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Azerbaijan has warned the EU that it’s going to solely have the ability to meet its dedication to double fuel exports to the bloc if supplied with contemporary funding in its pipelines and long-term buy contracts, as Brussels rushes to search out options to Russian vitality.
Brussels and Baku signed an settlement in July to double provides to 20bn cubic metres a yr by 2027 — certainly one of a string of latest offers struck by the EU to interchange Russian fuel in response to the warfare in Ukraine, amid fears of winter shortages and rationing.
However increasing the three,500km Southern Fuel Hall (SGC) from the Caspian to the Adriatic requires billions of {dollars} of funding and contracts for European corporations to purchase the fuel gone 2027, stated Elnur Mammadov, Azerbaijan’s deputy overseas minister.
“Whoever is focused on investing, whether or not it’s public or personal, they [must] put their cash on the desk to ensure that us to have the ability to improve their capacities,” he stated in an interview. “I wouldn’t say that there’s a disagreement [with the EU], however that is . . . an necessary a part of this puzzle.”
“At the moment there’s a determined want for Europe to search out different suppliers,” Mammadov stated. “We have to ensure that this . . . shouldn’t be a kind of spontaneous demand in mild of the warfare in Ukraine, which someday will finish after which hastily you begin shopping for again from Russia and say, ‘hey, effectively we don’t now want the fuel’.”
Mammadov stated that whereas Azerbaijan was blissful to contribute its share of the required funding, it additionally anticipated the EU to step up, though he was not conscious of concrete figures but being below dialogue.
The whole price for the SGC, which started supplying fuel to Italy in 2020, was about $40bn.
Earlier than Putin’s full-scale invasion of Ukraine in February, Russia supplied about 40 per cent of the EU’s fuel wants. That has fallen to lower than 10 per cent, offset by larger imports from Norway and liquefied pure fuel shipments.
Laurent Ruseckas, at S&P World Commodity Insights, stated that whereas Azerbaijan might improve fuel exports to Italy and Bulgaria marginally within the quick time period, substantial extra volumes would require important funding each in manufacturing and transportation of the fuel.
“No nation goes to tackle billions of {dollars} in improvement threat with out figuring out they’ve a long-term purchaser,” Ruseckas stated.
“That is a part of the broader debate: we all know Europe wants extra fuel within the quick to medium time period, however the long run outlook is so much much less clear given environmental targets.”
The European Fee declined to remark when requested if talks had been ongoing with potential personal and public buyers.
An EU official stated that “contemplating the current EU fuel scenario and outlook”, the bloc was assured the growth of the pipeline would “creat[e] alternatives for all companions concerned as Azerbaijan’s vitality could have better entry to the EU market”.
“Constructing on the constructive monitor document of vitality co-operation and the profitable begin of fuel deliveries through the Southern Fuel Hall at an important juncture, the EU views Azerbaijan as a dependable and strategic vitality buying and selling accomplice,” the official added.
Complicating the SGC funding case is each the pipelines’ construction and possession.
The SGC is made up of three separate pipelines: the South Caucasus Pipeline (SCP) by Azerbaijan and Georgia, the Trans Anatolian Pipeline (TANAP) throughout Turkey, and the Trans Adriatic Pipeline (TAP) by Greece, Albania and Italy.
Britain’s BP and Azerbaijan’s state vitality group personal elements of all three pipelines, whereas Turkish state corporations personal stakes in SCP and TANAP.
SCP is nineteen.99 per cent owned by Russian oil firm Lukoil and 10 per cent owned by Iran’s state oil firm, doubtlessly presenting hurdles for any EU funding selections.
Solely TAP is majority managed by EU corporations, with 55 per cent held between three vitality teams — Snam, Fluxys and Enagas.
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