Review of oil and gas operations in Azerbaijan (January-April 2016)

1. FEC

а) Oil and Gas Production

About 13.98 million tons of oil and gas condensate were produced in Azerbaijan in January-April 2016, which is by 1.8 percent less than in the same period of 2015, said the country's State Statistics Committee's report as of January-April 2016.

Some 41.69 million tons of oil and gas condensate were produced in Azerbaijan in 2015 versus 41.9 million tons produced in 2014.

The main part of produced oil accounted for Azerbaijan's Azeri-Chirag-Guneshli (ACG) block of oil and gas fields.

Production of tank gas was 6.3 billion cubic meters in January-April 2016, which is by 9.8 percent less than in the same period of 2015.

Tank gas production was 19.72 billion cubic meters in 2015 in Azerbaijan versus 18.7 billion cubic meters in 2014.

Azerbaijan's state oil company SOCAR extracted 2.11 billion cubic meters of gas from the country's offshore and onshore fields in January-April 2016 using its own funds, versus 2.23 billion cubic meters extracted in the same period of 2015.

SOCAR produced 2.52 million tons of oil from the country's offshore and onshore fields in January-April 2016, as compared to 2.76 million tons in the same period in 2015.

SOCAR carried out drilling operations in the volume of 32,040 meters in Jan.-Apr. 2016 versus 33,140 meters during the same period of 2015.

All volume of drilling operations in Jan.-Apr. accounted for production drilling.

Fourteen new wells were commissioned during the reporting period.

The Azerbaijani SOCAR-AQS company increased productivity of wells of the field West Absheron in the Caspian Sea by more than four times by applying the latest technologies when drilling and completing wells, head of the drilling engineering department of the company Elshan Ismayilov said.

He said that the company drills only horizontal wells on the field West Absheron.

"At the moment, four wells have been drilled here, mastered and delivered to the customer, the drilling of the fifth one is underway," Ismayilov said. "Technologies used during their drilling are applied for the first time in Azerbaijan."

b) Processing

About 1.86 million tons of oil products were produced in January-April 2016 in Azerbaijan, versus 2.24 million tons produced in the same period 2015, said a report of the country's State Statistics Committee (SCC).

Currently, due to the increased fuel consumption, SOCAR, which is the sole producer of oil products in Azerbaijan, is conducting work on modernization of the existing processing capacities.

Some 368,800 tons of gasoline was produced in Azerbaijan during the reporting period, or 8.1 percent less than in January-April 2015.

Below is the summary table of oil products' output in Azerbaijan:

SOCAR will start construction work as part of modernization of the Baku Oil Refinery named after Heydar Aliyev in 2017.

The announcement was made by Emil Alkhasli, deputy director general of SOCAR OGPC (Oil and Gas Processing and Petrochemical Complex).

"The development of FEED project will be completed by late 2016 and the construction work will begin in 2017," he said.

A number of facilities will be constructed by July of 2019 in order to ensure the production of diesel fuel meeting Euro 5 standard and several facilities will be built by May of 2020 for producing gasoline meeting Euro 5 standard, according to the SOCAR OGPC representative.

Alkhasli added that a new asphalt plant and off-plot facilities will be commissioned by July of 2018.

Most of oil products to be produced at the Heydar Aliyev Baku Oil Refinery after modernization, will account for diesel fuel, Rauf Naghiyev, deputy director general of SOCAR's Oil and Gas Processing and Petrochemical Complex (OGPC), said. "Some 39 percent or 2.9 million tons out of 7.5 million tons of oil products will account for diesel fuel, 33 percent or 2.2 million tons - gasoline (1.3 million tons - AI-92, 900,000 tons - AI-95)."

"One million tons of jet fuel (13 percent), 400,000 tons of bitumen and 350,000 tons of coke are also expected to be produced," he said. "The remaining share of production will account for other oil products."

2. Chemical complex

Azerbaijan produced 35,900 tons of polyethylene in January-April 2016, which is by 0.3 percent more than in the same period of 2015, said the country's State Statistics Committee's report on the results of four months of 2016.

The country produced 18,700 tons of propylene during the reporting period, which is by eight percent less than in January-April 2015.

Meanwhile, 22,500 tons of barium sulfate were produced in Azerbaijan in January-April 2016, which is by 23 percent more than in the same period of 2015.

The report also said that the country produced 4,170 tons of isopropyl alcohol in January-April 2016, which is by 57.1 percent more than in the same period of 2015.

Moreover, the report said that the production of most of the major types of chemical products in Azerbaijan has increased in January-April 2016.

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

The country also produced 3,550 tons of solid polyethylene pipes, tubes, hoses in April 2016, which is by 9.4 percent less than in January-April 2015.

Azerbaijan's chemical industry will be fully modernized by late 2019, Sarvar Aghayev, deputy executive director of Azerkimya production association, said. He said that the modernization is divided into three stages, which include upgrade of Azerkimya's existing infrastructure and the construction of new facilities.

"It is expected to modernize the propylene production unit, build the new units for hydrogen enrichment, hydrogen production, propylene purification, as well as pass to digital production management system in the first phase (2015-2017)," he said.

"The second phase (2016-2018) includes the construction of pyrolysis furnaces, reconstruction of selective hydrogen unit, reconstruction and optimization of compressors," he added.

The transition to the DCS system will be carried out, the additional units will be constructed and the infrastructure will be modernized in the third phase (2017-2019).

Two Bullet type ethylene warehouses will be built with a total capacity of 2,500 tons and two propylene warehouses with a total capacity of 1,000 tons will be built.

The ethylene production will be increased by 192,000 tons per year, propylene production - 190,000 tons at the Ethylene-Polyethylene plant in Sumgayit following the modernization. The ethylene production amounted to 106,000 tons, propylene production - 56,000 tons in 2015. Most of the products will be used as raw materials for SOCAR Polymer.

3. Electricity

­Azerbaijan's power plants generated 7.69 billion kilowatt hours of electricity in January-April 2016, or 7.7 percent less than in the same period in 2015, the State Statistics Committee's report said.

During the reporting period, commercial electricity accounted for 7.35 billion kilowatt hours of the total volume of electricity production, or 7.6 percent less than in January-April 2015.

Thermal power plants accounted for 6.76 billion kilowatt hours of the total volume of commercial electricity production in January-April 2016, or 10.3 percent less than in the same period in 2015.

During the reporting period, Azerbaijan's hydro power plants generated 575.2 million kilowatt hours of commercial electricity, or 38.2 percent more than in January-April 2015.

This is while the wind farms and solar power plants in the country produced 5.8 million kilowatt hours of electricity and 15.2 million kilowatt hours of electricity, respectively, in January-April 2016.

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.

At present, the generation capacity of Azerbaijan's power supply system is 7,200 megawatts. This allows generating around 24 billion kilowatt hours of electricity annually.

Azerbaijan is completing the construction of three hydroelectric power plants (HPP), Azerenergy OJSC said. "Ismayilli-2" HPP with a capacity of 1.6 megawatts, "Astara-1" HPP (0.3 MW) and "Oguz" HPP (3.6 MW) will be constructed soon. Moreover, "Balakan-1" HPP with a capacity of 1.5 MW, which is already generating electricity in a test mode, is ready for operation.