The military clash between Azerbaijan and Armenia over the Nagorno-Karabakh territory has not affected the energy market. However, a further escalation in the conflict could disrupt oil and gas exports from the region, energy market analysts said on Monday. Oil and gas exports from Azerbaijan are vulnerable to disruptions, although overseas supplies are relatively distant from the conflict’s hotspot. Meanwhile, the Metsamor nuclear power plant in Armenia is already in a distressing situation because of earthquake risk. Both countries have previously warned about energy security risks in the region due to the conflict.
Azerbaijan’s Baku-Tbilisi-Ceyhan pipeline accounts for 80% of the country’s crude exports or about 1% of global oil supplies. The 1.2 million bpd pipeline ships crude via Georgia to Turkey’s Mediterranean coast. The country also exports crude oil to Russia by rail and pipelines. The Nagorno-Karabakh conflict has sparked concerns that it could threaten the stability of the region, which houses major oil and gas pipelines.
So far the conflict is not seen to have a direct impact on Azerbaijan’s plans to increase natural gas exports to Europe, analysts said. The BP-led consortium is developing Azerbaijan’s Shah Deniz gas field, which is expected to begin gas exports to Europe later in 2020. The Shah Deniz I field began production in 2006, with the current production capacity of 8 Bcm. The Shah Deniz II field is estimated to reach 16 Bcm production, of which 10 Bcm will go to Europe, while the rest to Turkey.
