Review of oil and gas operations in Azerbaijan (January-November 2010)

1. FEC

а) Oil and gas production

In January-October, SOCAR's oil and gas departments extracted about 45 million barrels (over 6.1 million tons) in offshore and onshore fields of the country compared to over 44.7 million barrels (about 6.09 million tons) in January- October 2009, SOCAR said.

About 10.83 million barrels fall to joint projects of SOCAR with foreign companies. Over 1.8 million barrels fall to operating companies. About 5.6 million barrels fall to "Azeri-Chirag-Guneshli", 948,150 barrels fall to gas condensate from Shah Deniz field.

In January-October SOCAR received about 6.37 billion cubic meters, compared to about 6.1 billion cubic meters during the same period of last year. SOCAR's oil and gas departments extracted about 5.9 billion cubic meters of gas. Joint ventures and operating companies which produce natural gas onshore delivered SOCAR 71.9 million cubic meters of gas in January-October.

Azerbaijan International Operating Company (AIOC) extracted over 2.8 billion cubic meters of associated gas in the field "Azeri-Chirag-Guneshli" in January-October for SOCAR compared to over 3.3 billion cubic meters during the same period of last year.

There are 59 oil and gas fields, of which 18 offshore, the rest onshore in Azerbaijan.

b) Refinery

In January-November, oil refineries in Azerbaijan processed about 5.7 million tons compared to about 5.5 million tons over the same period last year, SOCAR said.

In January-November, the largest volume of production fell to diesel fuel - over 22.1 million tons compared to over 2 million tons in January-November last year.

Azerbaijan has two refineries with total capacity of 20 million tons per year. SOCAR supplies oil extracted at onshore and offshore fields to refineries at its own expense.

Oil production in Azerbaijan in January-November  (in thousand tons):

The growth of petroleum products manufacturing in January-November 2010 totaled 9.6 percent or 408,000 tons compared to January-November 2009.

v) Realization

Over 3.6 million tons of oil was delivered to the domestic market of Azerbaijan in January-November or 3.8 percent more than in January-November last year, the State Statistics Committee said.

Over 961,700 tons of oil products fell to motor petrol. The wholesale cost of 1 ton of A-92 petrol (including delivery and VAT) is 670 manat, A-95 - 736 manat on the domestic market of Azerbaijan. According to the State Statistics Committee, Azpetrol received 435,650 tons of petrol, LUKoil - approximately 150.000 tons, SOCAR Petroleum - 194,200  tons of petrol in January-November.

Over 823,800 tons of diesel fuel was sold in January-November on the domestic market, or 15.7 percent more than in January-November last year. The wholesale cost of 1 ton of diesel fuel (including delivery and VAT) is 485 manat on the domestic market of Azerbaijan. According to the State Statistics Committee, Azpetrol received more than 199,360 tons of diesel fuel, LUKoil - about 91,440 tons. The Caspian Shipping Company has bought 20,600 tons of diesel fuel. About 131,000 tons of diesel fuel during this period was delivered to SOCAR Petroleum.

Azpetrol has 70 filling stations in Azerbaijan, of which 66 - petrol, 4 - gas stations. An oil tank farm with total capacity of 7,000 tons and car park, meeting international standards was commissioned in 1999 to improve fuel quality, ensure uninterrupted operation of filling stations and improve the quality of customer service. Currently, Azpetrol fleet consists of 110 fuel tankers with capacities ranging from 17 to 42 tons, which provide the company's filling stations with fuel. Azpetrol owns approximately 15 percent of the total number of filling stations in the country. The company's share in the relevant market sector is more than 50 percent.

Roughly 241,100 tons of heating oil was sold in January-November on the domestic market, or 9.9 percent less than the same period last year. The wholesale cost of 1 ton of fuel oil M-40 (including delivery and VAT) is 100 manat on the domestic market of Azerbaijan.

Roughly 443,200 tons of air kerosene was sold, or 27.1 percent more than in January-November 2009. The wholesale cost of 1 ton of air kerosene (including delivery and VAT) is 307 manat on the domestic market of Azerbaijan.

Roughly 209,300 tons of oil bitumen was sold on the domestic market in January-November or 0.5 percent less than the same period last year. The wholesale cost of 1 ton of bitumen BN 60/90 (including delivery and VAT) is 160 manat on the domestic market of Azerbaijan.

Roughly 73,800  tons of liquefied gas (LPG) was sold in January-November on the domestic market, or 6.8 percent less than in January-November 2009.

Roughly 798,800 tons of other types of oil products were domestically sold, or 11 percent less than in January-November last year.

2. Chemical complex

SOCAR's Azerkimya PU (production of chemical products) produced 13.9 million cubic meters of nitrogen in January-November. It is 17.1 percent more than the same period of 2009, the Azerbaijani State Statistics Committee.

There was growth for polyethylene and paintwork materials in January-November.

Production of basic chemical products during January-November:

Along with increased production of chemical raw materials, production of plastics and rubber also increased. Thus, over 4,400 tons of solid polyethylene pipes, tubes, hoses were produced in January-November. It is 79.9 percent more compared to the same period of last year. Some 196 tons of porous polyurethane plates and strips were produced in the republic. It is 49.3 percent less than the same period of last year. A significant growth is also observed in the production of polymer coatings. About 482.8 tons of this type of product was produced in January-November. It is two times more than the same period of last year.

3. Power engineering

Azerenergy JSC (production and distribution of electricity in regions of Azerbaijan) generated more than 16.7 billion kilowatt-hours of electricity in January-November compared to about 16.8 billion kilowatt-hours for the same period of last year.

Azerenergy generated about 1.6 billion kilowatt hours of electricity in November compared to more than 1.5 billion kilowatt hours in November last year.