COMMENT: Will COP29 become a milestone in Azerbaijan’s long-term energy strategy?

Despite its heavy reliance on fossil fuel exports for many years, Azerbaijan has now shifted its long-term energy strategy by steadily switching to renewable energy sources.

Thus, the 29th Conference of the Parties to the UN Framework Convention on Climate Change (COP29) in Baku became a vital platform for Azerbaijan’s main energy giant SOCAR and its affiliate SOCAR Green LLC (established in December 2023) to ink new agreements with countries and companies in the field of green energy, smart technologies and decarbonisation. 

Focus on gas

It is noteworthy that SOCAR started supplying North Macedonia with natural gas on November 15, while Azerbaijan was hosting the major climate event on its soil. Considering that natural gas is the cleanest fossil fuel, in contrast to crude oil, Baku did not hesitate to announce the new partnership during COP29. 

Although Azerbaijan has maintained the role of a significant crude oil and gas exporter for many years, in the last few years, it has primarily focused on exports of natural gas to Europe, including developing green energy fields by launching bilateral partnerships and joint projects with global leading companies like ACWA Power, ADNOC, Masdar, Siemens, Total Energy, BP, Fortescue Future Industries and others within the framework of decreasing dependence on oil and gas exports and commitment to reach a higher level of decarbonisation. 

According to local sources, Azerbaijan produced 33bn cubic metres (bcm) of natural gas in the first eight months of 2024, while gas sales during this period amounted to approximately 16.4 bcm, reflecting a 3.1% increase compared to 2023. Of this, nearly 6.5 bcm was sold to Turkey, 8.4 bcm to Europe and 1.5 bcm to Georgia. Additionally, 3.7 bcm of gas was exported to Turkey via the Trans-Anatolian Natural Gas Pipeline (TANAP).

President Ilham Aliyev’s praise of the country’s oil/gas resources during the speech at COP29 summit outraged some Western countries, such as Belgium, which dubbed it “inappropriate”. In his turn, Aliyev highlighted the fact that it was the EU that was asking for additional volumes of Azeri gas after 2022, but now some member countries are “lecturing Baku for having and bringing these resources to the market”.

Greener deals 

Seemingly, Azerbaijan will keep demonstrating its strong commitment to increasing gas volumes to Europe, while inking additional agreements on alternative energy sources, with several signed on the sidelines of COP29.

For example, on the first day of COP29, SOCAR signed a new agreement with IntelliGrid, a joint venture between Esyasoft holding and the Presight company. According to the signed document, IntelliGrid's artificial intelligence capabilities will be used to integrate data analysis, predictive maintenance and real-time monitoring into the gas distribution network, optimising gas consumption, minimising losses and improving overall operational efficiency. 

On November 13, during the visit of Bulgarian President Rumen Radev to Baku, SOCAR inked the Joint Development Agreement with Bulgaria’s Asarel Energy to enhance joint efforts on renewable energy projects. 

In addition, on November 15, during another COP29 session, SOCAR announced a new collaboration with China Energy to begin decarbonising its offshore facilities soon. SOCAR Green and China Energy Overseas Investment Co. Ltd. signed an additional agreement to build a 160 MW solar power plant in the Fuzuli district, while a separate memorandum of understanding was signed with China Datang Co. Ltd. on developing a renewable energy field in Azerbaijan. 

New partnerships

SOCAR's interest in diversifying partnerships in the renewable energy field can be explained by Azerbaijan’s massive reconstruction of the formerly war-torn Karabakh region and its vast potential for generating green energy. 

For example, a few months ago, SOCAR, in partnership with BP, started construction of the 240 MW Shafag solar power plant in the Jabrayil district, describing it as another essential step in decarbonising the largest oil and gas terminal in the Caspian region, the Sangachal terminal.

Hence, as a part of SOCAR’s recent agreements with Chinese companies, a research and development centre in the renewable energy field will be established in Azerbaijan to facilitate joint projects. 

SOCAR's vision of green energy is not limited only to the Karabakh region, as on November 17, the company inked a separate agreement with Masdar, the Asian Development Bank, European Bank for Reconstruction (EBRD) and Asian Infrastructure and Development Bank (AIIB) securing finance for the 445 MWac Bilasuvar and 315 MWac Neftchala solar projects, with the total cost expected to be more than $600mn. A separate agreement was signed on the same day with Saudi Arabia’s ACWA Power on wind power production with a capacity of 3.5 gigawatts in the Azerbaijani sector of the Caspian Sea. 

Furthermore, SOCAR and Italgas S.p.A announced another new partnership at COP29 to promote innovation, efficiency and sustainability in gas distribution.

On the global stage 

Despite the controversy, hosting COP29 clearly boosted Azerbaijan’s international profile. November 11 saw the arrival of dozens of governmental officials, top diplomats, foreign delegates and energy companies to attend the event. A major focus of COP29 was the establishment of a New Collective Quantitative Goal (NCQG) for climate finance. To advance this objective, the presidency of COP29 has introduced 14 key initiatives that integrate climate action with the United Nations Sustainable Development Goals (SDGs).

Moreover, to repeatedly emphasise the need to switch to renewable energy sources, the Azerbaijani government has announced the Climate Finance Action Fund (CFAF) to invest in climate action. The fund will be capitalised with contributions from fossil fuel-producing countries and companies across oil, gas and coal, and Azerbaijan will be a founding contributor. As a result, a consensus has been reached on Article 6.4 of the Paris Agreement and on raising annual climate finance commitments by multilateral financial institutions from $75bn to $170bn. 

For the government of Azerbaijan, the COP29 event became a milestone in promoting climate action, alternative energy sources, and decarbonisation, boosting its own image as a potential green energy producer and exporter. Such an image is vital for Azerbaijan to tackle criticism made by some Western countries during COP29, as well as to decrease dependence on fossil fuel exports, diversify its energy portfolio, and make additional inroads into the European market.