On Friday, the first ever staging of the European Games gets started in the capital Baku.

The country needs the tourist dollars.

In Azerbaijan, they know the meaning of 'peak oil.'

They're living it.

One of the most profitable offshore oil fields in the world is now in decline.

Production is slowing at ACG, about 60 miles off the coast of Azerbaijan in the Caspian Sea. The nation is located between Russia and Iran on the Caspian.

And the price per barrel is down sharply.

"Do I look worried?" said Elshad Nassirov, vice-president of Socar.

Nassirov is a vice president at Socar, Azerbaijan's national oil company.

As a matter of strategy he says decreasing production is just not an option.

"Our production which is now about one and a half percent. I would say that we have to increase our production in order to provide alternative, neutral oil and gas to the world markets,” he said.

What does neutral mean? Nassirov says the company must continue to be a reliable energy partner for Europe.

A crucial alternative to Russian oil and gas.

Azerbaijan's dilemma: How to do that, find and fund new oil and gas projects in the coming decades? It means investing in oil and natural gas and crucially trying to reshape Europe's entire energy strategy with new pipelines.

Azerbaijan is banking on the southern corridor project, delivering Caspian gas straight to Europe by 2020.

The deal is done but the pipeline must be built.

Not an easy ask with energy prices still low and volatile.

To get it done, Azerbaijan will likely have to shoulder more of the cost on its own.

The payoff could be huge for Azerbaijan financially and politically.

"It's very interesting because we're actually seeing is that because of the crisis between Russia and the West we're seeing that the West is actually starting to support Azerbaijan significantly to get the southern gas corridor project flying because it's seen as a key alternative to Russia,” said Livia Paggi, a political risk analyst with GPW, an international business intelligence firm.

And watch how Azerbaijan nurtures and funds the southern corridor project could forever strengthen Europe's energy security.

And once again give this small, but energy-rich nation uncanny influence in the region.

 

(CNN)