AZERBAIJAN - Natural Gas

Azerbaijan consumes whatever gas it produces. The Baku government has refused to import gas from the neighbouring countries, hoping that it will be self- sufficient in this clean source of energy once again. The domestic market needs more than 15 BCM/year of gas. But it can only produce about 5.9 BCM/year at present. The country's demand for natural gas would exceed 20 BCM/year by 2000. But it will not be able to produce at that level, and the government will continue to refuse to import gas. Under a long-term plan announced in late 1997 by the state-owned NOC, Socar, marketed production of natural gas should average 6.22 BCM in 1998 and rise gradually to reach almost 13.4 BCM/year by 2005 and over 15 BCM in 2006. By 2010, marketed production would have reached 16.5 BCM/year. Azerbaijan's marketed production of gas used to average 14 BCM per annum during the Soviet era. Of this, the country used to consume 11 BCM/year and 3 BCM/year used to be supplied to neighbouring Armenia. Only Baku and Sumgait are consuming natural gas at present. Sometimes these cities encounter shortages, due to supply interruptions. Before the Khomeini revolution of late 1978/early 1979, Iran used to export natural gas to Azerbaijan through the IGAT-1 pipeline to Astara. Iranian supplies were resumed later and in 1990, but for very short periods. Now IGAT-1 is only being used to supply Iran's domestic market. Gas supplies by pipeline from Turkmenistan to Azerbaijan and Armenia during the Soviet era ended after the war over Nagorno-Karabakh erupted in the late 1980s between the Azeris and the Armenians. Azerbaijan stopped exporting its own gas to Armenia after the war was escalated and the Soviet Union collapsed in late 1991. Azerbaijan declared its independence in 1991 and joined the Russian-led Commonwealth of Independent States (CIS) after President Aliyev assumed power in June 1993. To ease the problem of shortages caused by inefficiency as well as gas supply shortfalls, state company Azerigaz is implementing a "gas system rehabilitation project" financed 82% by the International Development Association of the World Bank under a $20.2 million loan. The $24.6 million project, approved in 1996, aims to rehabilitate the gas distribution network, improve delivery and boost user efficiency. Azerigaz will provide $4.4 million of the funding required. The four components of the project are metering, cathodic protection (CP) system rehabilitation, analytical equipment, and corporatisation support. Restoration of CP systems should reduce the need for spending on pipeline replacement. The CP part of the project will be concentrated in the Apsheron peninsula where most of the gas is transported and used. About 2,700 km of pipelines serve the area which has the highest population density in the country.

The existing Azeri gas network comprises about 4,500 km of high pressure transmission lines, seven compressor stations and more than 31,000 km of medium and low pressure distribution lines. This Soviet-built system is low- tech compared to Western standards and they are also in poor condition, with many commercial and industrial consumers having no gas meters; and meters that are installed are said to be of questionable accuracy. Metering of household gas use is non-existent. Azerbaijan's consumption of hydro-power used to be stable at 0.1 mtoe between 1987 and 1991, but after the collapse of the Soviet Union, consumption doubled to 0.2 mtoe in 1992 and has remained at that level since then. Coal consumption between 1987 and 1991 amounted to 0.1 mtoe per year, but stopped completely after the collapse of the Soviet Union in 1991. Unlike several other former Soviet states, including Armenia, Azerbaijan has no nuclear power generating capacity.