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Shahin Abbasov

Shahin Abbasov

Shahin is a contributor to ISN Security Watch

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Azerbaijan Finding New Energy Customers in the Middle East

Could turmoil in the Middle East provide a market opportunity for Azerbaijan’s state-run energy company SOCAR? A pending energy deal with Jordan could open the way for the company’s aggressive expansion into Arab markets.

After a February pipeline explosion cut its gas imports from Egypt for more than a month, Jordan, which imports almost all of its energy resources, decided to diversify its suppliers, the government-run Petra news agency reported earlier this month. Loss of the Egyptian gas cost Jordan about $28 million a week after it changed suppliers, according to the country’s Energy Ministry.

Enter Azerbaijan. An April 14 protocol on economic cooperation between Azerbaijan and Jordan includes a framework for discussions about the export of an unspecified amount of Azerbaijani crude oil and natural gas to Jordan.

In connection with the potential deal, Azerbaijan will open an office on energy issues in Amman, the Jordanian capital. Azerbaijani companies will participate in geological surveys for oil and gas in Jordan, as well as promote their own energy products. And with an eye to the future, the two sides also pledged to explore ways to develop alternative energy resources.

That uptick in energy market activity suggests that political uncertainty in the Middle East may prove not just a source of worry, but a blessing in disguise for Azerbaijan, commented energy expert Ilham Shaban. Prior to the regional instability of 2011, relations between the two states, while friendly, never were robust in economic or energy terms. Exports of agricultural products and construction materials from Jordan accounted for most of the countries’ meager $2.5 million trade turnover in 2010.

Jordan’s interest in Azerbaijani energy is not new. A 2009 memorandum expressed the kingdom’s intention to import 1 billion cubic meters of gas per year from Azerbaijan. But the timing of this latest expression of interest could prove key. As countries like Jordan now search for more stable energy suppliers, the “instability in the Middle East creates good conditions” for Azerbaijani energy products, Shaban noted.

Provided the energy deal moves forward, tankers would deliver shipments of Azerbaijani crude to Jordan via Turkey’s port of Ceyhan on the Mediterranean coast, according to the protocol. Azerbaijani oil has almost reached its production peak of 50 million tons per year, and Baku’s desire to cash in with customers is running strong.

Alternatively, in a less secure scenario, refined oil could also be sent from Alexandria, Egypt, where SOCAR’s Socar Trading subsidiary refined up to 300,000 tons of Libyan oil in 2010, Shaban said. The conflict in Libya has now made the future of those supplies uncertain, however.

SOCAR’s delivery capacity could soon expand. Socar Trading plans to open a 300,000-tons-per-year oil terminal in the United Arab Emirates in 2013. “This terminal will open up additional opportunities for trading Azerbaijani oil in the Middle East,” Shaban said.

Jordan’s gas needs also create a potential opportunity for Baku. Annual production at Azerbaijan’s largest gas source, the Shah Deniz field, has not yet reached its projected 8.6 billion cubic meter (bcm) peak, and production by SOCAR (State Oil Company of the Azerbaijani Republic ) is also growing.

Getting gas to Jordan, however, could prove tricky – no pipeline infrastructure exists as yet, but Turkey’s state-owned pipeline company, BOTAS, plans next year to complete a route that will link Turkey to the Syrian city of Aleppo. That could pave the way for Azerbaijan to sell small volumes of its excess gas not only to Jordan, but also to Syria and Greece by 2012, Shaban said. “I think Azerbaijan could turn into a serious player in the Middle Eastern energy market in a few years,” he added.

Currently, Baku’s largest energy customer in the Middle East is Israel, which imports up to 3 million tons of Azerbaijani oil per year. No oil or gas is exported to Arab states at present.

Despite the potential for expanded exports in the Middle East, SOCAR representatives don’t show public signs of excitement. A SOCAR foreign investment manager, who asked not to be named, stated that the company has not noticed any particular increase of interest in Azerbaijani energy products as a result of instability in the Middle East. “SOCAR has never had a deficit of interest [from potential clients] in oil and gas from Azerbaijan,” the manager asserted.

Some observers are skeptical about Azerbaijan’s Middle East energy prospects. Political analyst Elkhan Shahinoglu, director of the Baku-based Atlas research center, cautioned that the political uncertainties make the region a risky investment bet. “It would be smart to wait for political stabilization in the region,” Shahinoglu commented. “Turkey and Russia risk losing multi-billion-dollar investments in Libya. The further fate of the regimes in Syria and Jordan is also not clear yet.”


Jordan has been hit by protests demanding economic and political liberalization, but the scale of the disturbances there has not approached the magnitude of demonstrations in Tunisia, Egypt, Libya or Syria. King Abdullah II has responded by appointing former army Gen. Marouf Bakhit as the country’s new prime minister, while the government has rounded up hundreds of members of a conservative Islamic sect after violent clashes with police and government supporters earlier this month.

By. Shahin Abbasov

Originally published by EurasiaNet.org

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