Germany buys Azeri gas: it will pass (via Tap) through Italy

Germany shut down the last three nuclear power plants in 2023, completing - despite the severe energy crisis triggered by the war in Ukraine - a programme it had established in 2011, in the aftermath of the Fukushima disaster in Japan. At the same time, Berlin remains committed to coal phase-out and aims to achieve climate neutrality by 2045.

The need to balance the intermittency of renewables - in a system in which the contribution of solar and wind power is growing - has also prompted a revival in gas: the government of Chancellor Friedrich Merz even plans to double the capacity of gas-fired power plants, encouraging the rise from 10 to 20 gigawatts in total by 203o.

Germany - which had become more than 50 per cent dependent on Russian gas - increased its imports from Norway and, in order to be able to supply itself with LNG, equipped itself with four regasifiers, to which it plans to add others. Azerbaijan offered one of the few real possibilities to increase and diversify volumes delivered by pipeline. And Berlin was ready to seize it, grabbing supplies that might otherwise have gone elsewhere.

Bp, the largest shareholder and operator of the Shah Deniz consortium - the Caspian field from which Azeri gas exported to Europe originates - on 3 June has made the final investment decision (FID) for a new phase of production development: the $2.9bn Shah Deniz Compression project, which by enhancing low-pressure gas recovery will extend the life of the field and enable additional supplies of 50 billion cubic metres of gas and 25 million barrels of condensate. The first increase will take place from 2029, said Bp, which at the same time also approved other investments to reduce emissions from mining operations through electrification and the use of solar energy.

This last point is also of particular interest to a European buyer such as SEFE, since US-made LNG risks being penalised in the future by EU environmental regulations, from the Cbam (the carbon tax at the border) to the rules to limit fugitive methane emissions, in force since 2027 and which the US has rejected as a non-tariff barrier to trade.

The European Commission is soon expected to present legislative proposals to ban the purchase of Russian gas on the spot market from the end of the year and long-term contracts from the end of 2027.