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World Bank calls for gas infrastructure upgrades in Azerbaijan

Oil&Gas Materials 29 November 2023 12:49 (UTC +04:00)
Laman Zeynalova
Laman Zeynalova
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BAKU, Azerbaijan, November 29. In all modeling scenarios, natural gas, progressively combined with clean gas and hydrogen, will maintain a significant role in Azerbaijan's energy portfolio, serving hard-to-abate applications and balancing the variability of renewable energy generation, Trend reports with reference to the World Bank.

The Bank believes that to fulfill this pivotal role, the gas infrastructure necessitates upgrades. These upgrades aim to not only sustain current supply levels with minimal methane emissions but also, in the medium term, to accommodate substantial proportions of clean gas and hydrogen blends. According to the Net-zero emissions scenario (NZS), by the year 2060, synthetic methane, biogas, and green hydrogen could collectively constitute approximately 80 percent of the total piped gas.

“When planning for these investments over the next decade, Azerbaijan will need to carefully monitor sector trends and technological developments to avoid stranded assets. In terms of financing, current natural gas tariffs are insufficient to adequately cover investment costs for grid modernization. In recent years, Azerbaijan has implemented some institutional reforms at Azerigaz and the company now has a focused mandate (serving the domestic gas market) and, as a wholly owned subsidiary, can draw on financial and human resources from SOCAR to modernize its planning, investment management, operation, and maintenance,” said the WB in its latest report.

However, the Bank experts believe that without tariff reforms, economically attractive investments will not be implemented, even when limiting this to investments that are economic at (implicitly) subsidized prices.

“This affects investments to reduce the still very high levels of gas leakage as well as long-term investments to prepare and eventually transition the gas grid to low-carbon energy carriers,” reads the report.

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