Gas Instead of Oil: Exports to Europe and What They Mean for Baku

People talk about Azerbaijan and they talk about oil, and that has been a decade out of date. Oil is declining and gas is rising, and the gap between those two directions is probably the single most important economic fact an investor needs to grasp about the country today.

Two opposite directions

In the article on oil dependence we saw that oil output fell 4.3% in the first quarter of 2026, and that the sector as a whole is projected to contract by 2.4% in real terms this year.

Gas behaves in reverse.

Measure	Value
Total gas exports in 2025	25.2 bcm
Of which to the European Union	more than half
Growth in exports to Europe since 2021	+56%
Countries Azerbaijan supplies with gas	16 (up from 12 a year earlier)

Four countries added in a single year. That is not gradual growth but rapid expansion.

Where it goes

The breakdown over the past year and the first four months of 2026:

• Europe - 16.7 bcm
• Türkiye - 12.8 bcm
• Georgia - 3.3 bcm
• Syria - 800 million m³

Note that Europe already exceeds Türkiye. That is a structural shift: from a regional destination to an exporter to the European market.

Why Europe is buying

The answer is simple and familiar: after the invasion of Ukraine, the European Union began aggressively diversifying its energy imports. The Southern Gas Corridor - the combination of the South Caucasus Pipeline, TANAP and TAP - went from a contested project to strategic infrastructure.

Azerbaijan happened to be in the right place with pipe already in the ground.

The pipeline geography

It is worth understanding what runs where, because it also explains the politics.

The Southern Gas Corridor consists of three connected segments:

The South Caucasus Pipeline carries gas from Azerbaijan through Georgia to the Turkish border.

TANAP crosses Türkiye from its eastern border to its western one.

TAP continues from Türkiye through Greece and Albania, and under the Adriatic to Italy.

Note what is missing from that route: it passes through neither Russia nor Iran. It is the only energy route from the Caspian basin to Europe that bypasses both.

Which is why Azerbaijani gas is not merely a commodity but a geopolitical asset, and it explains why further transport corridors - such as TRIPP - provoke such sharp reactions. The same bypass logic applies to both.

The doubling plan

On the basis of a memorandum of understanding signed between Azerbaijan and the European Commission, Azerbaijan plans to double gas exports to Europe by 2027.

The route there is capacity expansion:

• TANAP - from 16 to 32 bcm
• TAP - from 10 to 20 bcm

TAP capacity has already been expanded by 1.2 bcm, and four new gas projects are expected in coming years - including the first non-associated gas production from the Azeri-Chirag-Gunashli block.

An important caveat: a target to double by 2027 is a target, not delivery. Energy infrastructure projects slip routinely. It is worth tracking actual capacity rather than declarations.

Why this matters to the property market

Three implications, in ascending order of importance.

First, revenue. Gas partly replaces the revenue oil is ceasing to supply. That softens the scenario described in the shock scenarios, because it means declining oil does not necessarily mean declining income.

Second, long-term contracts. Unlike oil, sold on a volatile market, pipeline gas is largely sold under multi-year contracts. That means more predictable income - and predictability is exactly what stabilises a budget, and through it employment and local demand.

And third, and most important: standing. An energy supplier to 16 countries, including a European market actively seeking alternatives, is not "a small oil state in the Caucasus". It is a strategic partner. That affects diplomatic relations, the willingness of Western institutional investors, and over the long run the risk premium the market prices in.

What this does not say

It does not say gas rescues the economy. It is significant but not sufficient to replace oil on its own, and the country still depends on the shift to the non-oil sector.

And it does not say there is no risk. Dependence on one export market - here Europe - is concentration. European energy policy changes, and fossil fuel phase-out targets exist too.

Nor should a property be priced off the capacity doubling. That rests on projects not yet complete and a timetable that can slip.

Anyone wanting to see whether any of this is showing up in the numbers can look at the price per square metre index by district.

Related articles

• How dependent is Azerbaijan's economy on oil, really?
• Azerbaijan's 2026 budget: where the oil money goes
• Three oil shock scenarios for the Baku market
• Renewable energy and agriculture as growth engines