• Azerbaijan plans to boost natural gas production by 8 billion cubic meters a year within five years, but it remains unclear who will buy the extra supply
• Baku is seeking investments to expand pipelines to facilitate exports to Europe, but the EU has backed away from fossil fuel financing
• Brussels is also under pressure from Washington to buy more US energy

BAKU, Azerbaijan

Azerbaijan is preparing to ramp up natural gas production significantly over the next five years, but officials in Baku are grappling with the challenge of finding committed buyers and reliable routes for the surplus, as Europe sends mixed signals on its energy future.

The EU, the biggest buyer of Azerbaijani gas, had called for a doubling of supplies by 2027 after the war in Ukraine reshaped regional energy flows.

Exports responded accordingly, rising to 12.9 billion cubic meters (455 billion cubic feet) last year – up nearly 60% from 2021 levels. In 2025, the total is expected to reach 13.5 billion cubic meters (476 billion cubic feet).

But Brussels’ reluctance to help finance expanded natural gas infrastructure or commit to the long-term purchase agreements sought by Baku has undercut ambitions.

By 2030, Azerbaijan will have 8 billion cubic meters (282 billion cubic feet) of guaranteed extra gas annually, President Ilham Aliyev told Al Arabiya last month. But he acknowledged that the country has yet to decide where that gas will go.

Alternatives to Europe include increasing deliveries to the Middle East via the Arab Gas Pipeline or using gas swap deals, which would allow Azerbaijani gas to reach distant markets indirectly through third-party infrastructure. 

What are the alternative markets?

With the EU hesitating, that pivot is already underway. In July, state energy company Socar began delivering 1.2 billion cubic meters (42 billion cubic feet) of gas a year to Syria via Türkiye, with the potential for more if demand grows.

Socar has also turned to individual European buyers. In a major deal signed this year, Germany’s Uniper agreed to import at least 1.5 billion cubic meters (53 billion cubic feet) annually from Azerbaijan over the next decade.

“This was a great achievement for Socar,” Ilham Shaban, a Baku-based energy analyst, told Anadolu. He added that Azerbaijan has enough supply to meet its 2022 commitment to double exports to Europe – provided that the infrastructure is in place.

That new supply will come from several major sources. A deep-layer section beneath the Azeri-Chirag-Gunashli (ACG) block in the Caspian Sea is expected to begin production in December or January, eventually yielding about 2 billion cubic meters (70 billion cubic feet) of gas per year.

Meanwhile, a BP-led group this year approved a $2.9 billion investment to expand capacity at the Shah Deniz field, Azerbaijan’s largest gas deposit. The Shah Deniz Compression Project is expected to enable extraction of an additional 50 billion cubic meters (1,765 billion cubic feet) over time.

Another Caspian Sea deposit, Umud, which produced 2.4 billion cubic meters (84 billion cubic feet) of gas last year, is expected to increase output by around 20% in 2027.

The government has also launched an ambitious plan to boost electricity generation from clean energy sources. Officials aim to raise the share of renewable energy in power production to 30% within five years – a move designed to reduce domestic gas consumption and free up more for export.  

Türkiye-Bulgaria pipeline and other routes

But moving the gas is another matter.

To increase deliveries to Europe, Azerbaijan wants to expand its Southern Gas Corridor – the 3,500-kilometer (2,175-mile) pipeline network that runs from the Caspian Sea to Italy.

However, Europe’s financing role is unclear. The European Investment Bank, citing climate goals, has ended new lending for fossil fuel infrastructure.

The corridor’s final leg, the Trans-Adriatic Pipeline (TAP), currently carries 10 billion cubic meters (353 billion cubic feet) of gas annually, most of it to Italy. According to its operator, that capacity could be doubled – but no final expansion decision has been made.

A similar proposal exists for the Trans-Anatolian Natural Gas Pipeline (TANAP), the corridor’s longest stretch, which runs 1,850 kilometers (1,149 miles) across Türkiye. Officials say TANAP could also double capacity, to 32 billion cubic meters (1,130 billion cubic feet) a year.

As European financing remains in doubt, Baku is seeking alternative routes. One of those is the Türkiye-Bulgaria gas pipeline, which currently has an annual capacity of 4 billion cubic meters (141 billion cubic feet).

Last year, Socar signed a transit deal with Türkiye’s state-owned pipeline operator Botas to access the route – enabling additional shipments to Europe without modifying TAP, Shaban explained.  

 ‘Reliable partner’

At the same time, the EU continues to reduce its reliance on Russian energy, with plans to end all oil and gas imports from Russia by 2027.

Russia’s share of EU pipeline gas imports fell to around 11% last year, down from more than 40% in 2021.

EU Energy Commissioner Kadri Simson, during a visit to Baku in June 2024, hailed Azerbaijan as a reliable partner and pledged cooperation on gas, renewables and energy efficiency – as well as infrastructure upgrades aligned with the bloc’s Black Sea strategy.

However, beyond green transition targets, Brussels is also under pressure from Washington to ramp up purchases of American energy.

In a recent non-binding trade pledge, the EU agreed to buy $750 billion in US energy products – including gas, oil and nuclear – by 2028, in part to avoid higher tariffs.

America already supplies around 55% of the EU’s liquefied natural gas imports. Still, total annual spending on US energy stands at just $90 billion to $100 billion – well below the targeted amount.

With Europe balancing climate targets, US trade pressure and energy security concerns, Azerbaijan is now navigating a more complex export landscape than it faced just a few years ago.

For now, the country says it has enough gas for exports for the next 100 years.