EU Looking for Gas Deal with Azerbaijan to Offset Loss of Russian Supplies

The European Commission proposed the EU members a deal with Azerbaijan to boost imports of natural gas and support expansion of Southern Gas Corridor, the pipeline to increase supply. The Commission’s draft memorandum of understanding (MoU) is part of the bloc’s goal to reduce reliance on Russian fossil fuels following Moscow’s invasion of Ukraine. The proposal, which needs approval from the EU governments, could still change.

The document prepared by Brussels says the EU and Azerbaijan aim to support bilateral trade of natural gas via the Southern Gas Corridor, of at least 20 billion cubic meters (bcm) annually by 2027.

Azerbaijan delivered around 8 bcm of gas into European countries through the Trans-Adriatic pipeline, the final leg of the Southern Gas Corridor pipeline network.

The proposal says both sides would finance the expansion of the network to carry more Azeri gas to Europe. The investment would also include the network to carry low carbon gases in the future.

An increase in deliveries would also require Azerbaijan to boost its domestic gas production.

The draft emphasizes the importance of “long-term, predictable and stable contracts” to provide security to gas producers. It also underlines that future gas contracts must comply with the EU’s climate change targets. Brussels will require gas use to drop, especially after 2030.

Both sides should increase action to curb emissions of methane, a potent greenhouse gas, in their supply chains, including through incentives to collect gas that would otherwise leach into the atmosphere.

As a scheduled maintenance began on the Nord Stream 1 pipeline this week, concerns over additional cuts to Russian gas supply grew. Governments and companies warn that Russia may prolong the suspension.

The draft agreement said the EU and Azerbaijan would also examine the development of electricity interconnections, to promote renewable energy, and discuss future hydrogen trade.

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