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

1. FEC

а) Oil and Gas Production

Azerbaijan produced 32.54 million tons of oil and gas condensate in January-September 2013 or by 0.9 percent less than in the same period of 2012, the State Statistics Committee reported.

According to the State Statistics Committee, Azerbaijan produced 42.98 million tons of oil and gas condensate in 2012 or by 5.3 percent less than in 2011.

The main volume of oil production in January-July 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 amounted to 13.08 billion cubic meters (tank gas) in January-September 2013 or by 2 percent more than in January-September 2012. Gas production in 2012 totaled 17.24 billion cubic meters (excluding associated gas), which is 5.4 percent more than in 2011.

- Azerbaijan has overcome the period of decline in oil production, the president of the State Oil Company of Azerbaijan (SOCAR), Rovnag Abdullayev said. According to him, the rates of decline were completely overcome both by SOCAR at its own fields, and on Azeri-Chirag-Guneshli block of fields, developed jointly with foreign partners. Today, oil production figures show that the decline in production has stopped and a slight increase is possible by late 2013, Abdullayev said.

SOCAR carried out drilling (except joint enterprises and operational companies) of 119,123 meters in January-September 2013 compared to 107,588 meters in the same period of 2012, the company said.

Around 112,789 meters of the total volume of drilling operations carried out in January-September fell to the development drilling, 6,334 meters - exploration drilling.

Azneft Production Association of Azerbaijani State Oil Company (SOCAR) produced over 5.1 million tons of oil which exceeds the forecasted figure by 1.1 per cent, the Production Association said.

According to the message, the Production Association produced some 4.74 billion cubic meters of gas in January-September, which exceeded the forecasted figure by 2.4 per cent.

Within the construction of the new platform of Chirag oil project (increase of oil production in block of Azeri-Chirag-Guneshli fields) topsides were installed onto its jacket. According to the message, it is expected that offshore hook-up and commissioning of the unit will be complete by the end of the year. With its completed weight of 19,500 tons the West Chirag topsides is the heaviest structure ever installed in the Caspian Sea.

The consortium for the development of Azerbaijani gas condensate field "Shah Deniz" signed the contracts with buyers of Azerbaijani gas in Europe. The signed long-term contracts for the sale of gas cover 25 years.

The contracts on gas purchase from the second stage of developing "Shah Deniz" field were signed in Baku with such companies as Shell, Bulgar gas, DEPA, Gas Natural Fenosa, EON, Gaz de France, Hera, Enel, Axpo.

b) Processing

Some 1.05 million tons of petrol were produced in Azerbaijan in January-September 2013, which is 8.9 percent more compared to the same period of last year, the State Statistics Committee reported.

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

Azerbaijan produced more than 3.82 million tons of the main petroleum products in January-September 2012.

Summary table of production of oil products in Azerbaijan:

Production of petroleum products

Jan.-Sept. 2013 (in thousands)

Compared to Jan.-Sept. 2012 (%)

Petrol

1 052

108,9

Naphtha

100,2

80,3

Kerosene

530,3

110,2

Diesel fuel

1 872,4

105,8

Lubricating oil

34,5

68,6

Oil bitumen

234,8

108,1

At present, the design work on the reconstruction of the main units at the Heydar Aliyev Baku Oil Refinery is underway. In particular, this will increase the petrol production volumes. The further increase in production capacity up to 3 million tons of petrol per year will depend on the fuel consumption volumes in the country. The reconstruction operations of the enterprise are planned to be completed in 2015-2016.

It is planned to reconstruct the primary oil processing units due to the dismantling of Azneftyag plant. Dismantling will be held after the process of establishing a new complex for processing of oil, gas and petrochemical production (OGPC) starts.

SOCAR plans to deliver 6.7 million tons of oil for processing in 2014. SOCAR delivered more than 6.2 million tons of oil for processing in 2012. This year, this amount is projected at 6.4 million tons. A SOCAR representative explained the growth in oil processing volumes as the increase in the petrol and diesel fuel consumption in the country.

"The annual petrol consumption increased by more than 10 percent," the representative said. The increase in diesel fuel consumption is 13 percent."

In particular, the petrol production volume is expected to reach about 1.4 million tons in 2013 compared to 1.3 million tons in 2012.

c) Sale

Around 3.86 million tons of oil products were delivered to the Azerbaijani domestic market in January-September 2013, or 8.9 percent more than in the same period of 2012, the State Statistics Committee said.

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 percent more than in 2011.

According to the report, in particular, supply of petrol, diesel fuel, jet fuel, oil bitumen, liquefied gas and other petroleum products to the domestic market increased in January-September.

Around 5.02 million tons of Azerbaijani oil products were delivered to consumers (including exports) in January-September or 5.6 percent more than in January-September last year.

Around 76.8 percent of the total volume of petroleum products delivered to customers was sold on the domestic market, while the remaining 23.2 percent went to export.

2. Chemical complex

Azerbaijan produced 55,000 tons of polyethylene in January-September 2013, which is by 12 percent more than in the same period in 2012, the Azerbaijani State Statistics Committee said.

According to the State Statistics Committee, an increase in production was observed in most categories of main chemical products in the country in January-September.

Production of basic chemical products:

Products

Jan.-Sept. 2013

Compared to Jan.-Sept. 2012 (%)

aluminium sulphate (thousands tons)

47

109,1

Polyethylene (thousands tons)

55

112

Propylene (thousands tons)

20,7

102

Isopropyl alcohol (thousands tons)

9,6

171,6

Paintwork material (tons)

3 359,8

129

Iodine (tons)

203,1

110,3

The country produced 21,300 tons of hard polyethylene pipes, tubes and hoses in January-September, which is 0.1 percent less than the same period in 2012. Also the country produced 471 tons of porous polyurethane plates and strips, which is 21.4 percent more than in January-September 2012.

Currently, SOCAR continues working on the project of construction of a new complex on processing oil and gas and petrochemical production (OGPC) in Azerbaijan. The construction of new facilities involves the dismantling of existing production facilities, particularly refineries.

3. Electricity

Around 15.17 billion kilowatt/hour electricity was generated in Azerbaijan in January-September 2013, which is by 1.2 per cent less than in the same period of 2012, the Azerbaijani State Statistics Committee said.

According to the State Committee, some 14.02 billion kilowatt/hours of the total volume of generated electricity fell to the share of thermo power plants which is by 1.5 per cent more than in January-September 2012.

The hydro power plants of Azerbaijan generated around 1.14 billion kilowatt/hour of electricity which is by 25.4 per cent less than in the same period of 2012.

The planned electricity flow with Russia, Iran, Turkey and Georgia was continued during this period.

There are more than 200 substations with a capacity of 500, 330, 220 and 110 kilovolt amperes, as well as 9 hydropower plants and 13 thermal power plants on Azerenergy's balance sheet.

At present, the installed capacity of the country's power system is about 6,500 megawatts, of which about 5,500-5,600 MW were used. In this case, the country's demand for electricity is at the level of 4,200-4,400 MW.

"Bakielektrikshebeke" company (sale and distribution of electricity in Baku) bought over 6.37 billion kilowatt-hours of electricity from "Azerenergy" company (generation and distribution of electricity in the Azerbaijani regions) in January-September 2013 compared to 5.76 billion kilowatt-hours in January-August 2013, Bakielektrikshebeke said.

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