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

1. FEC

а) Oil and Gas Production

Azerbaijan produced 35.6 million metric tons of oil and gas condensate in January-October 2014, compared to 36.11 million metric tons in the same period of 2013, the Azerbaijani State Statistics Committee's report said.

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

The major part of oil produced in Azerbaijan falls to the Azeri-Chirag-Guneshli oil and gas fields' block and Shah Deniz gas condensate field, which are developed jointly with foreign partners.

Around 15.5 billion cubic meters of commercial gas was produced in the country in January-October compared to over 14.62 billion cubic meters in the same period of 2013, the State Statistics Committee said.

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

The State Oil Company of Azerbaijan (SOCAR) produced 7.01 million metric tons of oil from the country's offshore and onshore fields in January-October 2014, compared to 6.94 million metric tons in the same period of 2013.

SOCAR produced some 6.09 billion cubic meters of gas in January-October 2014 compared to 5.9 billion cubic meters in the same period of 2013.

It is projected that Azerbaijan will produce about 40.62 million metric tons of oil in 2015 compared to 41.65 million metric tons of oil projected in 2014, the government of Azerbaijan said.

The government said that oil production volumes will fluctuate until 2018, according to the forecasts.

The oil production in Azerbaijan will amount to 40.77 million metric tons in 2016, 39.42 million metric tons in 2017 and 40.32 million metric tons in 2018, the government said.

The gas production volume will reach 30.2 billion cubic meters in Azerbaijan in 2018 compared to 28.42 billion cubic meters forecasted for 2014, a source in the country's government said.

The source said although the volumes of gas production forecasted for 2015 and 2014 are equal, it is expected that the gas production volume will increase starting from 2016.

The gas production is expected to hit 29.55 billion cubic meters in 2016 and 29.92 billion cubic meters in 2017, while this figure is forecasted to exceed 30 billion cubic meters in 2018, according to the source.

b) Processing

Around 1.02 million metric tons of motor gasoline was produced in Azerbaijan in January-October 2014, which is 12.5 percent less than in the same period of 2013, the country's State Statistical Committee said in its report.

Currently, the State Oil Company of Azerbaijan (SOCAR) is carrying out work on modernization of the processing facilities, as growth is observed in the fuel consumption in the country.

In total, 4.6 million metric tons of petroleum products were produced in Azerbaijan in Jan.-Oct. 2014, compared to 4.24 million metric tons in the same period of 2013.

Around 1.41 million metric tons of motor gasoline was produced in Azerbaijan in 2013, compared to nearly 1.3 million metric tons in 2012.

In total, 5.09 million metric tons of the main types of petroleum products were produced in Azerbaijan in 2013.

The table below shows the production of petroleum products in Azerbaijan:

Petroleum products

Jan.-Oct. 2014 (in tons)

Compared to Jan.-Oct. 2013 (%)

Motor gasoline

1 023.6

87.5

Naphtha

171.1

156

Kerosene

587.9

100.3

Diesel fuel

2 384.2

114.9

Lubricants

45.6

113.7

Oil bitumen

209.9

80.1

The annual production of oil products in Azerbaijan will exceed 6.3 million tons from 2016, the government said.

In 2013, Azerbaijan produced 5.9 million tons of petroleum products.

According to the forecasts, Azerbaijan will produce 6.22 million tons of oil products in 2015 compared to 6.17 million tons projected for 2014, the government said.

The production of oil products in the country are projected at 6.31 million tons per year from 2016 to 2018.

Most of the total volume of oil products in Azerbaijan accounted for gasoline and diesel fuel.

According to the forecasts, Azerbaijan will produce about 1.51 million tons of gasoline in 2015 compared to about 1.48 million tons projected for 2014. The annual production of gasoline in the country is projected at 1.53 million tons from 2016 to 2018, the government said.

The diesel fuel production is also expected to increase. For example, the country will produce 2.29 million tons of diesel fuel in 2015 (almost similar to the rate expected in 2014). The annual production of this kind of fuel will be 2.33 million tons in 2016-2018.

c) consumption

Some 2.7 million metric tons of oil products were delivered to Azerbaijan's domestic market in January-September 2014, which is 1 percent more than in January-September 2013, according to the Azerbaijani State Statistics Committee's report as of ten months of 2014.

The supplies of naphtha to the domestic market increased by 36 percent, lubricants - 9.4 percent, aviation kerosene and other types of kerosene - 6.9 percent, gasoline - 5.6 percent, diesel fuel - 1.4 percent, LPG - 1.1 percent in January-September. A decrease in supplies was observed in other types of petroleum products, the report says.

Azerbaijan produced around 3.56 million metric tons of main petroleum products in January-September compared to more than 3.82 million metric tons in the same period of 2013.

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

Around 6.8 million metric tons of Azerbaijani oil products were supplied to consumers (including export supplies) in 2013, which is 3.9 percent more than in 2012.

Around 77.5 percent of the total volume of oil products, supplied to the consumers, was sold on the domestic market, while the remaining 22.5 percent went for export.

2. Chemical complex

Azerbaijan produced 79,900 metric tons of polyethylene in January-October 2014, which is 30.1 percent more than in the same period of 2013, the Azerbaijani State Statistics Committee said in its report for ten months of 2014.

Around 45,500 metric tons of propylene were produced in Azerbaijan in January-October, which is 43.3 percent more than in the same period of 2013, according to the report.

The country produced 76,000 metric tons of polyethylene in 2013, or 13.9 percent more than in 2012.

However, Azerbaijan saw decrease in the production of other major types of chemical products in January-October 2014.

The table below shows the production volume of major types of chemical products:

Products

Jan.-Oct. 2014

The same period of 2013

(%)

Barium sulfate (1,000 metric tons)

73,1

83,4

Polyethylene (1,000 metric tons)

79,9

130,1

Propylene (1,000 metric tons)

45,5

143,3

Isopropyl alcohol (1,000 metric tons)

7 258

72,9

Paint products (metric tons)

4 013,9

89,8

Iodine (metric tons)

220,8

86,8

The country produced 13,470 metric tons of solid polyethylene pipes, tubes and hoses, which is 41.9 percent less than the same period of 2013.

At the same time, some 164.5 metric tons of porous polyurethane plates and strips were produced in Azerbaijan during the reporting period, which is 67.5 percent less than in January-October 2013.

The polyethylene production volume is projected to be stabilized at 105,400 tons per year in Azerbaijan from 2016 to 2018.

Azerbaijan is projected to produce 103,900 tons of polyethylene in 2015 compared to 75,100 tons projected for 2014, the government said.

In 2013, the country produced 76,200 tons of polyethylene compared to 66,800 tons in 2012.

The propylene production volumes are projected to be stabilized in Azerbaijan. So, the annual propylene production is projected at 74,000 tons from 2016 to 2018. Azerbaijan is projected to produce 72,800 tons of propylene in 2015 compared to 33,200 tons projected for 2014. In 2013, the propylene production in the country amounted to 31,000 tons compared to 27,200 tons in 2012.

The first phase of infrastructure construction of the "Sumgait Chemical Industrial Park" under the Azerbaijan Economic Development Ministry is planned to be completed by late 2015. The construction of a vocational training center and a 16-storey office building will be launched in the social area of the park in the near future.

Azertexnolayn steel pipe production plant operates in the park. At the same time, the construction of two plants began in the territory of the park.

Moreover, the production process is planned to be launched at SOCAR Polimer company in 2016. The equipment necessary for the production process has been already supplied.

The work is underway to attract investors. The experience is mutually exchanged with foreign industrial parks. More than 20 investment proposals have been already received from the companies in Canada, Germany, Greece, France, Italy and Turkey. They also expressed a desire to become residents of the park.

However, the meetings were held with the representatives of various organizations, companies and diplomatic missions to establish new industrial enterprises. At the same time, a development draft concept on business incubator activity in the territory of the park has been prepared proceeding from the experience of foreign countries.

3. Electricity

Azerbaijan produced 18.75 billion kilowatt hours of electricity in January-October 2014, which is 6.6 percent more than in the same period of 2013, the Azerbaijani State Statistics Committee said in its report.

Marketable electricity accounted for 17.79 billion kilowatt hours of the total volume of electricity generated in January-October, which is 6.2 percent more than in the same period of 2013.

The report said that thermal power plants accounted for 16.68 billion kilowatt hours of the total volume of marketable electricity generated in the country in January-October 2014, which is 7.3 percent more than in the same period of 2013.

This is while hydro power plants generated 1.1 billion kilowatt hours of marketable electricity during the reporting period, which is 8.8 percent less than in the same period of 2013.

Moreover, the country's wind power generation facilities produced 6.1 million kilowatt hours of electricity in January-October 2014.

Nearly 20.63 billion kilowatt hours of marketable electricity was generated in Azerbaijan in 2013, which is 0.6 percent more than in 2012. Some 19.26 billion kilowatt hours of the total volume of electricity generated in 2013, fell to thermal power plants, which is 2.7 percent more than in the same period of 2012. Hydro power plants produced nearly 1.37 billion kilowatt hours of electricity in 2013, which is 21.7 percent less than in 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 ten hydro power plants and 14 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.

Today, Azerbaijan is implementing the flow of electricity with Georgia, Iran and Russia.

The electricity generation volumes will reach 26.26 billion kilowatt / hours in Azerbaijan in 2018 compared to about 21.75 billion kilowatt / hours projected for 2014, the Azerbaijani government said.

According to the forecasts, the electricity production volume in the country will hit 22.91 billion kilowatt / hours in 2015, 24.12 billion kilowatt / hours in 2016, 25.24 billion kilowatt / hours in 2017, the government said.

The generating and transmission facilities are being constructed and reconstructed for the development of the power sector in the country.

The use of alternative and renewable energy sources is being expanded.

The entrepreneurship is being supported in the power sector.

The technical and technological losses in the production and transmission of electricity are being reduced, the government said.

Baku hosted the 13th Energy Investment and Regulation Conference of the Energy Regulators Regional Association (ERRA). During the conference, it was stressed that the total potential of alternative and renewable energy sources exceeds 12,000 megawatts in Azerbaijan.

Most of the country's potential in this area accounted for solar energy and is estimated at 5,000 megawatts. Around 4,500 megawatts accounts for wind energy, 1,500 megawatts - biomass, 800 megawatts geothermal energy, and the remaining 350 megawatts - the potential of small hydro power plants (HPP).

The government's upcoming plans in this area were also announced. In particular, it was stressed that the costs for the implementation of the projects in the field of alternative energy in the country will hit 1.04 billion AZN in 2015. These funds will be used to implement various projects with a total capacity of 299.6 megawatts. The hybrid electric and thermal power stations are planned to be built in Nakhchivan, Oguz, Balakan, Gadabay and Neftchala. At present, a feasibility study is being prepared to construct these hybrid stations.

Currently, 92 percent of electricity production in the country accounts for gas, 7.9 percent - hydro-resources and only 0.1 percent - alternative sources.

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