Slovakia Signs Pilot Contract for Gas Purchases from Azerbaijan

SPP, the main gas buyer in Slovakia, has signed a short-term pilot contract for the purchase of natural gas from Azerbaijan and will consider a longer-term agreement in connection with the possible suspension of supplies from Russia via Ukraine. This was reported on the SPP website.

The agreement on the transit of Russian gas through Ukraine to Europe expires at the end of the year, forcing EU companies to look for alternative sources, including Azerbaijan.

SPP said it has diversified its gas purchase contracts with BP, Exxon Mobil, Shell, Eni and RWE and has up to 150% of its customers' consumption available as a safety cushion. The company added that the reserve could grow.

‘Due to the high risk of gas supply interruption through the Eastern Pipeline, we are taking measures to guarantee reliable gas supplies to our customers - from large industrial consumers to households - in any situation,’ said SPP CEO Vojtech Ferenc.

SPP said that Slovakia has also diversified its transit routes in case the pipeline passing through Ukraine is disrupted. 

This includes the pipeline from Germany, which passes through the Czech Republic. The southern transit route through the Turkish Stream pipeline across the Black Sea would also be important in the event of a disruption of transit through Ukraine, and some Russian or Azerbaijani gas could be transported through this pipeline.

If supplies through Ukraine were to be cut off, additional measures would be taken to ensure security of supply, but they would be more expensive.

‘If the company lost Russian supplies and purchased the entire required volume from another source and physically transported it to Slovakia, it would cost it at least €140 million more,’ SPP said.

Russia has said it is ready to continue to supply gas through Ukraine despite the war, while Kyiv has refused to negotiate with Moscow on gas exports.

Russia still sends about 15bn cubic metres of gas to Europe a year, mainly to Slovakia and Austria, where Russia remains the dominant supplier. In Austria, Russian gas has covered more than 80% of Austrian consumption for five consecutive months. Europe also imports Russian LNG by sea, and despite frequent debates about whether it should, it has never imposed sanctions on Russian gas.

The European Commission believes that the bloc can withstand the cessation of Russian transit through Ukraine without serious security risks. Its plan is to rely on alternative suppliers and implement its ambitious climate strategy, including more renewables and energy savings.

In early July, President Volodymyr Zelenskyy said that an agreement to replace Russian gas with Azerbaijani supplies is ‘one of the proposals’ currently being discussed. Azerbaijan has previously stated that it wants to increase gas exports to Europe, but has not yet concluded enough long-term agreements to invest in further production.