Azerbaijan Heralds New Energy Route to Europe

Fakhraddin Gurbanov1

H.E. Mr. Fakhraddin Gurbanov
Ambassador of Azerbaijan to the United Kingdom of Great Britain and Northern Ireland

Baku hosted a historic signing ceremony for the development of Shah Deniz-2 gas field on 17 December 2013. Leaders of the countries along Southern Gas Corridor, representatives of the European Commission and energy companies joined President Ilham Aliyev to witness the Final Investment Decision on Shah Deniz-2 project, one of the world’s largest gas reserves.

The project involves plans to expand the existing Southern Caucasus Pipeline, which has been supplying gas to Georgia and Turkey in the frame of Shah Deniz-1 and the construction of two new gas pipelines, Trans-Anatolian Pipeline (TANAP) and Trans-Adriatic Pipeline (TAP) along 3500 km long route. It is expected that some 30,000 new jobs will be created during the construction phase in the countries all along the route.

The Shah Deniz-2 project stands among the most complex and comprehensive energy projects ever undertaken by the global energy industry and will represent the biggest foreign investment to Azerbaijani economy so far. The first volumes of gas are expected to reach  customers in Georgia and Turkey by the end of 2018 and gas deliveries to the European customers (Greece, Bulgaria and Italy) will follow the next year. Out of 16 bcm annual output, Turkey will get 6 bcm and the rest will be delivered to European countries.

This project opens new opportunities for the future of energy cooperation between Azerbaijan and Britain and further strengthens Azerbaijan’s role on the European energy map.

Firstly, the project opens a new energy route into the European markets. The Southern Gas Corridor, once fully operational, will become the fourth energy route to the European markets. For the very first time in its history Azerbaijan will get access to the European energy markets and European customers will access the gas reserves of Azerbaijan. In light of its geographical proximity, it can also potentially be extended to new energy sources in the Middle East. The energy corridor will connect all countries all along the route through common energy interests further contributing to stability and security in the region. During the construction phase it will create thousands of new jobs in all countries thus contributing to the national economies of the countries.

Secondly, the project further consolidates UK’s leading position in the energy industry of Azerbaijan. Over the last two decades British investments and expertise have played a pivotal role in developing Azerbaijan’s energy sector and this role will be further strengthened with the implementation of this important gas project. The project has the potential to move crucial Azerbaijan-Britain energy cooperation onto a new stage. Baku-based UK firms, which total more than 300, led by BP, are set to benefit significantly from the project. Currently UK is the largest foreign investor in Azerbaijan with around half of foreign direct investments coming from the UK into mainly energy industry and the new project will mean more investments into Azerbaijani economy.

Foreign Secretary William Hague’s visit to Azerbaijan is a manifest to the importance UK attaches to this project. The visit comes at a time of heightened bilateral cooperation and represents the highest governmental visit from Britain to Azerbaijan in the past 17 years. The energy cooperation lies at the core of bilateral Azerbaijan-Britain cooperation and the two countries are now exploring ways to further strengthen these energy ties and find ways to diversify the bilateral cooperation into new areas. The issues discussed in the meetings between Secretary Hague and President Aliyev and Foreign Minister Mammadyarov included cooperation in the frame of Azerbaijan’s two-year nonpermanent membership at the UN Security Council, Azerbaijan’s contributions to the peace efforts in Afghanistan and new areas for advancing bilateral cooperation. Education, cultural connections and sports are among the new areas both countries are keen to build ties.

The implementation of this energy project will help the Government of Azerbaijan continue its economic diversification policy and reducing dependence on energy revenues. The expected revenues from Shah Deniz-2 project will contribute to the continuing efforts to modernizing communications and infrastructure, establishing new industries and turning the energy revenues into human capital. In the future infrastructure, communications, human capital and new industries will prove vital areas to move the country’s economy beyond energy.

The Shah Deniz-2 project will strengthen Azerbaijan’s position on the European energy map, and tie it strongly to the European energy markets. It will also open a new chapter in energy cooperation between Azerbaijan and Britain with British companies standing to benefit from the project. Above all the project will bring more prosperity and continuing economic growth to the people and economy of Azerbaijan.

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