Azerbaijan urges the EU to invest more into securing its gas supplies

Azerbaijan's government has told the European Union it must boost investments in gas pipelines and commit to long-term purchase contracts if it wants to secure a previously agreed increase in gas flows from the nation.

The EU is working hard to find alternatives to Russian energy supplies following the outbreak of conflict in Ukraine, the consequences of which have exposed the continent's fragile energy security.

Previously, Russia had provided about 40 percent of the EU's gas needs, but that has fallen to less than 10 percent this year, according to the International Energy Agency.

In July, the European Commission expressed its intent, in an agreement with Azerbaijan, to double imports of Azeri natural gas to at least 20 billion cubic meters a year by 2027, and Azerbaijan has committed to raise supplies by 40 percent to 11.2 billion cubic meters this year.

In a speech at the time, President of the European Commission Ursula von der Leyen called Azerbaijan a "reliable partner", and noted that the country also has "tremendous potential in renewable energy" and that the EU intends to cooperate with it on solar and wind energy production.

Last year, more than 8 billion cubic meters of Azeri gas was brought into European countries via Italy through the Trans-Adriatic pipeline, which is the final leg of the Southern Gas Corridor pipeline network, according to the EU.

But Azerbaijan's deputy foreign minister, Elnur Mammadov, has now said that expanding the 3,500 kilometer Southern Gas Corridor from the Caspian to the Adriatic requires billions of dollars of investment and contracts for European companies to buy the gas long past 2027, the Financial Times reported.

"Whoever is interested in investing, whether it's public or private, they (must) put their money on the table in order for us to be able to increase their capacities," he said in an interview. "I wouldn't say there is a disagreement (with the EU), but this is... an important part of this puzzle."

"Currently there's a desperate need for Europe to find alternative suppliers," Mammadov said, adding that his country needed to be sure that demand from the EU would remain once the conflict in Ukraine ended and Russia became a reliable supplier again.

The FT reported that the total investment needed in the Southern Gas Corridor, which began supplying gas to Italy in 2020, was about $40 billion.

Azerbaijan would contribute its share of necessary investment but expected the EU to step up too, Mammadov said.

One analyst told the FT that increased gas flows to Europe would require significant investment both in production and transportation of the gas.

"No country is going to take on billions of dollars in development risk without knowing they have a long-term buyer," said Laurent Ruseckas, at S&P Global Commodity Insights.

An EU official was quoted as saying the bloc was confident the expansion of the pipeline would "create opportunities for all partners involved as Azerbaijan's energy will have greater access to the EU market".