Review of oil and gas operations in Azerbaijan (January-April 2015)

1. FEC

а) Oil and Gas Production

The production volume of oil and gas condensate in Azerbaijan in January-April 2015 totaled 14.21 million metric tons, or 0.4 percent more than in the same period of 2014, the Azerbaijani State Statistics Committee said in its report.

The production of the commercial gas in the country stood at 6.84 billion cubic meters in January-April or by 12.4 percent more than in the same period of 2014, according to the report.

The State Oil Company of Azerbaijan (excluding the joint enterprises and operating companies) carried out drilling work in the volume of 33,143 meters in January-April 2015 or by 28.86 percent less than in the same period of 2014 (46,587 meters), SOCAR said.

This is while the development drilling accounted for 32,143 meters of the total volume of drilling work carried out by SOCAR in January-April 2015, and exploration drilling accounted for the remaining 1,000 meters.

SOCAR has commissioned 21 new wells since early 2015, the statement said.

Major events in the oil and gas industry of Azerbaijan in April:

- The Milli Majlis (parliament) of Azerbaijan has ratified a PSA (production sharing agreement) contract on holding joint geological exploration on potentially promising structures located on the shallow part around the Absheron peninsula in the Azerbaijani sector of the Caspian Sea. The contract has been signed between SOCAR (State Oil Company of Azerbaijan) and BP. The contract will cover three stages, namely initial exploration, main exploration, development and production.

- Some 14 new wells are planned to be drilled and put into operation in the block of Azeri-Chirag-Guneshli fields in the Azerbaijani sector of the Caspian Sea in 2015, a source in the country's oil and gas market said. Some 10 of 14 wells planned to be drilled at ACG this year are the extraction wells, four - injection wells.

- Salyan Oil operating company, developing the Kursengi and Qarabagli onshore fields in Azerbaijan, plans to produce 180,000 metric tons of oil in 2015, a source in the oil and gas market of Azerbaijan said. At present, about 500 metric tons per day are extracted from the Kursengi and Garabagli fields. The decline in daily production volumes is explained by the fact that these deposits have been developed for a long time. It is necessary to drill the new deep wells to increase the production level. Currently, there are 245 producing wells on the fields. During the work on the fields, Salyan Oil drilled 37 wells, 29 of which are in operation. According to some specialists, the residual oil reserves in the contract area exceed 150 million metric tons.

- The drilling contractor, SOCAR-AQS, the 51-percent share of which is held by Azerbaijan's state oil company SOCAR, will start drilling a new well at the Gunashli field in the shallow part of Caspian Sea soon. The company said that the drilling of the well No. 344 at the Guneshli field would be carried out from the fixed offshore platform No.11. The well No.344 will be drilled until the 'Fasila' suite, and its design depth will be 3,150 meters. According to the plan, the daily debit of the well will be 60 metric tons.

- The drilling operations of the SDD-04 well within the pre-drilling on the second stage of development of Shah Deniz gas condensate field in the Azerbaijani sector of the Caspian Sea have started. The operator of the Shah Deniz is British oil company BP. "The well is being drilled from the Heydar Aliyev platform," said the source. "The project depth of SDD-04 is about 6,300 meters."

- BP has completed all operations on commissioning of a new well on the block of Azeri-Chirag-Guneshli (ACG) offshore fields in the Azerbaijani sector of the Caspian Sea. BP is the operator of the ACG field. "Well J08 has been drilled and put into operation," said the source. "The first oil has been produced at it. The new well will further increase the efficiency of production from the platform, which is 11.8 percent more than was planned." The construction of the platform West Chirag was conducted within the Chirag oil project, which envisages an increase in oil production on the ACG block.

b) Processing

The volume of diesel fuel production in Azerbaijan in Jan.-Apr. 2015 stood at 1.12 million metric tons, or 50.2 percent more than in the same period of 2014, Azerbaijani State Statistical Committee said in its report.

Currently, the State Oil Company of Azerbaijan is carrying out the work on the modernization of the refining facilities as the fuel consumption has increased in the country.

SOCAR is the sole producer of petroleum products in Azerbaijan.

In total, 2.24 million metric tons of petroleum products were produced in Azerbaijan in Jan.-Apr. 2015, compared to nearly 1.45 million metric tons in the same period of 2014, according to the report on Jan.-Apr. 2015.

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

SOCAR (State Oil Company of Azerbaijan) continues working to increase the production capacity of the Heydar Aliyev Baku Oil Refinery. According to the company, the work has already been carried out to use the automatic control system - Eksperion PKS software on the coke and catalytic cracking units. The automatic control system has been already used at the catalytic reforming unit No 31.

2. Chemical complex

Azerbaijan produced 35,800 metric tons of polyethylene in January-April 2015, which is 36 percent more than in the same period of 2014, the Azerbaijani State Statistics Committee said in its report as of January-April 2015.

Azerbaijan produced 20,400 metric tons of propylene in January-April 2015, which is 23.7 percent more than in the same period of 2014.

The country produced 73.2 metric tons of iodine in January-April 2015, or 14 percent more than in the same period of 2014.

Around 2,650 metric tons of isopropyl alcohol were produced in the country in January-April, which is 2.7 times more than in the same period of 2014, the report said.

However, Azerbaijan saw an increase in the production of other major types of chemical products in January-April 2015.

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

The country produced 3,920 metric tons of solid polyethylene pipes, tubes and hoses, which is 22.9 percent less than in the same period of 2014.

Major events in the chemical industry of the country in April:

The State Oil Company of the Azerbaijan Republic (SOCAR) has signed a contract with Maire Tecnimont for the implementation of EPC-contract (engineering, procurement and construction contract) for the construction of polypropylene production within the framework of the project SOCAR Polymer.

The total contract value is approximately 350 million euros.

The contract envisages rendering full technical services, procurement, installation work and construction activity before commissioning the project, as well as its trial.

SOCAR Polymer project is implemented in Sumgait Chemical Industrial Park. This project implementation will make it possible to produce 180,000 metric tons of polypropylene and 120,000 metric tons of polyethylene per year. The plant is planned to be commissioned in 2017.

SOCAR Polymer Company has chosen Innovene S Process technology of the Ineos Technologies British company for the production of polyethylene at a plant in Sumgayit Chemical Industrial Park, the message posted on the Ineos Technologies website said.

SOCAR Polymer will produce medium-pressure polyethylene (MDPE) and high-pressure polyethylene (HPPE) using Innovene S Process technology from Ineos Technologies. The Ineos company for the first time will provide a license for Innovene for Azerbaijani producer.

"The polyethylene plant will be producing a wide range of types of polyethylene using Innovene S technology, which will satisfy the growing demand for high-quality chemical products," the statement said. "The spectrum includes commercial varieties of polyethylene made from Ziegler catalysts and chromium, as well as special varieties such as polyethylene of a bimodal type (PE-100)."

Polyethylene plant is planned to be commissioned in late 2018.

3. Electricity

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The volume of electricity generation in Azerbaijan was 8.33 billion kilowatt hours in January-April 2015, which is 3 percent more than in the same period of 2014, the country's State Statistical Committee said in its report.

Marketable electricity accounted for 7.95 billion kilowatt hours of the total volume of electricity produced during the reporting period, which is 3.1 percent more than in the same period of 2014.

Thermal power plants accounted for 7.53 billion kilowatt hours (94.8 percent of the total electricity) of the total volume of marketable electricity generated in January-April, which is 2.6 percent more than in the same period of 2014.

Azerbaijan's hydro power plants generated 413.7 million kilowatt hours of marketable electricity during the reporting period, which is 12.2 percent more than in the same period of 2014.

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 over the last five years. Currently, its capacity is 7,105 megawatt. This generates around 24 billion kilowatt hours of electricity and export 2.1 billion kilowatt hours of electricity annually.

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