TotalEnergies Sees Azerbaijan as Boost for EU Energy Security

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Written by Daniel Graeber for IIR News Intelligence (Sugar Land, Texas)

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Summary

A final investment decision on the Ashberon natural gas field is expected to benefit the European market, TotalEnergies said while announcing plans for increased spending and production.

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FID on Ashberon

An increase in natural gas production from offshore Azerbaijan is expected to help provide energy security for the European Union, TotalEnergies said on Saturday.

TotalEnergies, alongside its joint venture partners in Azerbaijan, announced a final investment decision (FID) for the full development of the Absheron natural gas and condensate field in the Caspian Sea. Data from Industrial Info Resources show affiliated projects combine for a total investment value of just over $2 billion, including $550 million along for pipelines and umbilicals.

TotalEnergies said the initial development has a production capacity of 53 billion cubic feet per year in natural gas and another 12,000 barrels per day (bpd) of condensate. That initial phase was brought online in 2023.

The second phase, which the French supermajor said would be onstream by 2029, bringing total capacity to 211 billion cubic feet per year and 47,000 bpd in condensate.

"Gas will be both supplied to the domestic market and exported to Turkey through the existing gas infrastructure connecting Azerbaijan to the European gas market, therefore strengthening regional energy security," the company said.

Rich in gas reserves, Azerbaijan in the 2010s was seen as a vital component of energy security in the European Union. The bloc was heavily dependent on Russian natural gas and various pipelines from the Caspian were considered vital for diversification.

The Azeri division of British energy company BP plc dominates the midstream landscape in Azerbaijan, followed by state-run State Oil Company of the Republic of Azerbaijan and TotalEnergies, data from Industrial Info show.

With Europe still embracing diversity, the conflict in the Middle East is adding new pressures. Liquefied natural gas (LNG), which avoids many of the cross-border issues associated with pipelines, was seen as a means to source alternative supplies. Damage to infrastructure in Qatar, a leading supplier, has curtailed deliveries for at least three years, however, QatarEnergy has said.

Europe still relies on imports to meet 85% of its gas demand and the bloc may be trading one dependency for another in the form of LNG from the United States.

Meanwhile, competition from Asian markets is adding to the issue and Europe may be headed into winter with the lowest levels of gas storage in years. Data from Gas Infrastructure Europe show storage levels at around 70% capacity, about 10% below average for this time of year.

Deep in the natural gas sector, TotalEnergies in an online investment forum on Monday laid out a capital spending program of between $14 billion and $17 billion for the five-year period ending in 2032. That, in turn, is expected to add another 2-3% in production growth.

Boosted by a geopolitical risk premium that's supporting higher oil and gas prices, TotalEnergies in the second quarter said its adjusted net income improved 12% sequentially and 47% year-on-year.

By the Numbers

• 211 billion: Cubic feet per year from Azeri gas field expansion
• $14 billion: The low end for TotalEnergies five-year spending plan

Key Takeaways

• Europe needs a diverse pool of natural gas exporters.
• Caspian gas riches are among the sources of that diversity.

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About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).