Review of oil and gas operations in Azerbaijan (January-June 2013)

1. FEC

а) Oil and Gas Production

In Jan.-June 2013, Azerbaijan produced 21.8 million tons of oil and gas condensate compared to 22.16 million tons than in the same period of 2012, the State Statistics Committee reported.

The main volume of oil production in January-June 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.-June totalled 8.9 billion cubic meters (tank gas) compared to 8.84 billion cubic meters in Jan.-June 2012.

A number of remarkable events occurred in the country's oil sector in June:

- the West Chirag platform topsides were successfully installed in the Azerbaijani sector of the Caspian Sea within Chirag Oil Project (COP).

- the decline in oil production has been stopped and the block currently produces 660,000 barrels of oil (early June). Specifically, seven key areas were identified that will stabilise production at the block, BP Azerbaijan head Gordon Birrell said during the Caspian Oil and Gas 2013 conference in Baku. Among the activities, Birrell called drilling, management over lowering pressure in the reservoirs, optimisation of wells, repair and other works.

- Caspian Drilling Company (CDC - 92.44 per cent of the equity owned by SOCAR) and Singapore's Keppel signed an agreement to build a new rig for works in the Caspian Sea. The cost of the new floating drilling rig together with taxes is slightly over $ 1 billion. This rig will be used in projects of SOCAR. Negotiations are also being held on the construction of another floating drilling float which can be involved in the works on the field 'Absheron' in Azerbaijan.

- According to the plan of comprehensive activities of SOCAR (State Oil Company of Azerbaijan) until 2025, gas production from the Babak perspective structure in the Azerbaijani sector of the Caspian Sea will begin in 2019. Babak structure's reserves are estimated at 400 billion cubic meters of gas and 80 million tons of condensate.

- According to the plan, gas production from the Karabakh prospective structure is scheduled to begin in 2020. Reserves of the structure are estimated at 20 billion cubic meters of gas and 20 million tons of condensate. It is also planned to work on the Ashrafi structure, where gas production is expected to begin in 2023. The structure's reserves are estimated at 13 billion cubic meters of gas and 17 million tons of oil.

- the operations on the "Goshadash" prospective structure continued in June, where an exploration well is being drilled. The joint operations on data systematization on Mesozoic sediments stated with ConocoPhillips. The joint operations on two-dimensional research also started onshore Azerbaijan.

- State Oil Company of Azerbaijan (SOCAR) has commissioned a new well in the shallow part of Guneshli field. According to the report daily production rate of the well, which was drilled from the "Gunashli-13" platform, is 46 tons of oil and 11 million cubic meters of gas.

b) Processing

Some 701,500 tons of petrol were produced in Azerbaijan in January-June 2013, which is 16.3 percent more compared to the same period of last year, the State Statistics Committee reported.

Azerbaijan produced 2.6 million tons of main oil products in January-June 2013.

Summary table of production of oil products in Azerbaijan:

Over the past ten years, the petrol consumption increased by three times in Azerbaijan, SOCAR vice-president on processing David Mammadov said at the "Caspian Oil and Gas 2013" conference. A decision was made to increase the capacity of the Heydar Aliyev Baku Oil Refinery taking into account the growing fleet of the country and to ensure the long-term needs in the petrol in Azerbaijan before a new complex for oil and gas processing and petrochemical production is commissioned. In particular this applies to the primary oil refining, catalytic cracking, catalytic reforming and periodic carbonization units.

c) Sale

Around 2.5 million tons of oil products were delivered to the Azerbaijani domestic market in January-June 2013, or 8.9 percent more than in the same period of 2012, the State Statistics Committee said.

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

Around 3.31 million tons of Azerbaijani oil products were delivered to consumers (including exports) in January-June or 7.1 percent more than in January-June last year.

Around 75.4 percent of the total volume of petroleum products delivered to customers was sold on the domestic market, while the remaining 24.6 percent went to export.

2. Chemical complex

In January-June 2013, Azerbaijan produced 34,800 tons of aluminium sulphate or barium, which is by 20.8 percent more than the same period in 2012, the Azerbaijani State Statistics Committee said.

An increase was observed in all basic chemical products produced in January-June.

Production of basic chemical products:

In January-June, the country produced 11,820 tons of hard polyethylene pipes, tubes and hoses, which is 24.3 percent less than the same period in 2012. Also the country produced 345 tons of porous polyurethane plates and strips, which is 22.8 percent more than in January-June 2012.

3. Electricity

Around 10.39 billion kilowatt / hours of electricity were generated in Azerbaijan in the first half of 2013, which is 2.6 percent less than in the same period of last year, the State Statistics Committee said.

According to the committee, around 9.58 billion kilowatt / hours of the total volume of electricity generated in January-June fall to the thermal power plants or 1.3 percent more than in the first half of 2012.

The hydroelectric power plants generated 815.1 million kilowatt / hours of electricity in the first half of the year or 32.8 percent less than in January-June 2012.

Azerenergy deals with the generation and distribution of electricity in Azerbaijan.

The planned electricity flow with neighboring countries was continued during this period. 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 9 hydropower plants (1,023 MW) and 13 thermal power plants (5,252 MW) on its balance sheet.

"Bakielektrikshebeke" company (sale and distribution of electricity in Baku) bought 4.4 billion kilowatt-hours of electricity from "Azerenergy" company (generation and distribution of electricity in the Azerbaijani regions) in January-June 2013 which is similar with the same period of 2012.