While leaning on the previous Institute’s analysis, this work will particularly examine Azerbaijan's Southern Gas Corridor (SGC) as a strategic pathway for both the EU and Azerbaijan amidst the ongoing energy transition. The SGC serves as an infrastructure project, aiming to transport natural gas from the Caspian region to Europe. The strategic positioning of Azerbaijan, established infrastructure, and commitment to align with global climate needs are the strong features complimenting the SGC. By capitalizing on its natural resources and embracing innovative solutions such as CCS and hydrogen production, Azerbaijan can position itself as a reliable partner in the global pursuit of climate resilience. Addressing societal skepticism and fostering industry readiness are the next step for the SGC. As the world moves towards a more sustainable energy future, the SGC will continue to play a vital role in shaping the energy landscape of the Caspian region and Europe. In essence, the SGC embodies a paradigm shift towards collaborative energy governance, where mutual interests converge to forge a path toward a more sustainable future.

The Role of Oil and Gas Companies in the Global Energy Transition:

Climate change has shifted from a distant concern to an imminent crisis demanding immediate action across all sectors of society. At the forefront of this global challenge are oil and gas companies, longstanding pillars of the world's energy landscape. As the primary contributors to greenhouse gas emissions, these companies wield considerable influence in shaping the course of climate change and bear significant responsibility for mitigating its impacts. The urgency for change is underscored by the existential threat posed to oil and gas companies in the face of rapid global energy transformation. According to the report from the Atlantic Council, in the S&P 500, the energy sector has experienced a dramatic decrease of 48 percent in the last 10 years (Krauskopf, 2019).

National oil companies (NOCs), in particular, emerge as key players in this landscape. Fully or majority-owned by national governments, these companies have significant influence, accounting for half of global oil production and holding a substantial share of global oil reserves (Belle and Mulhovo, 2024). Oil income serves as a vital revenue source for governments, underpinning essential services and societal well-being. Despite their centrality to national economies and revenue generation, NOCs face mounting pressure to participate in the energy transition and support the decarbonization of the energy system.

Recent global climate conferences, such as COP28 hosted by the United Arab Emirates (UNFCCC, 2023) and the upcoming COP29 scheduled in Azerbaijan (UNFCCC, 2024), highlight the active involvement of petrostates and oil and gas companies in this pivotal transition. Moreover, IRENA analysis highlighted the link between the markets, governance structures, institutional features, and the energy transition in NOCs (IRENA, 2021), and in the face of these challenges and opportunities, oil and gas companies must navigate a multifaceted landscape characterized by policy, investor, and societal pressures. The sector's utilization of interconnected technologies offers great avenues for decarbonization. From geological expertise to the development of carbon capture and storage (CCS) and hydrogen production, the industry holds existing expertise that can be harnessed to facilitate the energy transition.

Azerbaijan's Strategic Positioning in Green Energy and the Role of SGC:

There are numerous opportunities open for countries like Azerbaijan, which thanks to their proximity to Europe and well-established oil and gas infrastructure, can utilize the already existing expertise and infrastructure to invest in hydrogen projects (Belle and Mulhovo, 2024). It has the potential to decarbonize the energy sector. Additionally, CCS technologies, which can capture emitted CO2, hold significant promise. Notably, according to the IEA report, a substantial portion of large-scale CCS projects, approximately 80% (2020), are integrated with oil and gas operations. Scaling up CCS is a pivotal aspect of global decarbonization efforts, aligning with initiatives such as the EU's Net Zero Industry Act and Nationally Determined Contributions under the Paris Agreement (IEA, 2023).

By becoming the host country for the next COP29, Azerbaijan has immediately drawn attention to its energy sector. Considering current geopolitical changes in Eurasia, Azerbaijan is in a favorable position to extend its influence both eastward into Central Asia and westward into the Balkans and further in the EU. The planned increase in energy supply to Europe and the advancement of critical connectivity projects such as the Middle Corridor and SGC are positioning Azerbaijan to apply an active role in the region, emerging as a vital hub for essential energy resources. Meanwhile, being a petrostate and with the oil and gas sector being the cornerstone of the country’s economy, Azerbaijan, considering the green transition, does participate in the process through its diversification efforts. Moreover, having renewable energy potential as hydro, solar, wind, and geothermal resources (IEA, 2023) is an opportunity for future growth. As it was stated during the Green Energy Advisory Council meeting in Baku, considering the role of the oil and gas sector in the green energy transition, SGC is going to be the platform for enhanced energy partnership between Azerbaijan and the EU (President AZ, 2024).

Meanwhile, there is a changing role of the oil and gas companies in energy, this analysis will primarily examine the strategic significance of Azerbaijan's SGC for both the EU and Azerbaijan amidst the ongoing energy transition. The SGC serves as a crucial energy infrastructure project, aiming to transport natural gas from the Caspian region to Europe.

The SGC will not only impact the energy transition but will also need and create changes in other areas such as policy, society, and industry. The political fit refers to the need for the policies and regulations governing energy production and consumption to align with the goals of decarbonization and sustainability. Meanwhile, society's increasing awareness and concern about climate change and environmental degradation play a significant role in shaping energy policies and practices. Finally, for the SGC, understanding the industry's readiness to seize CCS and hydrogen production opportunities is crucial for determining the project's success and its contribution to the energy transition. Therefore, this study will delve into various aspects, including policy alignment, societal demands for decarbonization, and industry changes, particularly concerning CCS technology and blue hydrogen production.

Evolving Energy Alliances: Azerbaijan's Role Amidst Political Shifts in Europe:

“The Russian clash with the west over Ukraine has prompted significant political changes in Eurasia, leading to a reconsideration of energy alliances and a closer examination of everyone’s role” – as guru of the higher education in Africa and the Swiss MP, prof. Djawed Sangdel pointed out. Caucasus is surely an important energy transiting and producing partner. Countries in Southeast Europe and Central Europe, including existing customers like Greece, Bulgaria, and Italy, as well as potential new customers such as Hungary, Croatia, Serbia, North Macedonia, Bosnia and Herzegovina, Romania, Slovenia, and Albania (Bowden, 2022), have expressed interest in increasing their imports of Azerbaijani gas.