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

1. FEC

а) Oil and Gas Production

BP, which is the technical operator of the field development, completed drilling of SDX- 07a well in October as part of implementing the second stage of Azerbaijani offshore gas condensate Shah Deniz field development. The projected depth of the well is 6,500 meters. Its drilling has been recently completed.

SOCAR commissioned a new offshore platform in Darwin Bank field in the Azerbaijani sector of the Caspian Sea. The new platform was installed at a water depth of 10 meters and designed to drill eight producing wells with an average depth of 1,040 meters.

SOCAR has started drilling a new well in the shallow part of the Guneshli field in the Azerbaijani sector of the Caspian Sea. A projected depth of the well at the Gunashli-13 platform hits 3,450 metres. According to the forecasts, the well will produce 100 tons of oil per day.

Azerbaijan produced 36.11 million tons of oil and gas condensate in January-October 2013, or by 0.2 percent more than the same period of 2012, the Azerbaijani State Statistics Committee said.

In total, Azerbaijan produced 43 million tons of oil and gas condensate in 2012 or 5.3 percent less than in 2011.

According to the State Statistics Committee, the bulk of oil production in January-October 2013 fell to the Azeri-Chirag-Guneshli oil and gas field block and Shah Deniz gas condensate field being developed jointly with foreign partners.

Gas production amounted to over 14.62 billion cubic meters of commercial gas in January-October 2013 or 1.9 percent more than in the same period of 2012.

Gas production totaled 17.24 billion cubic meters, excluding associated gas in 2012, which is 5.4 percent more than in 2011.

According to the forecasts, oil production will amount to 40.97 million tons in Azerbaijan in 2014 compared to about 42.1 million tons which were expected in 2013.

The draft state budget for 2014 stressed that gas production will see an increase as opposed to oil. In particular, the expected gas production in the country will amount to 27.36 billion cubic meters in 2014 compared to 26.63 billion cubic meters expected this year.

In total, oil and gas worth 21.22 billion manat will be produced in Azerbaijan in 2014 compared to about 21.7 billion manat expected in 2013.

b) Processing

Some 1.17 million tons of petrol were produced in Azerbaijan in January-October 2013, which is 9.5 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 4.24 million tons of the main petroleum products in January-October 2012.

Summary table of production of oil products in Azerbaijan:

Production of petroleum products

Jan.-Oct. 2013 (in thousands)

Compared to Jan.-Oct. 2012 (%)

Petrol

1 170

109,5

Naphtha

109,7

86,6

Kerosene

585,9

110,3

Diesel fuel

2 074,7

105,4

Lubricating oil

40,1

71,7

Oil bitumen

262,1

108,1

According to the forecasts, around 6.13 million tons of oil products will be produced in Azerbaijan in 2014 compared to the expected 5.87 million tons this year.

Over 5.62 million tons of oil products were produced in 2012 compared to 5.76 million tons in 2011.

Most oil products produced in Azerbaijan fell to petrol and diesel fuel. It is expected that around 1.49 million tons of petrol will be produced in the country in 2014 compared to nearly 1.36 million tons of gasoline in 2013. The production of diesel fuel next year is expected to hit 2.04 million tons compared to the expected 2.2 million tons this year.

c) Sale

Around 4.34 million tons of oil products were delivered to the Azerbaijani domestic market in January-October 2013 or 9.9 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-October.

Around 5.6 million tons of Azerbaijani oil products were delivered to consumers (including exports) in January-October or 5.3 percent more than in January-October last year.

Around 77.4 percent of the total volume of petroleum products delivered to customers was sold on the domestic market, while the remaining 22.6 percent went to export.

2. Chemical complex

Azerbaijan produced 61,400 tons of polyethylene in January-October 2013, which is by 13.8 percent more than in the same period of 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-October.

Production of basic chemical products:

Products

Jan.-Oct. 2013

Compared to Jan.-Oct. 2012 (%)

Aluminium sulphate (thousands tons)

51,6

106,4

Polyethylene (thousands tons)

61,4

113,8

Propylene (thousands tons)

22,8

100,9

Isopropyl alcohol (thousands tons)

10

177,2

Paintwork material (tons)

3604,8

127,2

Iodine (tons)

221,5

106,8

The country produced 23,270 tons of hard polyethylene pipes, tubes and hoses in January-October, which is 6.6 percent more than the same period in 2012. The country produced 506 tons of porous polyurethane plates and strips, which is 9.3 percent more than in January-October 2012.

The foundation laying ceremony of the Sumgait Chemical Industrial Park was held on October 3. The territory of the park with a total area of ​​168 hectares will be divided into two parts, namely, the administrative-social and industrial zones. Thus, 16-story and 20-story office buildings, a professional and educational center, seven workshops, a complex for conferences and exhibitions and a hostel, a laboratory and research center, indoor and outdoor sports facilities, a kindergarten and a number of other social facilities will be built in administrative-social zone. There will be around 35-40 companies at 43 areas of the industrial zone. Around 7,000 new permanent jobs are expected to be created. The industrial zone will be divided into subsections, namely, polymer chemistry, construction chemistry, automotive industry, agricultural chemistry, household chemistry and medicinal chemistry. Residents of the Sumgait Chemical Industrial Park are exempt from income tax, land and property taxes to increase the investment attractiveness of the Sumgait Chemical Industrial Park for seven year period.

Moreover, the equipment and technology in the park are exempt from value added tax.

According to the forecasts, some 142,500 tons of propylene will be produced in 2014 compared to 44,200 tons expected this year, the draft state budget for 2014, presented to Azerbaijani parliament's consideration, said.

The polyethylene production is expected to be increased in 2014 in accordance with the draft state budget. Thus, around 131,800 tons of polyethylene are expected to be produced next year compared to 105,300 tons expected this year.

According to the forecasts, Azerbaijan will start producing polypropylene in 2016. This index will hit 150,000 tons in 2016 and 2017.

3. Electricity

Around 16.75 billion kilowatt/hour electricity was generated in Azerbaijan in January-October 2013, which is by 0.3 percent less than in the same period of 2012, the Azerbaijani State Statistics Committee said.

According to the State Committee, some 15.54 billion kilowatt/hours of the total volume of generated electricity fell to the share of thermo power plants which is by 2.2 percent more than in January-October 2012.

The hydro power plants of Azerbaijan generated around 1.21 billion kilowatt/hour of electricity which is by 24.5 percent less than in the same period of 2012.

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

Azerenergy company generates and distributes electricity in Azerbaijan.

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.

According to the forecasts, Azerbaijan will produce more than 27.2 billion kilowatt-hours of electricity in 2014 compared to 24.5 billion kilowatt-hours expected this year.

The appropriate infrastructure as part of the development of alternative and renewable energy in Azerbaijan will be deployed in the areas with the highest possible indices, which will increase the effectiveness of green energy technology, Director of the Azerbaijani State Agency for Alternative and Renewable Energy Sources, Akim Badalov said.

Badalov said that three years ago, the creation of 2-2.5 MW capacity for the generation of alternative and renewable energy sources was thought to cost several billion manat, whereas in the present, it is possible to speak about smaller figures.

This is not only because the technology decreases in cost overtime, but also because Azerbaijan is developing its own production capabilities.

"In particular, it will be possible to save on the equipment itself, because Azerbaijan is already producing ​​solar panels. It is also planned to produce heat pumps and equipment for the regeneration of wind energy, as well as systems for the construction of power plants on small rivers," Badalov said.

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