all these infrastructure facilities in Azerbaijan is to increase the volume of transit traffic through Azerbaijan. This year we increased it by almost 50%. In the future this figure will be even higher", President Ilham Aliyev said.

Baku is also working to expand economic and investment cooperation with Sofia. President Aliyev invited Bulgarian companies to Azerbaijan to carry out more extensive works, including in the liberated territories.

The Bulgarian leader told Aliyev that he had received a proposal from his European colleagues just before the meeting regarding the supply of Azerbaijani gas: "We have been approached by three other European countries—Romania, Hungary and Slovakia—who also want to receive and transport additional gas volumes.

Europeans propose to ensure immediate transportation of Azerbaijani gas to other countries from Bulgaria without waiting until 2027 and transportation through the existing infrastructure in these four countries. In fact, the original plan was to double the volume of Azerbaijani gas deliveries to the EU through the expanded Southern Gas Corridor by that time.

"In this way, gas can be delivered to Central, Western and Southern Europe faster and more reliably," President Radev believes.

Bulgarian authorities are confident that a high-level meeting can be organised within a month to move the project forward and begin implementation.

As to the possibilities of gas cooperation with Azerbaijan, Bulgarian president said that he discussed with Ilham Aliyev various ideas, including the possible supplies of additional amounts of Azerbaijani gas not through Bulgargas, but directly to Bulgarian companies using gas for the manufacturing cement, glass and in other industries.

Expanding geography

The construction of the IGB pipeline was first discussed in 2009, when in January of the same year Russia abruptly cut off gas supplies via Ukraine without prior warning. In the same year, a Memorandum of Understanding was signed to implement the project, leading to the establishment of a joint Bulgarian-Greek company, ICGB, in 2011.

The IGB pipeline is 182 km long and is designed to run from the north-eastern Greek city of Komotini, where it connects to the Trans Adriatic Pipeline, to the city of Stara Zagora in central Bulgaria.

The pipeline was built with funding from the EU (over €240 million)  and the European Investment Bank lending additional €110 million for the construction of the facility.

At initial stage, the annual throughput capacity of IGB will be 3bcm, but in the long term the volume can be increased to 5bcm. With the implementation of this project, Bulgaria will be able to receive the contracted 1bcm of gas annually from Azerbaijan and thus cover its domestic demand by 25-30%.

"IGB will provide diversification and a guaranteed gas deliveries for Bulgaria. Its benefits will be even more evident when the liquefied natural gas terminal in Alexandroupolis, Greece becomes operational in late 2023," Gylib Donev, Prime Minister of the Technical Government of Bulgaria, introducing the project.

EC President Ursula von der Leyen said that the launch of the IGB opens a new phase for Bulgaria and Southeastern Europe. After all, the project is an important step towards eliminating dependence on energy imports from Russia.

"The pipeline is a game changer for Bulgaria and for Europe's energy security. This project means freedom from dependence on Russian gas. People in Bulgaria and across Europe are feeling the effects of Russia's war. But thanks to projects like this, Europe will have enough gas for the winter," Ursula von der Leyen believes.

Gylib Donev said that the new pipeline has sufficient capacity to meet all demands and ensure diversification of natural gas sources and supplies to Bulgaria. In addition, the interconnector will provide transportation of natural gas to Romania, Moldova, Ukraine and Central Europe.

In his address to the participants of the launching ceremony President Ilham Aliyev said that until now the only source of export gas via the Southern Gas Corridor had been the Shah Deniz field, but production will soon begin in several other gas fields in Azerbaijan, which will help to increase supplies.

Azerbaijan is projected to export 11.5bcm of gas to Europe in 2022, with total gas exports expected to reach 22bcm.

Aliyev also announced that Azerbaijan had already started consultations with its partners on the expansion of the TANAP pipeline from 16 to 32bcm annually and TAP from 10 to 20bcm, because without this "it will be difficult to ensure additional supplies".

Serbian President Alexander Vucic said that the IGB gas pipeline is also of great importance to Serbia. "I have to underline that without the involvement of our friend Ilham Aliyev, it would hardly be possible for any of us to hope for diversification of gas and electricity supplies," Vucic said.

He also announced the launch in autumn 2023 of a new interconnector for gas supplies to Serbia from Azerbaijan via Bulgaria.

"Serbia's Interconnector with Bulgaria will be completed in a year, and I hope that at the same time in 2023 we will be able to hold such a big ceremony in our country. Why is it so important for us? The price is very important, not just the volumes, that is one aspect," Vucic said.

In the future, it is planned to construct a Serbian gas interconnection with Northern Macedonia with EU support.

Russia is currently Serbia's only supplier of natural gas. Serbian authorities have previously discussed the planned purchase of 1.4bcm of gas annually from Azerbaijan in 2023 through a gas interconnector with Bulgaria. The EU has earlier allocated €50b in subsidies and the European Investment Bank has granted a loan of €25b for the construction of a 109-km-long Nis-Dmitrovgrad interconnector in the Serbian territory. In Serbia, the construction works began on February 1, 2022.

"Natural gas supplies from Azerbaijan to Bulgaria will break the strong grip of Russian gas on the region," Greek Prime Minister Kyriakos Mitsotakis said.

Serious intentions

The ceremony is over, the guests have returned home, yet the search for new sources of natural gas continues.

With the commissioning of IGB, Moldova has decided to expand cooperation with Azerbaijan amid worsened relations with the Russian Gazprom. Due to payment problems Chisinau faces a real threat of getting cut off from Russian gas supplies at any moment, as the Russian gas monopolist issued the last warning. As of October 1, Gazprom cut its gas supplies to Moldova by 30%, from 8 to 5.7mcm daily, explaining this by technical problems with transit through Ukraine caused by Ukrainian Naftogaz.

Azerbaijani gas, of course, is unlikely to bail Chisinau out in such a short term perspective. Most likely the Moldovan authorities are not counting on it either, but they want to secure the support of the Azerbaijani authorities in the future.

A delegation led by Moldovan Prime Minister Natalia Gavrilita arrived in Azerbaijan for talks on cooperation in the gas sector. The goal of the visit was quite clear: "We are in favor of diversifying the sources and routes of natural gas supplies. In the context of the existing energy crisis, we pay special attention to cooperation in the energy sector, looking for new promising steps of cooperation. That’s why we are going to discuss the possibility of Azerbaijani gas supplies to Moldova also considering Azerbaijan's intention to boost gas exports to the West.

In her meeting with Ilham Aliyev, Moldovan prime minister said Chisinau wanted to sign contracts for the purchase of energy resources and implement joint projects in the energy and agricultural sectors.

"Our priority is to increase the sustainability of the energy sector and ensure food security in Moldova. We rely on Azerbaijan's openness to intensify our trade relations and conclude contracts on favourable conditions," Gavrilita said.

Moldova has repeatedly expressed interest in importing gas from Azerbaijan; the launch of IGB simplifies the technical side of the issue, which is why it is already necessary to prepare the ground for concluding agreements on Azerbaijani gas. Otherwise it may be too late, as the number of perspective buyers is growing.