Review of oil and gas operations in Azerbaijan (January 2014)

1. FEC

а) Oil and Gas Production

Azerbaijan produced 3.6 million tons of oil and gas condensate in January 2014 compared to 3.8 million tons in the same period of 2013, the Azerbaijani State Statistics Committee said.

Azerbaijan produced 43.1 million tons of oil and gas condensate in 2013 compared to 42.98 million tons in 2012.

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

Azerbaijan produced 17.9 billion cubic meters of tank gas in 2013 compared to 17.24 billion cubic meters in 2012.

Gas production amounted to 1.6 billion cubic meters in January compared to 1.54 billion cubic meters in the same period of 2013.

A number of events occurred in the country's oil sector in January 2014:

- SOCAR commissioned the first horizontal well in the shallow part of Guneshli field in the Azerbaijani sector of the Caspian Sea. The daily debit of the well is 260 tons of oil and 20,000 cubic meters of gas.

- BP and SOCAR (the State Oil Company of Azerbaijan) are working on the agreement on developing gas resources in the deeper horizons of Azeri-Chirag-Guneshli block of oil and gas fields in the Azerbaijani sector of the Caspian Sea, Greg Riley, BP's Director of Eurasian Exploration, said. "Our knowledge of the field has confirmed presence of large non-associated gas resources in the deeper horizons of ACG that can be developed in support of Azerbaijan's plans to expand its new supplier role," Riley stressed. The deep-lying gas reserves in Azeri-Chirag-Guneshli are estimated at 300 billion cubic meters.

- BP, project operator for the development of the Azeri-Chirag-Guneshli offshore fields' block, announced the start of oil production in the fifth well at the West Chirag platform, head of BP Azerbaijan Gordon Birrell said. Oil production started in completely safe conditions," Birrell said. The new platform was constructed in the framework of the Chirag oil project, which envisages an increase in oil production at ACG block. The platform was installed at a depth of 170 meters between the already-running production platforms Chirag and Guneshli. According to the forecasts, the oil production volume from West Chirag new platform will hit three million tons in 2014.

- The construction work started at the Sangachal terminal as part of the second stage of development of Azerbaijani gas condensate field Shah Deniz, head of BP Azerbaijan (technical operator) Gordon Birrell said in Baku on January 29.

- SOCAR (the State Oil Company of Azerbaijan) has commissioned a second production well at the Umid gas condensate field in the Azerbaijani sector of the Caspian Sea, SOCAR said.

According to the statement, as the result of drilling, the well's depth constituted 6309 metres. The well was commissioned with a daily debit of 800,000 cubic meters of gas and 200 tons of condensate.

b) Processing

Some 119,300 tons of petrol were produced in Azerbaijan in January 2014, which is 2.8 percent less compared to the same month of 2013, the State Statistics Committee reported.

Azerbaijan produced 404,400 tons of the main petroleum products in January.

About 1.41 million tons of petrol were produced in Azerbaijan in 2013 compared to about 1.3 million tons in 2012. Azerbaijan produced 5.09 million tons of main petroleum products in 2013.

Summary table of production of oil products in Azerbaijan:

SOCAR will stop a catalytic cracking unit at the Heydar Aliyev refinery for the reconstruction in April for a month, a source in SOCAR said on Jan. 29. The need of increasing the capacity of the unit is associated with an increase in petrol consumption on the domestic market. It is planned to replace the missing petrol volumes through imports.

The petrol production and consumption volumes were equal in Azerbaijan for the first time, SOCAR head Rovnag Abdullayev said in late 2013.

c) Sale

Around 373,600 tons of oil products were delivered to the Azerbaijani domestic market in January compared to 393,000 in the same month of 2013, the State Statistics Committee said.

Fuel oil supplies (by 34.1 percent) and liquefied natural gas (by 19.5 percent) increased on the domestic market in January. A decrease in supplies of other types of oil products was observed.

Some 5.2 million tons of oil products were delivered to the Azerbaijani domestic market in 2013 compared to 4.8 million tons in 2012.

Around 496,900 tons of Azerbaijani oil products were delivered to consumers (including exports) in January or 3.8 percent less than in the same month of 2013.

Around 75.2 percent of the total volume of petroleum products delivered to customers was sold on the domestic market, while the remaining 24.8 percent went to export.

Around 6.8 million tons of Azerbaijani oil products were delivered to consumers (including exports) in 2013 or 3.9 percent more than in 2012.

Around 77.5 percent of the total volume of petroleum products delivered to customers was sold on the domestic market, while the remaining 22.5 percent went to export.

2. Chemical complex

Azerbaijan produced 7,400 tons of polyethylene in January, which is by 11.3 percent more than in the same month of 2013, the Azerbaijani State Statistics Committee said.

Some 76,000 tons of polyethylene were produced in the country in 2013, which is 13.9 percent more than in 2012.

According to the State Statistics Committee, a decrease in production was observed in other kinds of chemical products in January 2014.

Production of basic chemical products:

The country produced 882,900 tons of hard polyethylene pipes, tubes and hoses in January, which is 54.7 percent less than in the same period in 2013. The country produced 58.5 tons of porous polyurethane plates and strips, which is 6.4 percent more than in January 2013.

3. Electricity

Around 2.1 billion kilowatt/hour electricity was generated in Azerbaijan in January, which is by 3 percent more than in the same period of 2013, the Azerbaijani State Statistics Committee said.

According to the State Committee, over 2.02 billion kilowatt/hours of the total volume of generated electricity fell to the share of thermo power plants in January 2014 which is by 2.9 percent more than in the same month of 2013.

The hydro power plants of Azerbaijan generated around 74.2 billion kilowatt/hour of electricity in January which is by 6.2 percent more than in the same month of 2013.

Azerbaijan produced approximately 20.63 billion kilowatt / hours of electricity in 2013, which is 0.6 percent more than in 2012. Around 19.26 billion kilowatt / hours of the total volume of electricity generated in 2013 fell to the share of thermal power plants or by 2.7 percent more than in 2012. The Azerbaijani hydroelectric power plants generated about 1.37 billion kilowatt / hours of electricity in 2013 which is by 21.7 percent less than in 2012.

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 8 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.

Azerbaijan exported about 9.6 million kilowatt / hours of electricity upon the customs declaration in January 2014 compared to 11.34 million kilowatt / hours in January 2013, the report of the State Customs Committee said.

The construction of the second energy block of Shimal power station continued in January.

"Currently, the second energy block is being constructed," Azerenergy said. "All efforts are aimed at the implementation of this large project. The construction of the second unit with a capacity of 409 megawatt at Shimal power station is important in terms of strengthening the energy security of the Absheron Peninsula. Currently, a power station meets a quarter of the electricity demand of Baku and Absheron. Taking into account the construction of the second block, this figure will reach 35-40 percent. The second energy block is being constructed on the basis of a contract concluded with the Japanese company Toyo Engineering."