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Azerbaijan has accused the EU of treating the nation as a “firefighter” by solely committing to short-term fuel offers regardless of asking the nation to spice up exports of the gas to the bloc.
Baku wanted the understanding of long-term contracts with the intention to elevate the finance required to extend fuel manufacturing within the Caspian Sea and meet the extra EU demand, Vaqif Sadiqov, Azerbaijan’s ambassador to the EU, informed the Monetary Occasions.
“We can’t be a firefighter simply sending fuel for 3 to 6 months,” Sadiqov mentioned. “We want the contracts in order that we are able to go to banks for financing for drilling deep into the Caspian Sea.”
In 2022 Brussels and Baku struck a deal to extend Azerbaijan’s annual fuel exports to the EU to 20bn cubic metres by 2027, in contrast with 11.8 bcm final 12 months, because the bloc tried to wean itself off Russian fuel after its invasion of Ukraine.
Regardless of “deep discussions” with the European Fee about the right way to meet the goal, Sadiqov mentioned EU operators have been reluctant to signal lengthy contracts due to the bloc’s ambition to curb its consumption of fossil fuels and attain web zero greenhouse fuel emissions by 2050.
EU officers have mentioned it’s as much as corporations quite than nationwide governments to make the business agreements.
Discovering new sources of pure fuel has turn out to be important for the EU since Russia, beforehand the bloc’s largest provider, started to incrementally shut off fuel flows in retaliation for the EU’s help for Ukraine.
However the bloc has additionally dedicated to formidable local weather objectives. In a suggestion introduced in February for the EU to chop greenhouse fuel emissions by 90 per cent by 2040, Brussels mentioned fossil gas consumption in 2040 ought to be 80 per cent lower than in 2021, of which solely 40 per cent can be fuel. Fuel is made up primarily of methane, a potent warming molecule which holds extra warmth than carbon dioxide however is shorter-lived.
Azerbaijan, which depends closely on oil and fuel revenues, is because of host the UN’s annual COP local weather summit in November this 12 months. Some diplomats and negotiators have privately expressed concern that the nation was reluctant to deal with the query of the right way to shift away from fossil fuels.
Matthew Bryza, managing director at US consultancy Straife and a former US ambassador to Azerbaijan, mentioned that to achieve the EU’s 2027 goal for Azeri fuel imports, it was crucial to finance upstream manufacturing as a result of Azerbaijan wouldn’t in any other case have adequate additional fuel manufacturing to satisfy the aim.
“To finance that, there must be surety that there are [customers] in Europe into the longer term, and there’s a hesitancy on the EU facet to help any long-term fuel gross sales and buy agreements,” he mentioned.
Between January and June, Azerbaijan exported 6.4 bcm of fuel to EU nations, a few quarter of its complete manufacturing, in accordance with Azeri authorities figures. Over the previous three years Azerbaijan has elevated its fuel flows to the EU by 12 per cent.
At a summit of European leaders final week, Azerbaijan’s President Ilham Aliyev mentioned exports to the EU would hit 13 bcm this 12 months. He has beforehand known as the nation’s fossil gas reserves “a present from the gods”.
To satisfy the 2027 aim, pipelines within the Southern Fuel Hall (SGC) between Azerbaijan and Europe would additionally have to be expanded.
Brussels is unable to finance the undertaking due to adjustments to its guidelines in 2021 that stop the EU price range being spent on fossil gas infrastructure. The European Funding Financial institution has comparable restrictions.
“We provide a market that could be very fascinating to Azerbaijan however we can not finance it,” an EU official mentioned.
Sergiy Makogun, former chief govt of Ukraine’s state-owned fuel transmission community, mentioned the Caspian area might present giant volumes of fuel to Europe. If the EU helped facilitate funding, he mentioned, it might “considerably enhance flexibility” of fuel provides for the EU.
He added that the shareholders in Tanap, a pipeline by means of Turkey that varieties a part of the SGC, “don’t wish to make investments to increase capability as a result of they worry nobody will use it”.
The Southern Fuel Hall firm is engaged on an funding plan with potential backing from the European Financial institution for Reconstruction and Growth. However the EBRD has mentioned that to finance the undertaking, it should align with the goals of the 2015 Paris local weather accord.
Azerbaijan’s state-owned vitality firm Socar mentioned it was concerned in “a number of discussions” with Brussels and EU nations to extend fuel provides from 2025.
The European Fee declined to remark.
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