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

1. FEC

а) Oil and Gas Production

Around 24.92 million tons of oil and gas condensate were produced in Azerbaijan in Jan.-July, which is 2.2 percent less than in the same period of 2013, the Azerbaijani State Statistics Committee said in its report as of seven months of 2014.

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

The major volume of oil 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 10.76 billion cubic meters of tank gas were produced in the country in Jan.-July, which is 4.6 percent more than in the same period of 2013, according to the committee.

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

The State Oil Company of Azerbaijan (SOCAR) produced about 4.91 million tons of oil at onshore and offshore fields of the country in January-July 2014 compared to 4.85 million tons in the same period of 2013. SOCAR produced about 4.4 billion cubic meters of gas in January-July compared to 4.18 billion cubic meters in the same period of 2013.

The State Oil Company of Azerbaijan (SOCAR) carried out drilling operations (excluding joint ventures and operating companies) in the volume of 81,123 meters in January-July 2014 compared to 92,428 meters in the same period of 2013. Some 79,495 meters out of total volume of drilling performed by SOCAR for seven months accounted for production drilling (in January-July, 2013 - 86 670 meters), and the remaining part - for exploratory drilling. SOCAR carried out drilling operations (except joint ventures and operating companies) in the volume of 8,993 meters in July, 2014. Drilling work performed in July was operational.

Some 3.45 billion AZN were invested in the oil sector of Azerbaijan in January-July 2014 which is 30.4 percent more than the same period of last year, the report of the State Statistics Committee said.

Azerbaijan's State Oil Company (SOCAR) has commissioned a new well in the shallow part of Guneshli field in the Azerbaijani sector of the Caspian Sea. The well, located on the Guneshli-11 platform, was included into the operational fund with a daily debit of 85 tons of oil and 16,000 cubic meters of gas.

"SOCAR-AQS" LLC which renders services in the areas of drilling and maintenance of wells, in the next few months will wrap up preparation for the drilling of new wells at the "Umid" gas condensate field in the Azerbaijani sector of the Caspian Sea.
"Planned engineering work is already in progress, and upon its completion, the drilling work will begin," the company said. The company also noted that "SOCAR-AQS" is preparing to start drilling of the offshore "West Absheron" field where the company will drill 10 horizontal wells in the framework of a new contract with SOCAR.

The State Oil Company of Azerbaijan (SOCAR) is completing the construction of a compressor station for gas-lift oil production in the shallow part of the Guneshli field in the Azerbaijani sector of the Caspian Sea. The capacity of the new station that will be located at a depth of 87 meters, will be equal to three million cubic meters per day.

The State Oil Company of Azerbaijan has started construction and installation works within the framework of construction of new platform No. 6 at the "Bulla Deniz" field in the Azerbaijani sector of the Caspian Sea. The platform is designed for drilling of four wells, the report said. Daily debit of four wells on the platform No.6 is projected to reach two million cubic meters of gas and 600 tons of condensate. The platform will be installed at the point where the water depth is 26 meters.

SOCAR-AQS LLC that renders services for the drilling and maintenance of wells is starting to drill a new well in the shallow part of the Guneshli field in the Caspian Sea. The projected depth of the well is 3,500 meters, according to SOCAR-AQS LLC. The average daily production volume at the field is expected to be 150,000 cubic meters of gas and 15 tons of oil.

b) Processing

Azerbaijan produced 683,900 tons of motor gasoline in January-July 2014, which is 16.2 percent less than in the same period of 2013, the country's State Statistics Committee said in its report.

Currently, the State Oil Company of Azerbaijan (SOCAR) is modernizing the processing facilities.

Azerbaijan produced 2.7 million tons of the main types of oil products in January -July versus over 3 million tons in the same period of 2013. The country produced about 1.41 million tons of motor gasoline in 2013, versus nearly 1.3 million tons in 2012.

Totally, 5.09 million tons of main types of oil products were produced in Azerbaijan in 2013.

Summary table of oil production in Azerbaijan:

c) Sale

Some 1.71 million tons of oil products were delivered to the domestic market of Azerbaijan in the first half of 2014, which is 2.7 percent more than in January-June 2013, according to the report of the State Statistics Committee for the first seven months of 2014.

The supply of aviation fuel and kerosene (by 5.4 times) and petrol (by 5.8 percent) on the domestic market increased in January-June. Supplying other types of oil products decreased, according to the report.

Thus, 191,500 tons of aviation fuel and kerosene were supplied to the domestic market in the first half of 2014 compared to 35,300 tons in January-June 2013. The volume of petrol consumption amounted to 681,800 tons in Azerbaijan in January-June compared to 644,200 tons.

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

Some 6.8 million tons of Azerbaijani oil products were supplied to consumers (including export supplies) in 2013, which is 3.9 percent more than in 2012. Some 77.5 percent of the total volume of petroleum products delivered to customers, were sold on the domestic market, while the remaining 22.5 percent - delivered for export.

2. Chemical complex

Azerbaijan produced 48,300 tons of polyethylene in January-July 2014, which is by 3.8 percent less than in the same period of 2013, according to the Azerbaijani State Statistics Committee's report as of Jan.-July 2014.

Moreover, Azerbaijan produced 27,300 tons of propylene in January-July, which is 47.6 percent more than in the same period of 2013.

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 report, the production of basic chemical products decreased in Azerbaijan in January-July 2014.

Production of basic chemical products:

The country produced 9,530 tons of hard polyethylene pipes, tubes and hoses in January-July, which is 39.5 percent less than in the same period of 2013.

The country produced 164.5 tons of porous polyurethane plates and strips, which is 56.7 percent less than in the same period of 2013.

3. Electricity

Azerbaijan produced 12.53 billion kw/hours of commodity electricity in January-July 2014, which is 3.5 percent more than the same period of 2013, according to the report of the State Statistics Committee of the country as of the first seven months of 2014.

The share of thermal power plants (TPP) accounted for about 11.7 billion kw/hours of the total volume of commodity electricity produced in January-July 2014, which is 4.5 percent more than the same period of last year.

Hydroelectric power plants (HPP) in Azerbaijan in January-July produced 862.2 million kw/hours of commodity electricity or by 8.7 percent less than in the same period of 2013.

In 2013 Azerbaijan produced about 20.63 billion kw/hours or by 0.6 percent more compared to 2012. TPP accounted for 19.26 billion kw/hours of the total volume of electricity produced in 2013 or by 2.7 percent more compared to 2012. HPP last year produced nearly 1.37 billion kw/hours of electricity or by 21.7 percent less compared to 2012.

Azerenergy JSC is the main producer of electricity in Azerbaijan. It has over 200 substations with a capacity of 500, 330, 220 and 110 kilovolt amperes, as well as 10 hydro power plants and 14 thermal power plants.

Power generation system of Azerbaijan over the past five years has increased by 30 percent. At the moment, the figure is 7105 megawatts, which makes it possible to produce about 24 billion kw/hours of electricity. This allows the country to annually export 2.1 billion kw/hours of electricity.

At present, Azerbaijan carries out the flow of electricity to Georgia, Iran and Russia.

Azerbaijani President Ilham Aliyev attended the opening of the Surakhani Solar Power Plant of the AzAlternativEnerji LLC under the State Agency for Alternative and Renewable Energy in July.

President Aliyev was informed about the conducted work. It was stressed that there is a learning center at the station. It is planned to conduct various courses for students enrolled in this specialty, as well as for the specialists of this area. The station was built on a six hectare area. Some 8,000 solar panels generating almost 12,000 kilowatt-hours of electricity a day were installed here. In the future it is planned to install 4,000 more such panels.

While constructing this station, local raw materials and equipment were mainly used. The capacity is 2,800 kW. The annual generation of electricity is 4 million kilowatt-hours. In case of the planned capacity, some 1.5 million cubic meters of gas will be saved within a year.

President Aliyev reviewed the alternative and renewable energy development map in Azerbaijan up to 2020. The goal was set to create a hybrid power station in each city and region of Azerbaijan up to 2020. At present, the operations are being conducted to determine the number of stations to be built in each particular region. The construction of such stations near the places of residence will primarily prevent the loss of electric power and allow providing consumers at a lower price.