Development of Trade-Econimic Relations between Azerbaijan-EU
Countries in the Field of Natural Gas Supply
JAMILA HASANOVA1,a, KAMALA NAJAFOVA2
1Department of Humanitarian,
Azerbaijan State University of Economics (UNEC),
Baku,
AZERBAIJAN
2Department of Economics and Management,
Azerbaijan State University of Economics (UNEC),
AZERBAIJAN
aORCiD: https://orcid.org/0000-0001-8004-5898
Abstract: - The research work is devoted to the analysis of mutual relations between the European Union and
the Republic of Azerbaijan in the field of gas supply. In addition, the short-term and long-term measures
implemented by the European Union countries in response to the changes in the political arena in recent times
were reviewed. The relevance of the topic is related to the opening of economic and transport communications
after the Second Karabakh war. The region is an important link between Asia and Europe, and Azerbaijan is an
important energy partner of the EU as an exporter of oil and natural gas. In addition, considering the existing
gas production potential of the Republic of Azerbaijan, the development of this field is a very important field
for the country's economy. The article focuses on the directions of cooperation of the parties in the matter of
production and transit of energy resources. The main result is that it is designed as a framework that allows the
two parties to develop their relations in the form of mutually beneficial projects based on market principles.
Key-Words: - economy, oil, industry, natural gas, petroleum product, Azerbaijan, external policy.
Received: July 13, 2023. Revised: February 15, 2024. Accepted: April 11, 2024. Published: May 2, 2024.
1 Literature Review
In the research [1], the reaction to changes in the
demand, price, and production volume of natural
gas in the production sectors. The regression
estimation method, which takes into account
heterogeneous demand responses in different areas
for each country, is used to measure the elasticity
of demand Short and long evaluated and
investigated during the period. Also, as a result, it
was noted that the decrease in production caused by
demand shocks hurts gas demand more than the
increase in natural gas prices.
In his research [2], studied the features of the
EU's foreign energy policy. Special attention is
paid to the European "green agreement", which
affects the EU's energy relations with third
countries. Azerbaijan was chosen as an object of
analysis since this country is one of the most
important suppliers of natural gas to the European
Union. The author concludes that the
Europeanization of Azerbaijan with the help of
mechanisms of conditionality and externalization is
beneficial to both the EU and Azerbaijan, and this,
in turn, will push Azerbaijan to follow the
European "green agreement".
In the research work of [3], a study was
conducted on meeting the natural gas demand of
the European Union and increasing the volume of
imports shortly. Recognizing the need to ensure the
supply of natural gas imports, the European Union
has decided to diversify its sources of supply,
including obtaining natural gas from Azerbaijan
through the Southern Gas Corridor. Hamji's report
uses a combination of cost economics and Rational
Choice Institutionalism framework to explain the
EU's policy choice to support the SGC. As a result,
there was a choice to use the Southern Gas Corridor
as a source of supply, even though it is relatively
expensive to deliver Azerbaijani natural gas to the
EU.
In the research stated that the research work
paves the way for conducting investigations in this
direction for oil-exporting countries in the future.
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The results in the article show that fiscal policy has
a statistically significant positive effect on the non-
oil sector in both the long and short term. However,
due to low oil prices and the different specifications
used, the magnitude of the effect is small compared
to previous studies. Azerbaijani politicians should
take measures to compensate for the declining
share of oil revenues in state revenues. Although
the increase of tax rates, import and export duties,
energy, and other tariffs is considered a quick
means to fill the budget, it can simultaneously
weaken economic development. Alternative and
less harmful means would be the optimization of
public spending, strict monitoring of ongoing
projects, and a gradual rejection of social and
infrastructure projects that contribute less to
economic growth, [4].
In this article analyzed the impact of
disruptions in Russian gas on Europe's balance and
economic output. Our results show that in the short
term, the most vulnerable countries of Central and
Eastern Europe - Hungary, Slovakia, and the Czech
Republic - face the risk of gas consumption
shortages of up to 40 percent and gross domestic
product reduction of up to 6 percent. The effects on
Austria, Germany, and Italy will also be significant,
but will depend on the exact nature of the
remaining bottlenecks during the shutdown and the
resulting ability of the market to adjust; as reported,
[5].
İn [6]'s article analyzes the potential of the
discovery of natural gas fields on the Eastern
Mediterranean shelf to increase the security of
natural gas supplies to the EU. It provides an
overview of the status quo of the EU-28's
dependence on natural gas imports, and efforts to
increase energy security through various measures
and supply diversification challenges. This is
followed by an analysis of the energy and marine
resources sector of Egypt, Israel, Cyprus, and
Lebanon. The paper presents projections of
domestic natural gas consumption needs for the
period 2012-2042, and the results indicate
potentially large volumes for export.
2 Introduction
It is expected that the European Union's increased
demand for natural gas will lead to increased gas
imports into these countries shortly. In addition,
changes in the political arena in the region are
encouraging EU countries to reconsider and reduce
issues of dependence on gas supplies from the
Russian Federation. To this end, the European
Union (EU), recognizing the need to ensure
uninterrupted and safe supplies of imported natural
gas at all times, is trying to diversify its sources of
supply, including receiving natural gas from
Azerbaijan through the Southern Gas Corridor
(SGC).
The research work examined the current gas
supply system of the European Union countries. In
addition, short-term and long-term measures taken
by European Union countries in response to recent
changes in the political arena were reviewed. One
of the main goals set in the research work is to
calculate the cost of gas supplies from the Republic
of Azerbaijan to the countries of the European
Union.
2.1 The Existing Gas Supply System of the
European Union Countries
The European Union is largely dependent on
foreign countries, especially the Russian
Federation, for its hydrocarbon resources. This
relationship varies significantly depending on the
types of energy sources. The share of net imports in
total domestic consumption for the EU in 2020 for
all types of energy was 57.5 percent. Although gas
is primarily used for power generation and heating,
it is also very important in some industries. The
EU's dependence on natural gas from foreign
countries in 2020 was 84 percent. In 2020, Russia,
the EU's largest gas supplier, accounted for more
than 40 percent of total natural gas imports. Natural
gas dependence on Russia for total energy varies
significantly between countries, [6].
To determine the significance of the gas supply
system for the EU, it is first necessary to clarify the
structure of the EU's energy supply sources. For
this purpose, Figure 1 was prepared by collecting
statistical data on the main energy sources of EU
countries for 2010-2020 using the Eurostat
database.
The second largest component of the energy
supply system is natural gas resources, followed by
solid fuels such as coal, nuclear power, and
renewable energy sources. However, if we look at
the trend in recent years, it is clear that the demand
for renewable energy has increased over the years.
However, the use of natural gas resources has not
decreased as much as the use of oil and petroleum
products, with only a slight decline. Thus, if we
compare the structure of energy supply for 2020
with 2010, it becomes clear that 43% in solid fuels,
20% in nuclear energy, 19% in oil and petroleum
products, and 10% in natural gas supplies and
renewable energy sources. Sources and experienced
a 38 percent increase, [7].
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3 Problems
Looking at the natural gas consumption pattern in
2020, it can be seen that the bulk of natural gas
consumption was used in the energy conversion,
domestic, and industrial sectors. About 10-20
percent was consumed in the transport and non-
energy sectors.
The European natural gas market is not fully
integrated. Thus, the European gas pipeline passes
through Russia, Norway, Great Britain, North
Africa, and the Caspian region. Russian pipelines
enter Europe through Germany, Poland, Ukraine
and Turkey. Norwegian gas is exported through
Germany, the Netherlands, Belgium, the UK, and
Denmark (and Poland once the Baltic Pipeline is
completed by the end of this year). Gas moves from
North Africa and Azerbaijan through Spain, Italy,
Turkey, and Greece. In addition, Turkish also
supplies gas from Iran. Just 30 percent of gas
imports come from non-Russian pipelines, and 42
percent from Russian pipelines. In addition, 28
percent of total gas imports come from liquefied
gas resource terminals. Regarding the use of
potential pipeline capacity, it should be noted that
in 2021 Norway used 81 percent of its potential,
and other non-Russian countries used 50-60
percent. Actual capacity may be less than stated
because pipelines typically do not operate at 100
percent capacity throughout the year due to
maintenance shutdowns. Table 1 presents data on
EU gas imports and import potential in 2021.
Table 1. EU gas import and potential
import statistics for 2021
Country name
Annual
potentia
l
Curren
t flow
Volum
e of
use
Russian
Federation
276
153
55%
Norway
109
88
81%
South Africa
79
40
51%
Azerbaijan
13
8
62%
General
477
289
61%
LPG terminals
Spain
69
19
28%
France
43
18
42%
Italy
20
10
50%
Belgium
17
4
24%
Netherlands
14
8
57%
Greece
7
2
29%
Portugal
7
6
86%
Poland
6
4
67%
Lithuania
4
2
50%
Croatia
3
General
190
73
38%
Russia
276
153
55%
Not Russian
391
209
53%
Source: International Monetary Fund, 2022
As can be seen from Table 1, the Russian
Federation covered 41% of EU gas imports, using
only 55% of its total potential. The Republic of
Azerbaijan used 62 percent of its total potential and
covered 2 percent of EU gas imports.
LNG terminal capacity represents 28 percent of
the EU's total gas import capacity, and in 2021 it
used about 39 percent of its capacity. However, not
all of the specified capacity can be used (due to
technical limitations such as seasonal demand,
maintenance, and system redundancy). In the last
months of 2022, imports of liquefied gas increased
significantly. In April 2022, 66 percent of liquefied
natural gas imports came from Europe, of which 22
percent came from Spain, [8].
The existing infrastructure may create
conditions for a partial cessation of Russian gas
transportation to individual countries. Russian gas
supplies to Poland, Bulgaria, Finland, Denmark,
and the Netherlands have already been stopped, and
to Germany, Italy, France, and other countries have
been reduced. Poland was able to replace Russian
imports with LNG imports through the Lithuanian
Klaipeda LNG terminal and a new interconnector
with other EU countries, especially Germany.
Bulgaria has opportunities to increase gas imports
from Azerbaijan and imports of liquefied natural
gas through Greece and Turkey. Finland expects to
fully offset Russian imports by the end of the year
from a recently leased floating LNG terminal,
Denmark gets most of its flow from Germany, and
the Netherlands imports from suppliers with regular
access to Russian gas.
However, transmission in Europe is subject to
some technical limitations, meaning larger outages
could partially fragment the market. For this
reason, Spain, the largest liquefied natural gas hub
in the EU, with more than 35 percent import
capacity, can only export 10 percent of its import
capacity to France. France, for its part, poses a
serious obstacle to its operation, given the existing
barriers to north-south transit within France (the
time required to restore flows in pipelines from
Germany (gradually up to a year) and the
regulatory and technical restrictions associated with
smell). So French gas contains additives, basically
chemicals, that give the gas an odor that helps
people detect leaks. They are not added to German
gas because they are incompatible with some
industrial processes. North-South corridors not only
restrict the flow of gas within Germany and Italy
but also limit gas imports into Central and Eastern
Europe. Spain is limiting the potential for LNG
imports through North Africa through existing
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pipelines. As a result, gas flows from Greece and
Italy to southeastern Europe are limited, [9].
Fig. 1: Natural gas price statistics in Europe (based on TTF), May-October 2022
The infrastructure is starting to weaken over
time, with Russian flows down about 35 percent
compared to last year. Natural gas pipelines from
Britain and Belgium to Europe are running at 100
percent capacity, and European wholesale prices
have begun to fluctuate in recent months. For
example, on 20 June the TTF price in the
Netherlands (the main European reference price is
the Dutch Title Transfer Facility (TTF)) is €48
higher than in the UK.
As can be seen in Figure 1, from May to
September 2022, natural gas prices increased
approximately 6 times. This, in turn, had a rather
negative impact on the energy supply of EU
countries.
Natural gas storage can in principle help
accommodate disruptions in the natural gas market
and seasonal fluctuations in demand, but when
inventory levels fluctuate significantly:
• Storage capacity is significant but unevenly
distributed. Outside Russia and Belarus, Ukraine
and Germany have the largest gas storage capacity,
accounting for about 40 percent of total European
capacity. Some countries store gas for other
countries, and this idea could lead to the collapse of
established plans. Gazprom also owns large storage
facilities in Germany and Austria, which account
for 7 percent of EU storage capacity, and are
considered to be in crisis because they fall under
European jurisdiction. Gazprom did not fill these
stations until last winter, leaving the overall
average occupancy level across Europe below
historical norms. In April 2022, German energy
regulator Gazprom Germany took over the
company and effectively took operational control
of it.
• European gas inventories were at record lows
in winter 2022, but stockpiling has accelerated
since April. At the end of June, EU gas storage
capacity was at 58 percent capacity, close to the
average level over the past decade. The differences
between countries and regions are large, both in
terms of high capacity as a share of available
capacity and high capacity as a share of annual
consumption. The share of gas reserves in annual
consumption is very small in countries with good
connections to international liquefied natural gas
markets: the UK, Belgium, Portugal, and Spain. In
countries with limited access to alternative
international supplies of liquefied gas, including
Austria, Hungary, and Slovakia, the share of gas
reserves in annual consumption is very high, [10].
Therefore, taking into account the above, the
following key facts about the EU gas supply need
to be noted:
a) Gas accounts for 21.5% of primary energy
consumption in the EU and is the main source
of energy for households (32.1%).
b) About 40% of households are connected to the
gas network. They spend an average of €700
per month on petrol, which is 2.5% of their
average income (€27,911). However, it should
be noted that there are significant differences
between Member States.
c) The energy households receive from gas is
approximately three times lower than from
electricity.
d) The EU imports 80% of its total gas needs, and
domestic production has halved over the past
10 years.
e) The majority of gas demand in the EU (40%)
comes from the residential sector, followed by
industry and electricity consumption. While
industrial consumption has fallen by 20% since
2000, gas use for electricity has increased by
15% over the same period. These trends are
linked to the transition of the EU economy
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from industry to energy services and structural
changes in energy-intensive industries. [11].
4 Analysis and Revolution
Along with the oil and gas sector, the electric
power industry plays a leading role in the socio-
economic development of Azerbaijan. Since 2009,
major investments in power generation and
transmission have led to noticeable improvements
in the quality of power supply. Electricity
production is currently sufficient to satisfy
domestic demand, and the energy system is capable
of providing electricity of acceptable quality to
almost the entire population. Figure 1 shows the
capacity of power plants of the Republic of
Azerbaijan in megawatts for 2013-2020.
Table 2 shows the distribution of power of
power plants operating in the Republic of
Azerbaijan by energy source. As can be seen from
the table, more than 83% of the electricity
generated in our country comes from fuel power
plants and CPPs. Recently, the use of alternative
energy sources, such as solar and wind energy, has
increased significantly in our republic. Thus,
compared to 2015, solar energy increased 10 times,
and wind energy increased 9 times.
Fig. 1: Power plant capacity of the Republic of Azerbaijan, 2013-2020, in megawatts
Table 2. Electricity production in the Republic of Azerbaijan, 2015-2021, in kilowatts
Years
Power plant capacity by
the end of the year
including:
Parallel ES and
IES - total
SES
Wind
ESE
Sun
ES
Municipal solid
waste plant
Municipal solid
waste plant
2015
7,806.7
6,652.8
1,103.4
7.7
4.8
37.0
1.0
2016
7,910.4
6,726.8
1,105.0
15.7
24.9
37.0
1.0
2017
7,941.5
6,748.0
1,106.4
15.7
28.4
42.0
1.0
2018
7,828.9
6,552.2
1,130.8
66.0
34.9
44.0
1.0
2019
7,641.6
6,350.3
1,144.8
66.1
35.4
44.0
1.0
2020
7,621.6
6,326.1
1,149.4
66.0
35.1
44.0
1.0
2021
7,965.2
6,649.4
1,157.2
66.0
47.9
44.0
0.7
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Fig. 2: Share of the oil and gas sector and non-oil and gas sector in the GDP of the Republic of
Azerbaijan, 2010-2021, in percent
Oil and gas production occupies a significant
place in the country's economy and government
revenues, and forms the basis of its exports. Thus,
according to official data from the State Statistics
Committee of the Republic of Azerbaijan, 37% of
GDP comes from the oil and gas sector. Figure 2
shows the dynamics and dynamics of the share of
the oil and gas sector in the GDP of the Republic of
Azerbaijan during the period from 2010 to 2021.
Natural gas production in the Republic of
Azerbaijan developed after the discovery of the
Garadag gas field in 1955 and the exploitation of
new offshore fields in the Caspian Sea in 1970. The
turning point in this area was associated with the
country gaining independence and attracting new
foreign investment in this area. Thus, in 1996, the
British Petroleum Company signed an agreement
on the exploitation of the Shah Deniz gas field,
which is one of the largest gas fields in the world,
and in 2006, the specified gas field began to be
exploited. This increase in natural gas production in
2007, in turn, created the opportunity for gas
exports to the country, [12]. Natural gas was
exported to Georgia and Turkey via the Baku-
Tbilisi-Erzurum pipeline. Thus, with an increase in
domestic gas consumption in 2007-2017 gas
exports increased by 20.7% from 1.8 cubic meters.
km in 2007 to 8.9 cubic meters. km in 2017, which
is 4.9 times more compared to the corresponding
year. Along with more large-scale geological
exploration work, the volume of probable natural
gas reserves in our country increased from 1,100
cubic meters. km up to 1300 cubic meters km, [13].
The next phase of the Shah Deniz project, Shah
Deniz 2, was approved in 2013 and has become one
of the largest and most complex gas projects in the
world. It represents the first subsea gas field in the
Caspian Sea and the world's largest subsea
infrastructure operated by BP.
One of the largest gas fields in the world, Shah
Deniz 2 is also the gateway to the Southern Gas
Corridor (SGC), which for the first time delivers
natural gas from the Caspian Sea directly to
European markets. The Shah Deniz 2 project
includes 26 wells, 500 km of subsea pipelines, and
flow lines, including a new double platform
connected by a bridge. Natural gas is transported
through an 85 km pipeline to the Sangachal
terminal, which is being significantly expanded to
accommodate a new increase in gas production.
The project also expanded the UCP - adding 428
km in Azerbaijan and 59 km in Georgia, as well as
3 new compressor units with 3,500 km of gas to
Europe. Shah Deniz will produce 16 billion cubic
meters of gas in 2 years. Together with the
production of the first stage of development, the
total production of the Shah Deniz field will
amount to 26 billion cubic meters of gas and 100
thousand barrels of condensate per day. In addition,
the Shah Deniz-2 project included the expansion of
the Sangachal terminal to accommodate new gas
processing and compression facilities.
45%
50%
45%
41%
36%
28%
32%
36%
40%
37%
28%
37%
45%
45%
49%
52%
56%
63%
59%
57%
52%
54%
62%
55%
0% 10% 20% 30% 40% 50% 60% 70%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
oil and gas sector oil and gas sector
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Fig. 3: Natural gas production in the Republic of Azerbaijan, 2010-2021, m3
As a result, on May 29, 2018, the official
opening ceremony of the Southern Gas Corridor
took place at the Sangachal terminal. After this, on
June 30, 2018, as planned, supplies of commercial
gas from the Shah Deniz 2 gas field to Turkey
began, [14].
After the discovery of the Shah Deniz gas field,
oil and gas production increased significantly and
reached a record level in 2010. The government
and international companies have invested heavily
in the energy sector, building several new power
plants, rehabilitating and modernizing gas and
electricity networks, and improving the reliability
and security of supply. Figure 3 shows the volume
of gas production of the Republic of Azerbaijan in
the period from 2010 to 2021. As can be seen from
Figure 3, compared to 2010, natural gas production
increased by 67% or 17,555 cubic meters. Although
there were 11 years of high growth in natural gas
production, declines of 1-3% were recorded in
2011, 2015, and 2017, [15].
The export of natural gas is of strategic
importance for the country, and for this reason, it
receives special attention from the state. In 2010-
2016 Oil and gas revenues accounted for more than
70% of all budget revenues. Oil and gas products
account for 97% of total export earnings. In 2014,
lower oil prices led to a decline in overall oil export
revenues. In 2010-2017 Oil revenues declined as
production fell 3.8% and domestic consumption
increased 3.7%. In addition, this reduction in oil
production continued as OPEC countries agreed to
reduce it by 7 million barrels per day by 2022 and
by 6 million barrels by 2040. As a result, the
Republic of Azerbaijan is trying to compensate for
the decline in oil revenues by exporting natural gas.
For this reason, the export of natural gas has
become a priority issue for the Republic of
Azerbaijan.
Table 3. Commodity structure of exports of the Republic of Azerbaijan, 2021
Name of product
2021
Quantity
Amount, thousand US
dollars
Crude oil, according to SOCAR and ABEC reports, thousand tons
28,095.8
13,928,519.3
Oil, thousand tons
27,116.1
13,218,936.1
According to reports of natural gas companies, SOCAR and ACE,
million dollars. cubic meter
18,944.9
6,468,717.5
Natural gas, million cubic meters
20,046.7
5,534,398.3
Heavy distillates or gas oils for other purposes, thousand tons
1,100.6
528,333.4
Fresh fruit, tons
361,898.0
403,550.6
Cotton fiber, tons
122,990.5
207,980.0
Fresh vegetables, tons
173,812.0
179,786.5
Ethylene polymers in primary form, tons
139,324.9
175,428.7
Acyclic alcohols, their derivatives, tons
368,874.9
98,732.1
Raw aluminum, tons
30,374.4
75,507.1
Electricity, million rubles kWh
1,588.4
69,343.4
26.312 25.728 26.796 29.245 29.555 29.175 29.331 28.596 30.490
35.610 37.140
43.867
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
40.000
45.000
50.000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
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To analyze the role of natural gas exports in
our country's exports, it is important to look at the
data on imports and exports of basic goods from the
State Statistics Committee of the Republic of
Azerbaijan. Table 3 presents the commodity
structure of products exported from the Republic of
Azerbaijan in 2021, [16].
As can be seen from Table 3, in 2021, the
second place in total export revenues is occupied
by the export of natural gas, which amounts to $12
billion. Quantitatively, 38 million cubic meters of
natural gas are exported. Looking at the commodity
structure of exports, it is clear that oil exports were
in first place in 2021, bringing in US$27 billion in
revenue to the country, [17].
Another issue for a detailed analysis of natural
gas exports is the analysis of statistical data on
natural gas exports by year. Table 3 shows the
growth in natural gas exports for each year
compared to the previous year in percentage terms.
Since the start of gas production from the Shah
Deniz gas field in 2010, there has been a high
degree of increase in natural gas production. Only
in 2012, 2014 and 2016, there was a decrease of 1-
4 percent, [18].
5 Conclusion and Suggestions
Thus, taking into account the above, it is necessary
to note the following key facts about the gas supply
of the EU:
a) Gas accounts for 21.5% of the EU's
primary energy consumption and is the main source
of energy for households (32.1%).
b) About 40% of households are connected
to the gas network. They spend an average of €700
per month on gas, which is 2.5% of their average
income (€27,911). However, it should be noted that
there are significant differences between Member
States.
c) The energy obtained by households from
gas is approximately three times lower than from
electricity.
d) The EU imports 80% of its total gas
needs and domestic production has halved in the
last 10 years.
e) The majority of the EU's gas demand
(40%) is accounted for by the residential sector,
followed by industrial and electricity use. While
industrial consumption has decreased by 20% since
2000, gas use for electricity generation has
increased by 15% over the same period. These
trends are related to the EU's economic transition
from industry to energy services and structural
changes in energy-intensive industries.
The Russian-Ukrainian war has prompted the
European Union to reconsider its energy supply
system and look for alternative sources to the
Russian Federation. For this reason, he began to
take fundamental steps in the direction of
expanding cooperation opportunities in the field of
energy and especially gas supply with the Republic
of Azerbaijan. The Southern Gas Corridor project
can be attributed to the largest energy supply
project implemented in the Republic of Azerbaijan
and supported by the European Union, [19].
The main components of the Southern Gas
Corridor (SGC) project are the South Caucasus
Pipeline Expansion Project, the Trans-Anatolian
Pipeline (TANAP) project, and the Trans-Adriatic
Pipeline (TAP) project. The South Caucasus
Pipeline started operating in 2006. Its total length is
691 km, 443 km of which pass through the territory
of the Republic of Azerbaijan, and 248 km through
Georgia. The South Caucasus Pipeline expansion
project, is planned to ensure the connection of the
mentioned pipeline with the TANAP pipeline and
increase its transmission capacity from 7.4 billion
m3 to 16 billion m3. As mentioned above, the
second largest pipeline project of the Southern Gas
Corridor project is the Trans-Anatolian Pipeline
(TANAP) project. The total length of the belt is
1850 km and it has been put into operation since
2019. The third key element of the Southern Gas
Corridor project is the Trans-Adriatic Pipeline
(TAP) project. The belt has a total length of 880.8
km and passes through Greece, Albania, the
Adriatic Sea, and Italy. The pipeline was
commissioned in 2020. Although the annual
transmission capacity is 10 billion m3, it can be
increased to 20 billion m3. In 2021, 8.15 billion m3
of gas was produced in Europe through TAP, [20].
As the TAP project will bring positive results
for the countries of the European Union, it has its
advantages for the Republic of Azerbaijan:
• Increase of export revenues by 666-787
million US dollars;
• Reduction of CO2 emissions;
• Attracting new investments to the country in
the amount of 2,460-3,389 million US
dollars;
• Employment of 118-123 thousand people as
a result of the creation of new jobs. The EU's
energy needs are met by energy produced
within the EU and imported from other
countries. Energy supply and demand in the
EU fall into five main categories: oil
(including crude oil), natural gas, solid fossil
fuels, renewable energy, and nuclear energy.
Oil and natural gas continue to play an
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important role in the EU's energy demand.
However, the demand for oil and natural gas
varies depending on the energy needs of EU
member states. Despite the low production
of oil and natural gas resources in the EU,
the main burden on the energy consumption
of EU countries falls on these two
categories.
The European Union is largely dependent on
foreign countries, especially the Russian
Federation, for its hydrocarbon resources. This
relationship varies significantly depending on the
types of energy sources. The share of net imports in
total domestic consumption for the EU in 2020 for
all types of energy was 57.5 percent. Although gas
is primarily used for power generation and heating,
it is also very important in some industries. The
EU's dependence on natural gas from foreign
countries in 2020 was 84 percent. In 2020, Russia,
the EU's largest gas supplier, accounted for more
than 40 percent of total natural gas imports. Natural
gas dependence on Russia for total energy varies
significantly between countries. Looking at the
natural gas consumption pattern in 2020, it can be
seen that the bulk of natural gas consumption was
used in the energy conversion, domestic, and
industrial sectors. About 10-20 percent was
consumed in the transport and non-energy sectors,
[21].
The European natural gas market is not fully
integrated. Thus, the European gas pipeline passes
through Russia, Norway, Great Britain, North
Africa, and the Caspian region. Russian pipelines
enter Europe through Germany, Poland, Ukraine
and Turkey. Norwegian gas is exported through
Germany, the Netherlands, Belgium, the UK, and
Denmark (and Poland once the Baltic Pipeline is
completed by the end of this year). Gas moves from
North Africa and Azerbaijan through Spain, Italy,
Turkey, and Greece. In addition, Türkiye also
supplies gas from Iran. Just 30 percent of gas
imports come from non-Russian pipelines, and 42
percent from Russian pipelines. In addition, 28
percent of total gas imports come from liquefied
gas resource terminals. Regarding the use of
potential pipeline capacity, it should be noted that
in 2021 Norway used 81 percent of its potential,
and other non-Russian countries used 50-60
percent. Actual capacity may be less than stated
because pipelines typically do not operate at 100
percent capacity throughout the year due to
maintenance shutdowns. LNG terminal capacity
represents 28 percent of the EU's total gas import
capacity, and in 2021 it used about 39 percent of its
capacity, [22]. However, not all of the specified
capacity can be used (due to technical limitations
such as seasonal demand, maintenance, and system
redundancy). In the last months of 2022, imports of
liquefied gas increased significantly. In April 2022,
66% of liquefied natural gas imports were
consumed in Europe, of which 22% came from
Spain. The existing infrastructure may create
conditions for a partial cessation of Russian gas
transportation to individual countries. Russian gas
supplies to Poland, Bulgaria, Finland, Denmark,
and the Netherlands have already been stopped, and
to Germany, Italy, France, and other countries have
been reduced. Poland was able to replace Russian
imports with LNG imports through the Lithuanian
Klaipeda LNG terminal and a new interconnector
with other EU countries, especially Germany.
Bulgaria has opportunities to increase gas imports
from Azerbaijan and imports of liquefied natural
gas through Greece and Turkey. Finland expects to
fully offset Russian imports by the end of the year
from a recently leased floating LNG terminal,
Denmark gets most of its flow from Germany, and
the Netherlands imports from suppliers with regular
access to Russian gas, [23].
Therefore, taking into account the above, the
following key facts about the EU gas supply need
to be noted:
a) Gas accounts for 21.5% of primary energy
consumption in the EU and is the main source of
energy for households (32.1%).
b) About 40% of households are connected to the
gas network. They spend an average of €700 per
month on petrol, which is 2.5% of their average
income (€27,911). However, it should be noted that
there are significant differences between Member
States.
c) The energy households receive from gas is
approximately three times lower than from
electricity.
d) The EU imports 80% of its total needs in
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Contribution of Individual Authors to the
Creation of a Scientific Article (Ghostwriting
Policy)
The authors equally contributed to the present
research, at all stages from the formulation of the
problem to the final findings and solution.
Sources of Funding for Research Presented in a
Scientific Article or Scientific Article Itself
No funding was received for conducting this study.
Conflict of Interest
The authors have no conflicts of interest to declare.
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