Azerbaijan selling gas on spot market at record market prices

The record gas prices in Europe allows Azerbaijan to sell available free, uncontracted volumes of gas in this spot market at high prices, Report informs referring to informed sources in energy circles.

Azerbaijan Gas Supply Company, headed by the State Oil Company of Azerbaijan (SOCAR), currently sells at least 1 million cubic meters of gas per day from the Shah Deniz field on the spot market, on some days, sales volumes reach 2 million cubic meters.

The spot price of gas in Europe on the afternoon of March 2 increased by 57% compared to the close of trading on March 1, and the price of the nearest (April) futures on the TTF hub reached $2,227 per 1,000 cubic meters (according to the ICE Futures exchange).

This is a new historical high for the global gas market since the beginning of the year. The previous historical maximum was recorded on December 21, 2021 - $2,138 per 1,000 cubic meters.

Until July 2022, Azerbaijan has certain free volumes of gas that it can sell on the European spot market, primarily the Italian gas hub Punto di Scambio Virtuale - PSV) - the second most important after TTF.

Azerbaijan, which in December 2020 began exporting its gas to Europe through the Trans Adriatic Pipeline (TAP, the European section of the Southern Gas Corridor), was able to sell over 1 billion cubic meters of gas from Shah Deniz on the spot market (mainly PSV) in 2021.

Azerbaijan Gas Supply Company has submitted an application for free capacity of TAP from the start of its launch in the amount of up to 700 million cubic meters of gas per year for possible excess gas from Shah Deniz. According to the source, the company pays a transit tariff for transportation through the TAP, and, thanks to record high market prices for gas in Europe since the end of 2021, it has the opportunity to actively replenish the state budget of Azerbaijan.

"In 2021, in accordance with the gas supply schedule under long-term contracts signed with nine companies in 2013, two companies actually did not receive gas according to the approved schedule, this will start from mid-2022," the source said.

Under contractual commitments, in 2021 Italy received 6.8 billion cubic meters of Azerbaijani gas, and 1.2 billion cubic meters were supplied to Greece and Bulgaria.

In 2022, Europe can receive almost 11 billion cubic meters of gas from Shah Deniz, of which over 7 billion cubic meters will be supplied to Italy, Greece will reach the contracted 1 billion cubic meters per year, and Bulgaria's volumes depend on the launch of the Greece-Bulgaria interconnector (IGB).