A shake-up of natural gas supply arrangements is gaining momentum in Eurasia. Russia, which has seen its gas exports to Europe fall since the start of the war in Russia and Ukraine, now aims to increase supplies to Central Asia. Meanwhile, Azerbaijan is making progress in replacing Russian gas to meet European Union needs.
Russia’s unprovoked attack on Ukraine has prompted EU states to reduce their dependence on Russian gas. Moscow’s exports to Europe fell from 155 billion cubic meters (bcm) in 2021, the year before the invasion, to just 43 bcm last year. D.
EU members have so far compensated for falling Russian exports by combining an increase in LNG imports by ship and boosting energy production from other sources. Brussels further concluded a deal with Azerbaijan to double Azerbaijani gas exports to Europe, reaching at least 20 bcm per year by 2027.
Azerbaijan’s export expansion plans finally appear to be coming to fruition, as Baku recently signed agreements to transit gas from Turkmenistan to Europe, and concluded new agreements to extend connections to the states of Central and South-Eastern Europe.
The most significant decision is undoubtedly that of the Hungarian state entity MVM, to acquire a 5 percent stake in Azerbaijan’s gigantic Shah Deniz gas field, an announcement made during Baku Energy Week in early June. MVM already has two agreements in place to import Azeri gas.
With a stake in Shah Deniz, MVM becomes the only shareholder to also purchase gas from the field, creating an important link between producer and consumers. By increasing its dependence on Azerbaijani gas imports, Hungary is also signaling a distance from Russia. Budapest has long depended on Russia as its main gas source, with Viktor Orban’s government resisting imposing EU sanctions on the Kremlin.
Also significant, Azerbaijan concluded a agreement with Albania to supply 200 million cubic meters (mcm) of gas per year from 2026. The gas will arrive via the Trans-Adriatic Pipeline (TAP), which currently has a capacity of around 10 bcm/year but requires major expansion to meet Baku’s growing export commitments to European states.
To date, the pipeline’s owners, including Azerbaijan, have committed to adding an additional annual capacity of only 1.2 bcm, complaining that they cannot invest the sums to be standards required without obtaining advance commitments from European gas buyers for the purchase of additional volumes. The quantity to be supplied to Albania may be relatively small, but it marks a step forward towards the full implementation of the TAP expansion plan.
Another initiative to facilitate Azeri gas deliveries, called the “Vertical Corridor,” is moving forward at a faster pace than expected. The corridor involves the expansion of a network of pipelines across Southeast Europe, with Bulgaria serving as a hub connecting Greece, Moldova , Romania, Turkey and Ukraine.
On June 6, Bulgaria signed the first two construction contracts to expand its section of the planned corridor. Moves to expand other sections are expected later this year and early next year.
Meanwhile, Russia is trying to compensate for its lost market share in Europe by supplying Central Asia with gas. On June 7, at the International Economic Forum in St. Petersburg, the state-controlled Russian energy giant Gazprom, signed new supply agreements with Kyrgyzstan and Kazakhstan, and held discussions with Uzbekistan on future gas supply plans.
The Kyrgyz deal provides for Gazprom’s subsidiary, Gazprom Kyrgyzstan, to be supplied with Russian gas for 15 years, starting in 2025. Gazprom Kyrgyzstan has signed agreements to supply gas to Electric Stations JSC, the most major electricity and heat supplier in Kyrgyzstan, and with Bishkekteploenergo, the municipal heating company of the Kyrgyz capital. Details of the contracts, including volumes and purchase prices, were not immediately disclosed.
To facilitate deliveries to Kyrgyzstan, Gazprom signed an agreement with its Kazakh subsidiary, NC Qazaqgaz, under which Gazprom will expand its existing pipeline network in Kazakhstan. The expansion would also increase gas exports to Uzbekistan, which was once a gas exporter but has now become a net importer. In 2023, Tashkent signed a two-year deal to import Russian gas, with deliveries beginning last October.
Current and future gas exports from Russia to Uzbekistan were discussed on June 7 involving Gazprom CEO Alexei Miller, Deputy Prime Minister of Uzbekistan Jamshid Khodjaev , as well as the Minister of Energy Jurabek Mirzamakhmudov. With growing demand for gas in Uzbekistan, the supply agreement with Russia is widely expected to be extended.
By David O’Byrne via Eurasianet.org
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