Prospects for new natural gas development in the Caspian Sea region have improved substantially since Russia began its war in Ukraine in late February. For much of the past two decades, European Union (EU) energy policy has focused on broadening access to alternative sources of gas supply to Russia, to improve its energy security, rather than actively working to reduce the volume of Russian imports. But Brussels’ aim is now to phase out Russian supply as quickly as possible, with the European Commission targeting a reduction of as much as two-thirds within the next year.

Irrespective of whether such an ambitious goal is realistic, it is clear that Russia’s share of the European gas market, which currently stands at around 40%, will shrink over the coming years, assuming there is no dramatic rapprochement in relations between Moscow and the West. And even the most ambitious EU projections show that gas demand will decline at a slower rate, opening up new opportunities for other natural gas suppliers, including Caspian producers.

Expanding the Southern Corridor 
Azerbaijan established itself as a gas supplier to south Europe at the end of 2020, following the launch of the Trans-Adriatic Pipeline (TAP), which represents the final leg of the Southern Gas Corridor (SGC). The pipeline’s capacity is 10bn m3/y, of which 8bn m3 has been committed by Italy and 1bn m3 each by Bulgaria and Greece. This gas is sourced from the giant Shakh Deniz field off Azerbaijan’s coast.