Review of oil and gas operations in Azerbaijan (january-april 2013)

1.FEC

a) Oil and Gas Production

In Jan.-April 2013, Azerbaijan produced 14.3 million tons of oil and gas condensate, or 3.2 percent less than in the same period of 2012. According to the State Statistics Committee, in 2012, Azerbaijan produced 42.98 million tons of oil and gas condensate, or 5.3 percent less than in 2011.

The main volume of oil production last year accounted for the Azeri-Chirag-Guneshli block of oil and gas fields and the Shah Deniz gas condensate field, which are developed in cooperation with foreign partners.

Gas production in Jan.-April totalled 5.9 billion cubic meters (excluding associated gas), or 1.3 percent less than in Jan.-April 2012. Gas production in 2012 totalled 17.24 billion cubic meters (excluding associated gas), or 5.4 percent more than in 2011.

The State Oil Company of Azerbaijan (SOCAR) has started drilling of two wells in the shallow part of Guneshli field in the Azerbaijani sector of the Caspian Sea, SOCAR official website reported. The designed depth of the well on the "Gunashli-10" platform is 3,000 meters. According to forecasts, daily well yield is 100 tons of oil. In turn, the designed depth of the well on the platform "Gunashli-14" is 3,750 meters. From daily production of 150,000 cubic meters of gas and 15 tons of condensate is expected from the well.

By 2015, SOCAR plans to increase volume of oil production at its own fields by two million tons, SOCAR head Rovnag Abdullayev said. "At present, SOCAR is preparing a program, which does not aim at stabilizing oil production volume at old fields, but increasing the production", Abdullayev said. He said this program covers both onshore and offshore fields, owned by SOCAR.

SOCAR and Norway's Statoil signed a Memorandum of Understanding on the prospective 'Zafar' and 'Mashal' structures in the Azerbaijani sector of the Caspian Sea, in Baku. The memorandum provides for negotiations, the coordination of basic commercial principles and conditions of the contract for the development and conclusion of the contract within a year after its signing.

SOCAR completes the drilling of new wells in the Umid gas condensate field in the Azerbaijani sector of the Caspian Sea, the company's first vice-president of geology, geophysics and field development Khoshbaht Yusufzadeh said. According to him, some 6,000 meters of the projected 6,450 meters have been drilled in the well. According to SOCAR experts, the amount of the reserves amounts to more than 200 billion cubic meters of gas and 40 million tons of condensate according to the results of drilling of the first exploration well.

SOCAR conducts drilling of an exploratory well at the Bulla-Deniz field in the Azerbaijani sector of the Caspian Sea. The well will be drilled in order to test oil and gas content of the seventh horizon of reservoir at the offshore field. "The project depth of the well is 5,800 meters, at present its depth is 4,900 meters," the report says.

b) Refinery

Some 454,900 tons of gasoline was produced in Azerbaijan in January-April2013, which is 20.5 percent more compared to the same period last year.

According to the Azerbaijani State Statistics Committee, Azerbaijan produced almost 1.3 million tons of gasoline in 2012, or 0.1 percent more than in 2011.

In January-April this year, Azerbaijan produced 1.7 million tons of main oil products.

Summary table of oil production in Azerbaijan:

Production of petroleum products

in January-April 2013

in relation to January-April 2012 (in percent)

Gasoline

454.9

120.5

Naphtha

51.7

78

Kerosene

232.9

117.6

Diesel fuel

842.3

115

Lubricating oil

11.1

51.2

Oil bitumen

101

121.1

In 2014, SOCAR plans to begin work on the reconstruction and expansion of the production capacity of the catalytic cracking unit, a senior SOCAR representative said. According to him, in 2013, the UOP Company must submit the project for the unit's reconstruction to SOCAR. Works within the project are expected to start the following year. The work will be fully completed in 2015. The unit's modernization will increase the processing capacity by one million tons, while the production of gasoline will increase by 450,000 tons. The need to increase the capacity of the plant is associated with an increase in gasoline consumption in the domestic market, which leads to reduction in the volume of its exports.

c) Sale

Around 1.6 million tons of oil products were delivered to the Azerbaijani domestic market in January-April 2013, or 11.2 percent more than in 2012. According to the State Statistics Committee, Around 4.8 million tons of petroleum products were delivered to the Azerbaijani domestic market in 2012, or 8.8 per cent more than in 2011.

The committee said that in particular, supply of petrol, diesel fuel, fuel oil, liquefied gas and other petroleum products to the domestic market increased in January-February.

Around 2.16 million tons of Azerbaijani oil products were delivered to consumers (including exports) in January-April or 8.8 per cent more than in January-April last year.

Around 74.7 per cent of the total volume of petroleum products delivered to customers was sold on the domestic market, while the remaining 25.3 per cent went to export.

2. Chemical complex

In January-April 2013, Azerbaijan produced 25,100 tons of aluminium sulphate or barium, which is by 51.9 percent more than the same period in 2012. As Azerbaijani State Statistics Committee said, an increase was observed in all basic chemical products produced in January-April.

Production of basic chemical products:

Products

January-April 2013

Compared to January- April 2012 (%)

aluminium sulphate or barium (thousands tons)

25.1

151.9

Polyethylene (thousands tons)

30.4

94.2

Propylene (thousands tons)

9.5

78.2

Isopropyl alcohol (thousands tons)

7.1

126.1

Paintwork material (tons)

1 247.6

135.9

Iodine (tons)

85. 8

136.4

In January-April, the country produced 7,900 tons of hard polyethylene pipes, tubes and hoses, which is 13.6 percent more than the same period in 2012. Also the country produced 265 tons of porous polyurethane plates and strips, which is 13.7 percent more than in January-April 2012.

Economic Development Minister Shahin Mustafayev said at a meeting dedicated to the establishment of Sumgait chemical industrial park LLC that a consulting company with extensive experience in the field was hired for the purpose of organizing the Sumgait Chemical Industry Park. This company has conducted studies in the petrochemical sector of Azerbaijan and prepared proposals for the production of competitive products and the attraction of local and foreign investors. A master plan for the industrial park has been drafted in accordance with the terms of reference, the conceptual design for the network infrastructure and the social facilities prepared.

"We have obtained technical specifications for construction and established a system for the accounting and registration of residents. 167,660 hectares of land designated for the industrial park are currently suitable for construction. We have also prepared documentation on infrastructure building plans as well as on internal projects. We continue to work together with relevant government agencies to clean up contaminated chemical waste space," he said.

The Minister stressed that the provision of raw materials and their processing into a finished product will be conducted in close collaboration with the Azerikimya Production Association. Mustafayev noted that a plan of action and the corresponding presentation was prepared to attract investors to the Sumgait Chemical Industry Park.

3. Electricity

The Azerenergy company (generation and distribution of electricity in Azerbaijan) generated about 7.8 billion kilowatt hours of electricity in January-April compared to more than eight billion for the same period of 2012.

The company generated about 1.8 billion kilowatt hours of electricity in April compared to 1.6 billion kilowatt hours in April 2012.

The planned electricity deals with neighbouring countries were continued in April.

The total capacity of the power plants owned by Azerenergy exceeds 6000MW. There are more than 200 substations with a capacity of 500, 330, 220 and 110 kilovolt amperes, as well as six hydropower plants and 13 thermal power plants on its balance sheet.

Construction of the second energy block at the Shimal power station continued in April. Construction of the second combined-cycle unit with a capacity of 409 megawatts was launched in 2011. The electricity commercial generation via the by the second block and its supply to the distribution network will start in 2014.

The Shimal power station is essential in power supply of Baku, Baku settlements and Absheron peninsula in general.

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