Over 40% of the EU gas imports is originated from Russia. The recent potential discovery of new gas fields in Azerbaijan could change the picture and reduce Europe’s dependence on Russian gas. BP is preparing to drill six new exploration wells in Azerbaijan by 2020, in an effort to produce sufficiently high quantities of natural gas to be transported to Europe via a short-cut Trans-Anatolia Pipeline passing through Turkey. Natural gas is an important fuel for power generation and it is considered to be a low carbon source of energy. BP had spent $28 billion in order to bring a massive natural gas project in Azerbaijan onstream. The Company could find a new gas field that is about the same size as Shah Deniz, one of the world’s largest gas fields.
The two phases of Shah Deniz will produce about 26 billion m3 of gas every year, sufficiently high to meet the annual consumption of a single nation like Poland. Shah Deniz gas field, was discovered in 1999, and it is the largest gas field in Azerbaijan, and one of the largest gas fields in the world. It is situated in the South Caspian Sea, at a depth of 600 meters covering approximately 860 square kilometres, and it is commonly described as similar to Manhattan island in its size and shape. The field location is of strategic importance to Europe as an alternative source of natural gas supply.
The field operator is BP with several partners including Turkish Petroleum Overseas, SOCAR, Statoil, LukAgip, and Oil Industries Engineering & Construction. PETRONAS purchased the share of Statoil in 2014, according to an industry source. The current production rate of the field is 7 billion m3/year with an estimated 1.2 trillion m3 of natural gas in place and 3 billion barrels of oil in place.
In 2007, the EU imported 100.7 million tonnes of oil equivalent of natural gas which accounts for 38.7% of total gas imports. In 2017, 10 years later, the energy products imported by the EU from Russia accounted for 60% of the total EU imports from Russia.
According to the Oxford Institute of Energy Studies, the natural gas demand in Europe started to rise in 2015, 2016, and 2017 to reach 548 billion m3 due to the impact of low temperatures. economic recovery, and increasing gas deliveries to the power sector.
According to the US Energy Information Administration (EIA), European gas imports from Russia reached 15 billion ft3 per day in 2017, rising by around 2 billion ft3 from 2016. Other gas suppliers to Europe are Algeria, Norway, Qatar, and the United States. Europe’s natural gas demand reached almost 46 billion ft3 in 2017 of which more than a 1/3 is imported from Russia through the Russian gas company Gazprom. Many countries in Eastern Europe are dependent on Russian gas by more than 90% of their gas imports including Estonia, Finland, Latvia, Slovakia and Bulgaria. On the other hand, countries in Western Europe have substantially low gas imports from Russia including France (18%), Belgium (1.1%) and the Netherlands (5%).
Natural gas is supplied from Russian to Europe through 12 pipelines and the largest importers by quantity are Germany and Italy accounting for almost half of the Russian gas supplies to the EU. If the Caspian gas field is successful, it would enable supplying gas to Italy through the Trans-Anatolia pipeline that passes through Greece, Albania, and Bulgaria directly from the Shah Deniz Gas field in Azerbaijan Caspian Sea, reducing EU need for gas imports from Russia by a large extent. Since 2006, part of the EU mission has been to diversify gas supply while reducing its dependence on Russia due to energy security reasons, originating geopolitical conflicts between Russia and its Europe including, for instance, the Ukrainian conflict, during which Russia threatened to stop its gas supplies to Europe.
Updated in Paragraph 3 at 12:30 pm.