Conflict between Armenia and Azerbaijan threatens energy markets

Conflict between Armenia and Azerbaijan threatens energy markets
Conflict between Armenia and Azerbaijan threatens energy markets

Analysts said on Monday that clashes between Armenia and Azerbaijan, over the Nagorno-Karabakh region, have not yet affected energy supplies from the region, but may hamper oil and gas exports, if the conflict worsens.

Oil and gas-rich Azerbaijan is particularly exposed to any potential disruption to energy exports, although supplies abroad are not close to Nagorno Karabakh.Armenia has the Metsamor nuclear power plant, and it is in a precarious position because it is at risk of earthquakes. Last July, Yerevan warned of security risks in the region, and Baku also said that energy supplies are threatened by conflict.

Oil
Azerbaijan’s main route for oil exports is the Baku-Tbilisi-Ceyhan pipeline in Turkey, which carries about 80% of its oil exports, and passes through Georgia and from there to the Turkish coast on the Mediterranean, with a capacity of 1.2 million barrels per day, or more than 1% of supplies. Global oil.

Currently, it exports more than half a million barrels of oil per day. Azerbaijan also exports oil through Russia through the Baku-Novorossiysk pipeline, via Georgia by trains, and also via the Baku-Supsa pipeline.

OilX Consulting said in a comment: “The Nagorno Karabakh conflict raised the concern of the international community, in part because it threatens stability, in an area that forms a corridor for major pipelines that transport oil and gas to world markets.”

Gas
Azerbaijan has plans to increase natural gas exports to Europe, and BP is leading an international consortium to develop the Shah Deniz field in Azerbaijan, which is expected to send its first shipments to Europe later this year.

The production capacity of the Shah Deniz 1 field, which has been pumping gas since 2006, is 8 billion cubic meters, and the production of the Shah Deniz 2 field is expected to reach 16 billion cubic meters annually, of which 10 billion cubic meters are allocated to Europe, and 6 billion to Turkey.

And credit ratings agency Standard & Poor’s said it considered the conflict to be in a “slow flare-up” without threatening energy supplies for the time being.

“We will follow up the repercussions on countries’ financial conditions, energy flows and corporate liquidity in the event that the conflict worsens further, “she added.

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