It will be right to call the year of 2007 as a breakthrough in the gas sector. Firstly, refusing from Russia gas imports, an only gas supplier to the country, Azerbaijan has preferred to energy independence. Secondly, the development of Shah Deniz field enabled Azerbaijan to export to Georgia (soon to Turkey), which regained an image of the country as a gas exporter. In his welcoming address to the 14th International Caspian Oil and Gas 2007 exhibition and conference in Baku Azerbaijani President Ilham Aliyev noted that if in 2007 Azerbaijan was a gas importer, from this year the country has become a gas exporter.
Daily supplies of Azerbaijani natural gas to Georgia make up 2.1mln cu m. The Azerigaz closed joint-stock company supplies 1.3mln cu m of gas, while 0.8mln cu m of gas is exported from the Shah Daniz field. The tariffs for gas supplies from Shah Daniz in 2008 will remain the same - $63 per 1,000 cu m.
This year Azerigaz exports gas to Georgia at $120.
The reasonable prices offered by Azerbaijan was the major reason making ITERA-Georgia company, which supplies natural gas to Georgian regions, cease its purchasing of gas from Russia and prefer Azerbaijani gas. In accordance with the new contract, ITERA-Georgia made an inquiry for purchase of 16mln cu m of gas in June. Azerbaijan supplies gas to Georgia at the price of $120 per 1,000cu m. Gasprom sells gas to Georgia at the price of $235 per 1,000cu m.
As to Turkey, Azerbaijan has sent primary supplies of natural gas from the Shah Daniz field to Turkey for pressuring the Turkish section of the South-Caucasus Pipeline. Commercial volumes of Azerbaijani gas have not yet passed the Georgian-Turkish border. Commercial gas from Shah Daniz is transported to Georgia and Azerbaijan through the South-Caucasus pipeline
Turkey is ready to take gas from Azerbaijan's Shah Deniz field. "As soon as the gas comes at the end of July we will send it to Greece and from there we will send to Italy," Turkish Energy Minister Hilmi Guler was quoted by the Ihlas news agency
Azerbaijan's potential in gas delivery is not limited. The country is considering different ways for gas delivery to Europe. By 2030 gas supplies to the world markets will increase mainly from Russia and the Caspian region and Azerbaijan will play a considerable role in it, ExxonMobil forecasts. Currently, the Azerbaijani natural gas is great demand in European and the United States, while the signing of a memorandum with the European Union and the United States testifies for it.
Azerigas, a state gas company, has obtained a right for exports it gas at the expense of appearance of vacant gas in the country. The company announced that it receives 25mln cu m of gas a day. 13mln cu m of this volume is supplied by the SOCAR, 7mln cu m from the Azerbaijan International Operating Company (AIOC), which is developing the Azeri-Chirag-Guneshli fields in the Azerbaijani section of the Caspian and 5mln cu m from the Shah Deniz offshore field, developed by the AIOC led by BP-Azerbaijan. Azerbaijan's demand in natural gas is 20-22mln cu m of gas a day.
Most of part of the natural gas remainder is pumped to underground gas reservoirs, the total capacity of which is 520mln cu m, including 350mln cu in remainder fixed after the completion of the warm winter period this year. In general, for the next winter Azerigas plans to establish a reserve as minimum for 1bln cu m.
As of latest data, the volume of hydrocarbons in Azerbaijan exceeds the earlier publicized figure. If in 1994 the oil reserves of Azeri-Chirag-Guneshli (ACGГ) was forecast to comprise 500mln tons, now the figure is 1bln tons. The volume of gas on Shah Deniz was announced as 600bln cu m at the moment of signing of the contract, though they are forecast to comprise as minimum 1.2trln cu m now. So, the total gas reserves equal approximately 1.5trln cu m.
In case of successful implementation of a program to increase gas production to resolve the problem in supplying fuel to Azerbaijan, it is planed to produce nearly 8 bln cu.m of gas in the country in 2008.
At present the general gas production in the fields of SOCAR comprises 15mln cu m a day. This is a record figure. After the implementation of the program in 2008 the gas handling by SOCAR will comprise 8bln cu m, or 2/5 times more as compared to 2005.
According to assessments, under such volume of gas production, there will be enough to refine nearly 6-6.5 mln tons of oil and it will be possible to export the remaining part.
Some 8.6bln cu m of gas per year will be produced in Stage-1 of the development of Shah Daniz. At present SOCAR is discussing with its partners on Shah Deniz the opportunities for increase of gas production from the field by 1bln cu m a year. It can be done at the expense of increasing the debit of wells. Increase in gas production in the Shah Deniz field is expected to occur in 2008. In 2007 a total of 5.7bln cu m of natural gas will be produced from the Shah Deniz field. Some 2.7bln cu m of this volume will fall on Azerbaijan this year
In January to April Azerbaijan received 281.58mln cu m of has from the field (25.9% less than the forecast).
Azerbaijani International Operating Company (AIOC) is awaiting permission from the State Oil Company of Azerbaijan Republic (SOCAR) to begin the development of gas production at the 8th gas horizon (Balakhany Svita) situated above the Pereriv Svita in the Azeri-Chirag-Guneshli field, Production of the gas will enable AIOC to pump it back to the strata and to increase and stabilize oil production in the field.
"In order to be able to transmit up to 8mln cu m of gas every 24 hours to SOCAR, AIOC has suggested gas production in the Balakhany Svit. At present AIOC transmits 7-8mln cu m every 24 hours of casing-head gas from the Azeri-Chirag-Guneshli field to SOCAR free of charge." he said.
Gas production in Azerbaijan, in mln cu m
Demand for energy resources increases tear by year and by 2030 it will increase by 60% as compared 2000, ExxonMobil forecasts. Demand for gas for electricity production is expected to increase in all regions of the world following the rise in the number of population (8bln people by 2030) and rise in the GDP (2.8% in average a year by 2030).
By 2030 a considerable drop in production is expected in West European countries. To cover the increasing demand, import deliveries via the pipelines will be increased mainly from the Caspian region and Russia," ExxonMobil states.
Azerbaijan's role as an as exporter will increase due to considerable drop in gas production, expected in the West European countries by 2030. EU's dependence on import of energy resources rose to 70%. 94% of the dependence is caused by oil and 84% by gas.
Taking it into consideration the country is prepared to participate in different projects on gas transportation to Europe and as a transit country. In particular, it is dealt with an intensive work over the development of a regional transport infrastructure. Major importance is attached to NABUCCO project and Kazakh oil transportation via the Baku -Tbilisi- Ceyhan oil pipeline. Though the current capacity of the South Caucasus Pipeline is 9bln cu m of gas a year, at the expense of compressors it can be increased to 20bln cu m of gas a year. In the near future the deliveries will also be carried out via the Baku-Tbilisi-Kars railway, which assumes a regional significance for Azerbaijan.