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Azerbaijan has warned the EU that it’s going to solely be capable of meet its dedication to double fuel exports to the bloc if supplied with recent funding in its pipelines and long-term buy contracts, as Brussels rushes to seek out options to Russian power.
Brussels and Baku signed an settlement in July to double provides to 20bn cubic metres a 12 months by 2027 — one in every of a string of recent offers struck by the EU to exchange 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 international minister.
“Whoever is all in favour of investing, whether or not it’s public or non-public, 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.”
“Presently there’s a determined want for Europe to seek out different suppliers,” Mammadov stated. “We have to make certain that this . . . isn’t a kind of spontaneous demand in gentle of the warfare in Ukraine, which at some point will finish after which rapidly you begin shopping for again from Russia and say, ‘hey, properly we don’t now want the fuel’.”
Mammadov stated that whereas Azerbaijan was completely happy to contribute its share of the mandatory 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 increased imports from Norway and liquefied pure fuel shipments.
Laurent Ruseckas, at S&P World Commodity Insights, stated that whereas Azerbaijan may 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 growth danger with out realizing 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 loads much less clear given environmental targets.”
The European Fee declined to remark when requested if talks had been ongoing with potential non-public and public buyers.
An EU official stated that “contemplating the current EU fuel scenario and outlook”, the bloc was assured the enlargement of the pipeline would “creat[e] alternatives for all companions concerned as Azerbaijan’s power can have better entry to the EU market”.
“Constructing on the optimistic monitor file of power co-operation and the profitable begin of fuel deliveries by way of the Southern Fuel Hall at a vital juncture, the EU views Azerbaijan as a dependable and strategic power 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 way of Azerbaijan and Georgia, the Trans Anatolian Pipeline (TANAP) throughout Turkey, and the Trans Adriatic Pipeline (TAP) by way of Greece, Albania and Italy.
Britain’s BP and Azerbaijan’s state power 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 choices.
Solely TAP is majority managed by EU corporations, with 55 per cent held between three power teams — Snam, Fluxys and Enagas.
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