SOCAR's green transformation: From oil giant to international energy leader

As the world grapples with the urgent need to combat climate change and reduce carbon emissions, Azerbaijan's State Oil Company (SOCAR) is embarking on a transformative journey. Once known primarily as an oil and gas company, SOCAR is now confidently striding towards a greener future, positioning itself as a leader in the global energy transition.

With the upcoming Conference of the Parties (COP29) to the UN Framework Convention on Climate Change set to take place in Baku this November, all eyes are on Azerbaijan and its commitment to sustainability. SOCAR, recognizing the importance of this pivotal moment, is taking decisive steps to strengthen its position in global energy markets while diversifying its activities.

Central to SOCAR's strategy is the goal of decarbonization and energy transition. The company is implementing targeted measures to continuously reduce emissions across its operations, aligning with the global fight against climate change. By setting clear targets and taking concrete actions, SOCAR is not only fulfilling its corporate social responsibility but also making a significant contribution to international and regional initiatives aimed at curbing emissions.

This strategic shift marks a new era for SOCAR, as it evolves from a traditional oil and gas company to a comprehensive energy provider.

Decarbonization targets

SOCAR, which actively participated in COP28 held in the United Arab Emirates late last year, announced its medium and long-term decarbonization targets to the general public.

These targets include reducing routine flaring to zero in all operational areas by 2030, reducing emission intensity in the upstream segment of SOCAR's direct assets by 30% by 2030 compared to 2022 figures, and cutting corporate emission intensity by 30% and total emissions volume by 20% by 2035 for the company's direct assets, again compared to 2022 figures.

In addition, these targets include achieving near-zero methane in the upstream segment for the company's assets by 2035, and achieving "net zero" by 2050.

It appears that at the center of SOCAR's strategy is an ambitious goal of achieving "zero emissions" by 2050. This means substantially reducing greenhouse gas emissions, investing in renewable energy sources, and implementing innovative technologies.

Practical measures are already being taken towards the established targets.

Steps to achieve goals

SOCAR places special importance on collaborating with reputable companies with rich experience in the field to identify measures, develop low-carbon projects, and ensure decarbonization in oil and gas operations to achieve the mentioned goals.

In this regard, a two-year SOCAR C&S LightHouse project has been launched within the framework of cooperation with the consulting company Boston Consulting Group (BCG).

As part of the project, an artificial intelligence-based methane management platform will be created, which will allow SOCAR to more accurately track and reduce emissions of this powerful greenhouse gas.

The SOCAR C&S LightHouse project, implemented by SOCAR and BCG consulting company, aims to create an artificial intelligence-based methane management platform to assess the current state of methane emissions, map their sources, create a digital monitoring tool, and establish new emission reporting procedures. This platform will make a significant contribution to aligning the methane emissions reporting and monitoring system with international requirements in the future.

By the way, SOCAR has set as one of its main goals to align the emission reduction reporting system with the requirements of international standards and increase transparency.

SOCAR, which constantly demonstrates its commitment to environmental protection issues, is one of the co-founders of the Oil & Gas Decarbonization Charter (OGDC) proposed during COP28 organized in 2023, and is one of 12 companies represented in the Charter's Steering Committee. Thus, SOCAR directly participates in the management of the said Charter. The main goal of the OGDC Charter is to achieve "net zero" by supporting the decarbonization activities of member organizations in oil and gas operations. More than 50 international companies that carry out 40% of the world's oil production have signed the OGDC charter.

Accurate inventory of methane emissions formed in oil and gas operation areas is of great importance in terms of decarbonization. For this purpose, SOCAR intends to implement a satellite-based emission measurement project with the Oil and Gas Climate Initiative (OGCI). Within the framework of the project, it is planned to conduct measurements of methane emissions using the satellite tools of GHGSAT company over 5 onshore oil and gas operation areas of SOCAR. This project will make a positive contribution to more accurate measurement of emissions with the application of advanced technologies.

SOCAR also plans to implement an emission measurement project using drones in cooperation with the UN Environment Program (UNEP).

The company also actively participates in the development of international reporting standards for emissions and increasing transparency in this area. This will allow the company not only to demonstrate its progress in the field of decarbonization but also to be an example for market participants.

Investment in the development of "green energy" sources

Along with reducing emissions, SOCAR is also investing in the development of renewable energy sources. Thus, within the framework of cooperation with UAE's Masdar company, the company is implementing a number of projects on solar and wind energy, as well as "green hydrogen" production. These projects will not only help diversify SOCAR's energy portfolio but will also contribute to reducing greenhouse gas emissions in the country.

More accurate inventory of methane emissions using modern technological capabilities is one of SOCAR's main directions in the field of environmental protection. For this purpose, SOCAR, together with TotalEnergies, is conducting research on drone-based detection and measurement of methane emissions in oil and gas field areas. The project uses the AUSEA (Airborne Ultralight Spectrometer for Environmental) technology developed by TotalEnergies and its partners.

AUSEA consists of a sensor installed on a drone that detects methane emissions and can simultaneously determine their source. This allows for high-precision detection and measurement of methane emissions from oil and gas facilities. Initial research in this area was conducted in TotalEnergies areas of operation in the Caspian Sea. In the next stages, it is planned to conduct these studies in SOCAR's offshore areas of operation. The project is currently ongoing.

SOCAR is also currently implementing the Advancing Global Methane Reduction (AGMR) initiative within the framework of the Methane Guiding Principles (MGP) together with bp as leading industry leaders in Azerbaijan. The main goal of the initiative is to promote methane emission measurement, reporting, and reduction activities for oil and gas operators operating in Azerbaijan by bp and SOCAR, to improve knowledge and skills in this area, as well as to support the application of the best available technologies.

Emission volumes will be certified and sold to Europe

To reduce emissions released into the air, SOCAR is also implementing the LDAR (Leak Detection and Repair) project based on the carbon credit mechanism at Oil Rocks to identify and eliminate leaks. The project activities include leak detection, volume measurement, elimination of leak sources, and certification of reduced emission volumes. Measurements were carried out in the project area using state-of-the-art measuring equipment such as infrared cameras, and 171 leak sources were identified. After the audit results of an international validation company specializing in this field, the repair of leak sources has begun. The emission volumes reduced as a result of the project will be certified and sold on the European market.

One of the main ways to achieve the Net Zero target by reducing emissions is the development of renewable energy sources. Within this activity, relevant work is being carried out under the Joint Development Agreements signed between SOCAR and Masdar.

These agreements cover the implementation of a 2 GW onshore solar and wind energy project (Mega project) and a 2 GW offshore wind energy project, as well as a "green hydrogen" project (Hector project).

SOCAR's transformation into an energy company is not only a response to changing market conditions but also a reflection of the company's responsibility towards future generations.

Indicator of SOCAR's commitment to energy transition

The Baku Energy Week held annually in the capital is a stimulus and means for all the above-mentioned points, which is very important for oil and gas and energy market participants. Thus, within the framework of the traditional Baku Energy Week organized in the capital on June 4-6, SOCAR signed a number of important agreements on the "green energy" projects. In fact, this is also an innovation for SOCAR.

A Shareholders Agreement was signed between SOCAR and Masdar company for three projects. The agreements cover projects for one wind and two solar power plants in Azerbaijan. The groundbreaking of 3 stations with a total capacity of 1 GW is one of the next steps in the field of "green energy" in Azerbaijan, as well as an indicator of commitment to energy transition for the sake of a green world as the host of COP29.

As a result of the implementation of this project, 2.3 billion kWh of electricity will be saved annually, which will prevent the emission of 1 million tons of carbon. Thus, the launched project will contribute to ensuring sustainable development in line with the goals of our country's green agenda.

At the same time, as a result of joint cooperation between SOCAR and bp, the Shafag solar energy project is currently being implemented in the Jabrayil district. In addition, SOCAR and Saudi ACWA Power signed a cooperation agreement on the production of "green fertilizer" in Azerbaijan. Cooperation continues on the project envisaged to be implemented within the framework of the agreement.

SOCAR also signed a cooperation agreement with China Energy International Group Co.Ltd, which envisages the development of renewable energy projects in Azerbaijan, organization of experience exchanges between the parties, optimal approach for the implementation of potential projects technically and financially, and other issues in this direction.

In addition to the above, SOCAR has also signed cooperation agreements with Abu Dhabi National Oil Company (ADNOC) and Sirius International Holding to expand alternative and renewable energy projects, obtain best practices in "blue hydrogen", emissions management, geothermal energy, and development of emission reduction solutions. Such projects and strategic initiatives of SOCAR will play an invaluable role in further strengthening Azerbaijan's's position in the perspective of sustainable development.

Thus, the mentioned giant projects and substantial work done give grounds to say that SOCAR is confidently moving towards becoming a leading international energy company. The defined strategic goals will further strengthen SOCAR's important role in the dynamic development of Azerbaijan.