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

1) FEC

а) Oil and Gas Production

Azerbaijan produced 38.4 million metric tons of oil and gas condensate in January-November 2014, compared to 39.5 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 17 billion cubic meters of commercial gas was produced in the country in January-November compared to 16.2 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 volume of drilling operations carried out by the State Oil Company of Azerbaijan (SOCAR) (excluding joint ventures and operating companies) stood at 118,840 meters in January-November 2014, compared to 138,439 meters in the same period of 2013.

Some 116,656 meters of the total volume of the drilling operations carried out by SOCAR for eleven months, fell to the production drilling (131,475 meters in January-November 2013), while the remaining part fell to the exploratory drilling, SOCAR said.

SOCAR produced almost 7.7 million metric tons of oil at the country's offshore and onshore fields in Jan.-Nov. 2014, compared to 7.63 million metric tons in the same period of 2013.

The company produced over 8.31 million metric tons of oil in 2013, compared to 8.24 million metric tons in 2012.

SOCAR produced some 6.65 billion cubic meters of gas in January-November compared to 6.59 billion cubic meters in the same period of 2013.

SOCAR produced some 7.31 billion cubic meters of gas in 2013 compared to 7.46 billion cubic meters in 2012.

Around 5.42 billion AZN was invested in the Azerbaijani oil sector in January-November 2014 which is 24.4 percent more than in January-November 2013.

SOCAR, together with international partners, including BP, is discussing the technical concepts of the long-term development of Azeri-Chirag-Guneshli (ACG) block of oil and gas fields in the Azerbaijani sector of the Caspian Sea, a senior official of SOCAR said.

"ACG is a very important project," SOCAR representative said. "In 2024 is the deadline for the legal effect of the contract, but the story of the development of the field does not end with it. According to the concept of development, production will be held during a long time on this field."

Development of concepts is required in connection with the fact that it may be necessary to perform certain technical decisions without waiting for the contract period to end.

SOCAR senior representative did not comment on the issue of the possibility of extending the contract for the development of the ACG.

The first gas from the Absheron gas-condensate field in the Azerbaijani sector of the Caspian Sea will be produced in the fourth quarter of 2021, Total's planning development manager (operator of the field development) Eric Meyer said.

He said the final investment decision on the project will be made in the fourth quarter of 2017, and the beginning of the drilling of the first well is expected in the last quarter of 2019.

Meyer said it is planned to complete the preparation of the field development program and submit it to the government of Azerbaijan by the middle of 2015.

b) Processing

Around 1.11 million metric tons of motor gasoline were produced in Azerbaijan in January-November 2014, which is 13.9 percent less than in the same period of 2013, the Azerbaijani State Statistics Committee said in its report on the results of first eleven months of 2014.

Currently, SOCAR is carrying out work on modernization of the processing facilities, as growth is observed in the fuel consumption in the country.

SOCAR is the only producer of petroleum products in Azerbaijan.

In total, 4.9 million metric tons of petroleum products were produced in Azerbaijan in January-November 2014, compared to over 4.67 million metric tons in the same period of 2013.

Around 1.41 million metric tons of motor gasoline were 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.-Nov. 2014 (in metric tons)

Compared to Jan.-Nov. 2013 (%)

Motor gasoline

1 107,1

86,1

Naphtha

192,4

154,5

Kerosene

648,5

100,5

Diesel fuel

2 660,8

116,3

Lubricants

51

116,4

Oil bitumen

227,9

79,1

SOCAR plans to begin dismantling Azneftyag refinery in 2017, SOCAR head Rovnag Abdullayev said. He said that dismantling will begin after the production of bitumen and some lubricants is established at the Heydar Aliyev refinery.

As for the reconstruction of the Heydar Aliyev refinery, Abdullayev said that as a result of the planned renovation of existing facilities and construction of new facilities, the plant capacity will be increased to eight million tons per year from the current six million tons. The plant reconstruction will increase the gasoline production volume up to three million tons per year. The reconstruction will be completed in late 2018 - early 2019.

2. Chemical complex

Azerbaijan produced 90,000 metric tons of polyethylene in January-November 2014, which is 31 percent more than in the same period of 2013, the Azerbaijani State Statistics Committee said in its report for eleven months of 2014.

Around 50,900 metric tons of propylene were produced in Azerbaijan in January-November, which is 41.4 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-November 2014.

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

Products

Jan.-Nov. 2014

The same period of 2013 (%)

Barium sulfate (1,000 metric tons)

49,1

89,9

Polyethylene (1,000 metric tons)

90

131

Propylene (1,000 metric tons)

50,9

141,4

Isopropyl alcohol (1,000 metric tons)

9 081,1

76,5

Paint products (metric tons)

4 134,5

87,2

Iodine (metric tons)

242,8

87,4

The country produced 14,630 metric tons of solid polyethylene pipes, tubes and hoses, which is 41.3 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 72 percent less than in January-November 2013.

The chemical-industrial park to be located in the city of Sumgait will be formed by mid-2017, deputy director of the park Zaur Mammadov said. He said that the implementation of the first phase of the underground infrastructure is under completion. This envisages the formation of underground galleries. The necessary technical infrastructure will be delivered through them. The operations will be launched in 2015 to create the necessary social infrastructure and facilities. They will be completed at the end of 2016 - the first half of 2017.

"The additional infrastructure, namely, roads, substations, underground reservoirs for drinking and industrial water will be built by this time," Mammadov said. "The residents will be able to completely start creating production facilities by early 2016. The park will be formed by mid-2017."

Currently, two residents, namely, Ltd "Azertexnolayn" and Ltd "SOCAR Polimer" are represented in the park.

Mammadov said that Ltd "Azertexnolayn" has already built a plant for the production of industrial pipes (both plastic and metal pipes). It is engaged in their production.

Ltd SOCAR Polimer is working to create the facilities for the production of polypropylene and high density polyethylene. Their commissioning will fall to 2016-2017, the head of SOCAR's Azerkimya production association Mukhtar Babayev said. As for the expansion of a list of residents, Mammadov said that various international companies show great interest in the park. In particular, the negotiations are underway with various companies producing plastics, rubber and pharmaceutical products, construction and agricultural chemicals and other chemical products.

3. Electricity

­

Azerbaijan generated 20.91 billion kilowatt hours of electricity in January-November 2014, which is 7.6 percent more than in the same period of 2013, the Azerbaijani State Statistics Committee said in its report for eleven months of 2014.

Marketable electricity accounted for 19.83 billion kilowatt hours of the total volume of electricity generated in January-November, which is 7.2 percent more than in the same period of 2013.

The report said that thermal power plants accounted for 18.66 billion kilowatt hours of the total volume of marketable electricity generated in the country in January-November 2014, which is 8.3 percent more than in the same period of 2013.

This is while hydro power plants generated 1.16 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 7 million kilowatt hours of electricity in January-November 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.

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 Ministry of Energy has submitted the proposals to the Cabinet of Ministers to establish a center for the analysis of rational use of energy, Deputy Minister of Energy Gulmammad Javadov said. The proposals were also submitted to the cabinet of ministers to establish a fund for rational use of energy. He said that the work carried out in the country in the field of energy efficiency, is not purposeful. The work is conducted as part of various state programs and activities. For example, substations, power plants are built as part of the development of the power sector in the country. The power lines are reconstructed and modernized. "Of course, these operations will improve the energy efficiency," Javadov said. "But their main goal is the development of the power sector. Improving energy efficiency is not the main purpose in this case."

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