Adnoc gas deal fires up UAE-Azerbaijan ties

Reuters

• Adnoc to buy 30% of Absheron gas field
• UAE-Azerbaijan trade worth $980m in 2022
• Oil accounts for 92% of Azerbaijan’s exports

Abu Dhabi National Oil Company (Adnoc) is to acquire a 30 percent equity stake in the Absheron gas and condensate field off the coast of Azerbaijan, as part of a plan to grow its international gas business.

The deal will allow the state-owned company to facilitate a route into global markets for gas in Europe and Central Asia.

Azerbaijan state oil firm Socar and French energy group TotalEnergies previously held 50 percent stakes in the Caspian Sea field. They will each retain a 35 percent share after the Adnoc purchase.

• UAE’s Masdar to develop 4GW renewable projects in Azerbaijan
• Masdar could look East for investment opportunities
• Acwa Power to develop green energy projects in Azerbaijan

Adnoc and Socar have also signed a memorandum of understanding to evaluate potential areas of collaboration across renewable energy projects in the UAE and Azerbaijan, as well as internationally.

Trade between the UAE and Azerbaijan stood at AED3.6 billion ($980 million) in 2022, an increase of 46 percent compared with the previous year.

Azerbaijan generates nearly half its GDP from oil and gas. It is now in talks to join Opec, along with Malaysia, Brunei and Mexico.

The former Soviet republic currently exports oil and gas to neighbouring countries including Georgia, Turkey, Italy, Greece and Bulgaria.

Preliminary data for 2022 suggests oil products accounted for more than 92 percent of Azerbaijan’s total exports, but its trade relationship with the UAE is increasingly being driven by diversification away from crude.

Renewable growth

Leading the charge is Masdar, which has opened an office in the capital, Baku. The UAE renewable energy company is expanding its reach to Azerbaijan as the country seeks to transform its energy sector.

Azerbaijan aims to increase its installed power capacity from renewable sources to 30 percent by 2030. Ultimately, the government is looking to establish the country as a green energy producer and exporter.  

Dr Sultan Ahmed Al Jaber, UAE minister of industry and advanced technology, Cop28 president-designate and chairman of Masdar, said the company’s “increasing scope of work in Azerbaijan, evidenced by its new Baku office, demonstrates the UAE’s commitment to supporting decarbonisation and sustainable development around the world”.

Masdar has also signed joint development agreements for onshore wind and solar projects and integrated offshore wind and green hydrogen projects, with a combined capacity of 4GW.

The projects are part of a larger deal with Azerbaijan’s Ministry of Energy to develop a renewable energy programme on a bilateral basis, with a total capacity of 10GW across multiple technologies, one of the largest such agreements in Azerbaijan’s history.

Masdar is developing the 230MW Garadagh solar PV plant in Azerbaijan. It will help to generate half a billion kilowatt-hours of electricity annually, enough to meet the needs of more than 110,000 homes. The project is scheduled to start commercial operations later this year.

“Developing our ample renewable energy potential is a strategic priority for Azerbaijan, and we believe that working with partners like Masdar will help us achieve our goals and create a brighter, more sustainable future for our people,” Javid Abdullayev, director of Azerbaijan Renewable Energy Agency, said.

European gateway

Dr Thani bin Ahmed Al Zeyoudi, UAE minister of state for foreign trade, described Azerbaijan as a gateway to Eastern Europe, saying the value of non-oil trade had increased more than threefold during the past five years.

Mikayil Jabbarov, Azerbaijan’s minister of economy and chairman of the UAE-Azerbaijan Joint Economic Committee, hailed a number of joint investments in oil and gas, renewable energy, petrochemicals and agriculture. 

According to Middle East Briefing, part of the Dezan Shira & Associates foreign investment practice, about 360 commercial organisations in Azerbaijan have benefited from UAE investments in agriculture, transport, construction, trade and services.

It added that a trade representative office had been operating in Dubai since 2017 and, in 2019, the Azerbaijan Trading House was launched to facilitate sales in the UAE and GCC of products under a “Made in Azerbaijan” brand. 

Transport and travel is another sector ripe for growth.

Air Arabia Abu Dhabi, the UAE capital’s first low-cost carrier, plans to launch direct flights to Baku in September while Wizz Air Abu Dhabi is looking to increase services to the country.

The three Air Arabia flights a week will connect Abu Dhabi to Heydar Aliyev International Airport from September 13.

Group CEO Adel Al Ali described Baku as a “significant route in our expansion plans”.