Review of oil and gas operations in Azerbaijan (2014)

1. FEC

а) Oil and Gas Production

In 2014, Azerbaijan produced 41.9 million metric tons of oil and gas condensate compared to 43.1 million metric tons of oil and gas condensate, produced in 2013, according to a report from Azerbaijan's State Statistics Committee.

The main volumes of oil and gas accounted for the Azeri-Chirag-Guneshli block of oil and gas fields and the Shah Deniz gas and condensate field, which are developed jointly with foreign partners.

The report said the production of marketable gas in Azerbaijan in 2014 stood at 18.7 billion cubic meters compared to 17.9 billion cubic meters of marketable gas produced in 2013. The State Oil Company of Azerbaijan (SOCAR) produced 8.32 million metric tons of oil at the country's offshore and onshore fields in 2014 compared to over 8.31 million metric tons in 2013.

SOCAR produced over 7.22 billion cubic meters of gas in 2014 compared to 7.14 billion cubic meters in 2013.

The volume of drilling work carried out by SOCAR in 2014 was equal to 127,346 meters compared to 142,656 meters in 2013. This is while the development drilling accounted for 124,718 meters of the total volume of drilling work carried out by SOCAR in 2014 (135,665 meters in 2013), while the exploration drilling accounted for the remaining 2,628 meters. Over 5.96 billion AZN was invested in the Azerbaijani oil sector in 2014 which is 16.6 percent more than in 2013, the report said.

In 2014 SOCAR continued implementing a program on stabilizing and increasing the production volumes in the fields developed by the company. The program covers 2013-2015. The company repaired old and drilled new onshore and offshore wells. According to the above-mentioned figures (8.32 million tons in 2014 compared to 8.31 million tons in 2013), one can see that the State Oil Company copes with this task.

The operations were not conducted only at "Guneshli" field.

The new wells were drilled and commissioned at such fields as "Umid", "Agburun Deniz", "Bulla Deniz", "Darwin Bank", "Saadan", "Pirallahi adasi-guru" "Chilov", "Oil Rocks" and others.

SOCAR continued working closely with its foreign partners in 2014. An agreement was signed with German RWE Dea to conduct joint research on the availability of hydrocarbons in the waters of the southern part of the Absheron Peninsula with a contract area of 850 square kilometers. A PSA agreement on exploration of a shallow part of the Absheron archipelago was signed with the British BP.

Moreover, "West Chirag" new platform was commissioned at the "Azeri-Chirag-Guneshli" (ACG) field. The platform was constructed as part of the "Chirag oil project". It envisages an increase in oil production on the ACG block. The platform was installed at a depth of 170 meters between the production platforms at the "Chirag" and "Guneshli" fields.

The partners developing ACG and its operator - BP started preparing a long-term program for the development of fields, envisaging the maximum production of reserves of the block. The program refers to the oil and gas production in ACG. The variants of constructing the new platforms or creating the subsea production systems may be considered.

b) Processing

Azerbaijan produced 1.21 million metric tons of motor gasoline in 2014, which is 14.2 percent less than in the same period of 2013, the report said.

Currently, the State Oil Company of Azerbaijan (SOCAR) is modernizing its processing facilities, as the demand for fuel has increased in the country.

Azerbaijan produced over 5.31 million metric tons of oil products in 2014 compared to 5.09 million metric tons in 2013.

Summary table of production of oil products in Azerbaijan:

Production of oil products

in 2014 (metric tons)

Compared to 2013 (%)

Motor gasoline

1 207








Diesel fuel

2 895,9





Oil bitumen



The Heydar Aliyev Baku Oil Refinery of SOCAR (State Oil Company of Azerbaijan) in 2014 processed about 6.33 million metric tons of oil and other raw materials, which is over 2.4 percent more than in 2013, a source in the State Oil Company said.

The source said that about 4.74 million metric tons accounted for oil, and the rest - raw materials, obtained from the Azneftyag refinery, Azerkimya Production Association and a gas processing plant of SOCAR of the total volume of raw material processed at the plant.

The gasoline consumption equalized with the production volume in Azerbaijan for the first time in the end of 2013. On the one hand, this is explained by the increasing number of cars in the country. On the other hand, the Azerbaijani refineries fail to cope with the growing volumes of gasoline consumption in the country. In this regard, a number of measures were taken in 2014 to optimize the production of petroleum products.

SOCAR completely stopped production of AI-95 gasoline to satisfy the growing needs of the republic for AI-92 gasoline. The company switched to production of AI-92 gasoline, which accounts for most of the gasoline consumed in the country. Needs of the country in 95 octane gasoline are ensured by import.

The reconstruction of the catalytic cracking unit started at the Heydar Aliyev Baku Oil Refinery.

This unit will produce the high-octane gasoline. Modernization of the unit will make it possible to increase its processing capacity by one million tons (from two tons to three million tons), and gasoline production - by 450,000 tons.

The reconstruction and modernization of the Heydar Aliyev Baku Oil Refinery is scheduled to be completed by late 2018 or early 2019. The plant will continue its work for yet another 15 years, till the commissioning of a new refinery in Azerbaijan as part of the OGPC project in 2030. The reconstruction will increase its capacity from 6 to 8 million metric tons per year. The gasoline production capacity will be increased to 3 million metric tons per year.

The State Oil Company of Azerbaijan (SOCAR) announced about liquidation of Azneftyag oil refinery and its merger with Heydar Aliyev Baku Oil Refinery as part of improving and optimizing of SOCAR's structure. Azneftyag refinery is focused on the production of dark petroleum products, and in particular the bitumen. The Heydar Aliyev Baku Oil Refinery produces mostly light oil.


The final configuration and the economic indices of a new Oil, Gas Processing and Petrochemical Complex (OGPC), to be built by SOCAR in Azerbaijan were determined in 2014. The cost of the OGPC construction project given the payment of interest on loans is $14.4 billion. Around $ 6.1 billion of a total amount of the project expenses will account for the refinery, $ 3.6 billion - a gas processing plant and a power unit, $ 2.6 billion - a petrochemical complex and the rest $ 2.1 billion - payments on loans. The capacity of the refinery as part of OGPC will be 8.5-9 million tons per year. The capacity of a gas processing plant of the new complex will be 12 billion cubic meters per year. The capacity of the polyethylene production unit will be 800,000 tons, while a polypropylene production unit - 300,000 tons. The term of implementing the first phase of the project is two years. The total term of the project implementation is eight years.

2. Chemical complex

Azerbaijan produced 101,000 metric tons of polyethylene in 2014, which is 32.6 percent more than in 2013, the report said.

Around 56,500 metric tons of propylene was produced in Azerbaijan in 2014, which is 38.3 percent more than in the same period of 2013, according to the report.

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

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


in 2014

in 2013 (%)

Barium sulfate (1,000 metric tons)



Polyethylene (1,000 metric tons)



Propylene (1,000 metric tons)



Isopropyl alcohol (metric tons)

10 570,3


Paint products (metric tons)

4 586,1


Iodine (metric tons)



The country produced 15,220 metric tons of solid polyethylene pipes, tubes and hoses in 2014, which is 42.7 percent less than in 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 74.4 percent less than in 2013.

One of the main problems of the industry is to commission the industrial area "Sumgayit Chemical Industrial Park" Ltd. It will include approximately 35 companies. Up to 10,000 new jobs are planned to be created. Currently, there are two residents, namely, "Azertexnolayn" LLC and "SOCAR Polimer" LLC in the park.

The intensive preparation for this process continued in 2014.

The technical work started to commission the polypropylene production unit for SOCAR Polimer. The plant equipment was tested. The large equipment was ordered. The issues of logistics were resolved. The earthwork was conducted. The first phase of underground infrastructure was implemented. It involves the formation of underground galleries. All necessary technical infrastructure will be delivered through them.

As for the second resident of the park - LLC "Azertexnolayn", it has built an industrial pipe production plant (both plastic and metal) and started production.

Moreover, new storage units for a nitrogen-oxygen complex at the Ethylene-Polyethylene plant were commissioned in SOCAR's Azerkimya production association in 2014.

A tripartite memorandum of cooperation was signed between "Azerbaijan Investment Company" OJSC, "Sumgayit Chemical Industrial Park" LLC and the US company "SouthWest NanoTechnologies" (SWeNT) in 2014. According to the document, Azerbaijan Investment Company and SWeNT will cooperate in the carbon nanotube production in the Sumgait Chemical Industrial Park.

3. Electricity


In 2014, Azerbaijan produced 23.11 billion kw/hours of electricity, which is 6.7 percent more than in 2013, said the report of the Azerbaijani State Statistics Committee as of 2014.

In 2014 Azerbaijan produced 21.93 billion kw/hours of commodity electricity, which is 6.3 percent more than in 2013.

The share of thermal power plants (TPP) accounted for about 20.68 billion kw/hours of the total volume of commodity electricity generated in 2014, which is 7.4 percent more than in the same period of 2013.

Hydroelectric power plants (HPP) produced 1.23 billion kw/hours of commodity electricity in Azerbaijan in 2014 or by 10 percent less than in the same period of 2013.

In 2014, some 7.9 million kw/hours of electricity were generated the wind power generation facilities.

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.

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, which allows the country to annually export 2.1 billion kw/hours of electricity.

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

The government continued focusing on the development of traditional power engineering in 2014. The construction of the second power unit of the Shimal power station continued throughout the year.

The construction of the second combined-cycle plant with a capacity of 409 megawatts at the Shimal power station is extremely important in terms of strengthening energy security of the Absheron Peninsula, where more than three million people live. At present, the power station meets a quarter of the needs for electricity of Baku and Absheron. After the construction of the second unit, this figure will reach 35-40 percent. The second unit is being constructed on the basis of a contract with Japanese Toyo Engineering company.

A 220-kilovolt Agdash substation was also commissioned. The construction of the Agdash substation, its connection to the 110-kilovolt power line of the 220 KV double circuit project "Construction of the overhead line "Absheron substation - Mingachevir power station" are important as part of the state program of socio-economic development of Azerbaijani districts in 2009-2013.

"Arpachay-1" and "Arpachay-2" hydropower stations were put into operation in the Nakhchivan Autonomous Republic.

The alternative (renewable) energy sources began developing in 2014.

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 energy sources in Azerbaijan exceeds 12,000 megawatts. Most of it accounted for the solar energy. It is estimated at 5,000 megawatts. Around 4,500 MW accounted for the wind energy, 1,500 MW - biomass, 800 MW - geothermal energy and the remaining 350 MW - the potential of small hydro power stations.

The upcoming plans of the government in this area were also announced. In particular, the expenses for the implementation of the projects in the field of alternative energy in the country in 2015 will hit 1.04 billion AZN. These funds will be spent to implement various projects with a total capacity of 299.6 MW. The hybrid electric and thermal power stations are planned to be established in Nakhchivan, Oguz, Balakan, Gadabay and Neftchala. A feasibility study for the construction of hybrid stations was prepared in 2014.

The Surakhani solar power station began operating. Around 8,000 solar panels were installed at the station. They can generate almost 12,000 kilowatt-hours of electricity a day. Around 4,000 more panels are planned to be installed in the future. The design capacity of the plant is 2,800 kilowatts and annual electricity generation - 4 million kilowatt-hours.

The wind power generation station with a total capacity of 50 megawatts was constructed in Yeni Jashma settlement.

The drafts of seven solar power stations were prepared in the first half of 2015. Their foundation is planned to be laid in the first half of 2015.

Currently, power engineering, in particular, electrical power engineering, is fully controlled by the state. The head of Baku office of the Asian Development Bank (ADB) Olli Norojono made a very important statement at a press-conference in Baku in late 2014. He said that the bank analyzes the ways and opportunities of allowing the private sector to enter this area.

Norojono said that the research will not only affect the distribution, but also the generation of electricity.

ADB intends to hold consultations on this issue with the government. After the analysis completes, namely by the middle or the end of 2015, it will be possible to talk whether the government will approve the proposals or not.

The electricity export remained relevant in 2014. All technical issues were solved as part of the "Azerbaijan-Georgia-Turkey Energy Bridge" project. It envisages the supply of 1,200 megawatt / hours of electricity to Turkey. Around 600 MW / hours of this volume will account for Azerbaijan. The project is at the stage of commercial negotiations.

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