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

1. FEC

а) Oil and Gas Production

Around 17.7 million tonnes of oil and gas condensate was produced in Azerbaijan in January-May, versus 18.12 million tonnes in the same period of 2013, the country's State Statistical Committee said.

Some 43.1 million tonnes of oil and gas condensate was produced in Azerbaijan in 2013, compared to 42.98 million tonnes in 2012.

The major part of the oil produced in 2013, fell to the Azeri-Chirag-Guneshli oil and gas fields' block and the Shah Deniz gas condensate field that are developed jointly with international partners.

Some 7.6 billion cubic meters of tank gas was produced in the country in January-May, compared to nearly 7.4 billion cubic meters in the same period of 2013, according to the committee.

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

The State Oil Company of Azerbaijan (SOCAR) produced some 3.51 million tonnes of oil from onshore and offshore fields of the country (developed independently) in January-May 2014 compared to 3.46 million tonnes of oil in the same period of 2013.

SOCAR also produced some 3.26 billion cubic meters of gas in Jan.-May 2014, versus 3.03 billion cubic meters in the same period of 2013.

SOCAR's drilling operations in January-May, 2014 (excluding joint ventures and operating companies) stood at 62,222 meters. At the same time, some 60,627 meters out of the total volume of drilling performed by SOCAR in five months of 2014 accounted for production drilling and 1,595 meters for exploratory drilling. SOCAR's drilling operations in May 2014 stood at 15,635 meters.

SOCAR plans to drill 20 new wells in the shallow part of Guneshli oil and gas field in accordance with its program for 2013-2015 to stabilize and increase the production volume in the independently developed fields. At the same time, the work on rehabilitating the old wells is underway at the field.

SOCAR started to drill a new well in the shallow part of the Guneshli field in May. The projected depth of the well is 3,650 meters. The daily production of the well is expected to consist of around 150,000 cubic meters of gas and 15 tonnes of condensates.

Moreover, after the overhaul, SOCAR commissioned a well in the shallow part of the Guneshli field. The well was included in the operating fund with daily production of 180,000 cubic meters of gas and 75 tonnes of oil.

Additionally, after the overhaul, SOCAR commissioned another well in the shallow part of the Guneshli field. The well was included in the operating fund with daily production of 170,000 cubic meters of gas and 70 tonnes of oil.

Another gas condensate well was put into operation in the shallow part of the Guneshli field after the overhaul, a message from SOCAR said. The well, located on the Guneshli-6 platform, was included in the operating fund with the daily production of 186,400 cubic meters of gas and 14 tonnes of condensates, the company said.

Moreover:

- SOCAR started exploratory drilling at offshore Agburun-Deniz structure in the Azerbaijani sector of the Caspian Sea. Drilling operations in the south-west wing of the structure aims to study the stratigraphy, lithology and oil and gas-bearing levels in the area. The projected depth of the well is 1,250 meters. Agburun Deniz structure is located six kilometers south from the West Absheron field.

- SOCAR designed a new platform for the Bulla Deniz field in the Caspian Sea. The daily production of four wells on the platform No 6, is expected to consist of two million cubic meters of gas and 600 tonnes of condensates. The platform will be installed at a depth of 26 meters.

- SOCAR and German RWE Dea signed a Joint Study Agreement on evaluation of the hydrocarbon prospect in an area south of Absheron peninsular in the Caspian Sea in May. The contract area covers approximately 850 square kilometres and lies in shallow waters, with water depths from 0 to 30 metres.

b) Processing

Around 442,200 tonnes of petrol were produced in Azerbaijan in January-May 2014 which is 23.1 percent less than in the same period of 2013.

Currently, some units, producing petrol in the country, are being reconstructed and modernized at the Heydar Aliyev Baku Oil Refinery, producing the main types of light petroleum products.

Azerbaijan produced oil products totaling 988.1 million AZN in Jan.-May, which is 15.5 percent less than in the same period of 2013.

About 1.41 million tonnes of petrol was produced in Azerbaijan in 2013, compared to 1.3 million tonnes in 2012. In total, some 5.09 million tonnes of the main types of oil products were produced in Azerbaijan in 2013.

A summary table of oil product production in Azerbaijan:

Oil product production

January-May 2014 (thousand tonnes)

Compared to January-May 2013 (%)

Petrol

442,2

76,9

Naphtha

57,5

89,3

Kerosene

251,8

85,2

Diesel fuel

863,8

82,2

Lubricants

19,4

126,8

Oil bitumen

118,3

92,4

The final configuration and economic characteristics of a new oil and gas processing and petrochemical complex (OGPC) was presented in May.

OGPC will be constructed in Azerbaijan by SOCAR.

The project cost, including the payment of interests on loans, is $14.4 billion. Around $6.1 billion out of the total volume of expenditures will fell to the oil refinery, $3.6 billion - to the gas processing plant and power generating unit, $2.6 billion - petrochemical complex and the remaining $2.1 billion - payment on loans.

The capacity of OGPC's oil refinery and gas processing plant will be 8.5-9 million tonnes and 12 billion cubic meters per year, respectively. The capacity of the polyethylene producing plant will be equal to 300,000 tonnes.

The first phase of the project will be implemented within two years. The entire project will be implemented within eight years.

2. Chemical complex

Azerbaijan produced 30,100 tonnes of polyethylene in January-May, 2014, which is 17.4 percent less than in the same period of 2013.

Furthermore, some 18,300 tonnes of propylene was produced in Azerbaijan in January-May, which is 55.2 percent more than in the same period of 2013.

The country produced 76,000 tonnes of polyethylene in 2013, which is 13.9 percent more than in 2012.

A decrease was observed in the production of basic chemical products in Azerbaijan in January-May 2014, the report said.

Production of basic chemical products:

Production

January-May, 2014

Compared to January-May 2013

(%)

Barium sulfate ( thousand tonnes)

15,7

51,7

Polyethylene (thousand tonnes)

30,1

82,6

Propylene (thousand tonnes)

18,3

155,2

Isopropyl alcohol (thousand tonnes)

967,6

11,7

Paintwork material (thousand tonnes)

2048,1

100,5

Iodine (thousand tonnes)

71,3

65

The country produced 6,300 tonnes of solid polyethylene pipes, tubes and hoses in Jan.-May, which is 39.3 percent less than in January-May 2013.

Also, some 164.5 tonnes of porous polyurethane plates and strips were produced in the country during the reported period, which is 46.9 percent less than in January-May 2013.

3. Electricity

Nearly 9.2 billion kilowatt hours of marketable electricity were produced in Azerbaijan in January-May, 2014, which is by three percent more than in the same period of 2013.

The thermal power plants (TPP) accounted for some 8.6 billion kilowatt hours of the total volume of marketable electricity produced in January-May, 2014, which is by 4.7 percent more than in the same period of 2013.

Azerbaijan's hydro power plants (HPP) produced some 575.1 million kilowatt hours of marketable electricity in January-May, which is by 17.3 percent less than in the same period of 2013.

Nearly 20.63 billion kilowatt/hours of marketable electricity were generated in Azerbaijan in 2013, which is by 0.6 percent more than in 2012. Some 19.26 billion kilowatt/hours of the total volume of electricity generated in 2013 fell to TPPs, which is by 2.7 percent more than in the same period of 2012. HPPs produced nearly 1.37 billion kilowatt hours of electricity in 2013, which is by 21.7 percent less than in 2012.

Azerenergy JSC is the main producer of electricity in Azerbaijan. It owns over 200 substations with the capacity of 500, 330, 220 and 110 kilovolt-amperes, as well as eight hydro power plants and 13 thermal power plants.

The generation capacity of Azerbaijan's power supply system has increased by 30 percent in the last five years. Currently, its capacity is 7,105 megawatt and this allows the generation of around 24 billion kilowatt hours of electricity and subsequently, export of about 2.1 billion kilowatt hours of electricity

Azerbaijan exported about 289.1 million kilowatt hours of electricity based on customs declaration, in Jan.-May 2014, which is 17.4 percent less than in the same period of 2013. By comparison, about 350.01 million kilowatt hours of electricity was exported in January-May 2013, according to the statistical report of the State Customs Committee.

Azerbaijan exported electricity totaling $13.41 million in January-May, compared to $13.93 million in the same period of 2013 (a decrease of 3.7 percent), the report said.

Azerbaijan exported over 595.67 million kilowatt hours of electricity on customs declaration totaling $24.85 million in 2913, versus 482.7 million kilowatt hours worth about $24.76 million in 2012.

President of the Republic of Azerbaijan Ilham Aliyev attended the opening of 220-kilovolt electric substation Agdash on May 1. The project on the construction of the Agdash substation, its connection to the 110-kilovolt grid, the construction of the power line from the 220-kilovolt dual substation Absheron to the Mingachevir hydroelectric power plant is one of the most important projects undertaken within the framework of the 'State program on the socioeconomic development of districts of the Republic of Azerbaijan in 2009-2013'.

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