Slovak gas distributor SPP concludes pilot deal with Azerbaijan's SOCAR

Slovakia’s largest gas company, the state-owned Slovensky plynarensky priemysel (SPP), has concluded a pilot deal with Azerbaijani national gas company Socar to source gas supplies as a potential alternative to Russian gas.

Ukraine has said it intends to stop the supply of Russian gas over the pipelines that cross its territory when the transport contract runs out at the end of this year. This is forcing countries such as Slovakia, Hungary and Austria to scramble for alternative supplies. Slovakia received 89% of it gas supply from Russia last year

“SPP has been long supporting the continuation of gas transit across the territory of Ukraine. It is the most advantageous solution in terms of price for our clients,” SPP CEO Vojtech Ferencz was quoted as saying by state broadcaster STVR.

“However, considering the high risk of stopping suppliers through the eastern branch, we are adopting measures so we can guarantee our clients from large industrial customers to households safe supplies of gas in any situation,” Ferencz added.

Reuters noted that for the pilot deal in December “small volumes of Azerbaijani gas will be shipped via the Trans Balkan pipeline in Bulgaria” and delivered to Austria, referring to a source with knowledge of the SPP-SOCAR deal.

If SPP were later to sign a long-term deal, it could potentially import Azerbaijani gas via Ukraine. In this case, one possibility is that this would be Russian origin gas, and in exchange Azerbaijan would supply gas to Russia.

SPP’s preferred alternate route is the gas pipeline connection through neighbouring Czechia from Germany, a route where it has reserved sufficient transit capacity. Slovakia can be also supplied from the south using the Turk Stream route from Turkey, Bulgaria, Serbia and Hungary, which can be used for gas from Russia and Azerbaijan.

Daily Sme noted that SPP already has contracts with international energy companies BP, ExxonMobil, Shell, ENI and RWE giving SPP 50% coverage of the consumption of its clients, and the contracts and its own reserves enable it to raise this to 150% of this consumption. 

Ferencz said that “compared to last year we have increased the volume of gas in underground storage [facilities] in Slovakia, which we currently have at disposal, by about 20%”, adding that the storage capacity “will be 100% full not just at the beginning of the heating season, but also […] in January 2025”,

Ferencz added it is the largest volume of gas Slovakia has stored in recent years and that if Slovakia loses the Russian supplies and buys the gas from a different source the additional costs would amount to €140mn.   

Slovakia’s sitting left-right cabinet of populist Prime Minister Robert Fico has been slow to reduce the country's energy dependence on Russia. Fico even threatened Ukraine earlier this year, saying that his government would halt diesel supplies to Ukraine after Kyiv tightened sanctions against Russian oil giant Lukoil in the summer.

The EU urged governments in both Slovakia and Hungary to do more to shake off their dependency on Russian oil in response to Hungary’s and Slovakia’s complaints over the sanctions on Lukoil.