Energy - Azerbaijan


The energy sector still plays a key role in the development of Azerbaijan’s economy. Azerbaijan is one of the world’s oldest oil-producing countries and is a crucial oil and gas supplier in the Caspian Sea region. This sector is even regaining importance, with the Southern Gas Corridor being completed and fully operational since 2020 and continues to be of interest also to Dutch entrepreneurs even after the new Memorandum of Understanding on a Strategic Partnership in the Field of Energy in 2022, which intends to double gas imports from Azerbaijan by 2027.  

In the past, the renewable energy sector has received little attention in Azerbaijan, so developments have been slow compared with those in oil and gas production. Today, Azerbaijan has an electricity system dominated by thermal generation, fueled by natural gas extracted from local reserves. Fortunately, the country also possesses strong renewable energy resources including a world-class offshore wind potential located next to major demand centers. Exploitation of this OSW potential offers an opportunity for Azerbaijan. 

Promotion of Renewable Energy

In June 2022 roadmap was prepared and introduced in collaboration with the Azerbaijan Ministry of Energy and initiated by the World Bank and the International Finance Corporation (IFC) under the umbrella of the World Bank Group's Offshore Wind Development Program: Offshore Wind Roadmap for Azerbaijan. The Dutch diplomatic network has actively participated in these policy discussions. Azerbaijan has developed the Law on Utilization of Renewable Sources in the Electricity Production and the Law on Efficient Use of Energy Resources and Effectiveness of Energy in 2021, which are main legal documents regulating the sector and that should accelerate the deployment of renewables and attract foreign investment, where Dutch energy companies can benefit from. Meanwhile, the government is attempting to increase private investment in the renewables sector through supportive policies and incentives (tax, custom etc.). Renewables are receiving more attention every year due to increased demand for energy in Azerbaijan and the realization that more renewable energy is needed due to deteriorating environmental and climate conditions.