Review of oil and gas operations in Azerbaijan (January-August 2017)

1. FEC

а) Oil and Gas Production

In January-August 2017, 25.57 million tons of oil and gas condensate were produced in Azerbaijan, which is 9.3 percent less than in the same period of 2016.

In 2016, 41.03 million tons of oil and gas condensate were produced in Azerbaijan, which is 1.5 percent less than in 2015.

The main oil output in Azerbaijan accounts for the Azeri-Chirag-Gunashli (ACG) block of oil and gas fields.

Output of commercial gas in Azerbaijan stood at 12.06 billion cubic meters in January-August 2017, or 4.1 percent less than in January-August 2016, according to the State Statistics Committee.

Commercial gas output in Azerbaijan stood at 18.71 billion cubic meters in 2016, as compared to 19.72 billion cubic meters in 2015.

Azerbaijan’s state oil company SOCAR plans to ship about 255,000 tons of oil from the Russian port of Novorossiysk in August 2017.

Meanwhile, nearly 170,000 tons of oil will be transported via the Baku-Novorossiysk pipeline in August 2017.

SOCAR aims to transport approximately 425,000 tons of oil via the pipeline in 3Q17. The company transported about 330,000 tons of oil via the pipeline in 2Q17. More than 400,000 tons of oil was transported via the pipeline in 1Q17.

SOCAR will additionally produce around 3,650 tons of oil and 365,000 of cubic meters of gas annually through commissioning of a new well being drilled at the Oil Rocks offshore field.

The projected depth of the well is 1,770 meters, while the daily debit is expected to be 10 tons of oil and 1,000 cubic meters of gas, according to the message.

SOCAR will ship 170,000 tons of oil from the Russian port of Novorossiysk in August 2017.

The oil will be shipped in two batches. In total, 2.63 million tons of oil will be shipped from the Novorossiysk port in August.

SOCAR delivers the oil produced in its own fields as well as the oil from joint ventures and operation companies working in Azerbaijan’s onshore fields to Novorossiysk. The oil is delivered to the port via the Baku-Novorossiysk pipeline operated by SOCAR.

SOCAR plans to transport 1.5 million tons of oil via the Baku-Novorossiysk pipeline in 2017.

Below is the schedule of oil shipment from the Novorossiysk port for August, provided by the Energy Intelligence Group.

Position

Berth 1

Date

Position holder

Volume, 1,000 tons

1.

August 2-3

Lukoil

140

2.

August 6-7

Rosneft

140

3.

August 9-10

Surgutneftegas

140

4.

August 15-16

Rosneft

140

5.

August 19-20

Surgutneftegas

140

6.

August 22-23

Lukoil

140

7.

August 25-26

Kaztransoil (Samara - Novorossiysk) (120)

140

Kaztransoil (Makhachkala - Novorossiysk) (20)

7.

August 28-29

Rosneft

140

8.

August 30-31

Kaztransoil (Samara - Novorossiysk) (50)

140

Kaztransoil (Makhachkala - Novorossiysk) (90)

Berth 2

1.

August 1-2

Rosneft

80

2.

August 3-4

Lukoil

80

3.

August 4-5

Kaztransoil (Samara - Novorossiysk)

80

4.

August 8-9

Kaztransoil (Samara - Novorossiysk)

80

5.

August 10-11

Lukoil

80

6.

August 12-13

Rosneft

80

7.

August 14-15

Kaztransoil (Samara - Novorossiysk)

80

8.

August 16-17

SOCAR

85

9.

August 17-18

Lukoil

80

10.

August 19-20

Russneft

80

11.

August 20-21

Kaztransoil (Samara – Novorossiysk)

80

12.

August 23-24

Lukoil

80

13.

August 24-25

Gazprom Neft

80

14.

August 25-26

Novatek-Tarkosaleneftegas (56,1)

80

Allocated volumes (3)

Yargeo (20,9)

15.

August 27-28

Independent producers

80

16.

August 28-29

Gazprom Neft

80

17.

August 30-31

SOCAR

85

Total in August, 1,000 tons

2,630

SOCAR will additionally produce almost 4,750 tons of oil annually, through the commissioning of a new well at the Oil Rocks offshore field.

Thirteen tons of oil is extracted per day within the range of 1,749-1,745 meters, according to the message.

SOCAR refused to participate in the new tender on privatization of the Greek natural gas grid operator DESFA.

The company’s name is not on the list of applicants published by the Hellenic Republic Asset Development Fund S.A (HRADF).

In total, six investment schemes expressed their interest to acquire 66 percent of share capital of DESFA.

In particular, expressions of interest were submitted by: Macquarie Infrastructure and Real Assets (Europe) Limited; Snam S.p.A./ Enagás Internacional S.L.U./ Fluxys S.A./ N.V. Nederlandse Gasunie; Transgaz S.A. / GRTgaz S.A.; Regasificadora del Noroeste S.A.; Integrated Utility Services Inc. (INTUS) and Powerglobe LLC.

SOCAR will additionally produce 2,900-3,650 tons of oil annually as it has commissioned two new wells at the country’s Saadan onshore field.

The wells are giving four to five tons of oil per day, according to the message. The drilling was carried out down to the Govundag Maykop productive stratum.

The Saadan field is located in the Pre-Caspian-Guba oil and gas bearing region.

SOCAR is implementing a program to stabilize and increase oil production at onshore and old fields.

SOCAR will additionally produce more than 5,100 tons of oil annually through the commissioning of a new well at the Oil Rocks offshore field.

Fourteen tons of oil is extracted per day from the depth of 1,219-1,211 meters, according to the message.

SOCAR and Russia’s LUKOIL PJSC are discussing the possibility of joint acquisition of new assets in the fuel market of Turkey, Anadolu Agency quoted Vadim Vorobiev, LUKOIL’s senior Vice President for sales and supplies.

According to Vorobiev, Turkish retail fuel market remains attractive for LUKOIL, which actively promotes its interests in this sector of the Turkish economy.

Turkey’s Energy Market Regulatory Authority (EPDK) has issued four more licenses to SOCAR Turkey Enerji A.S. (subsidiary of SOCAR), the Turkish Official Gazette (Resmi Gazete) reported.

The EPDK issued SOCAR Turkey Enerji a license for LPG (liquefied petroleum gas) storage for the period of 15 years, two licenses for 15 years for the supply of petroleum products and another license for the storage of petroleum products.

In total, the EPDK issued licenses to 21 companies operating in the fields of electricity, oil, natural gas and LPG, while 24 other companies had their licenses revoked.

Azneft Production Union of SOCAR plans to abandon nearly 900 oil and gas production wells in the near future.

The abandoned well stock is constantly expanding due to run-out of the wells, according to the source.

SOCAR intends to restore old fields.

According to the source, in total, there are about 20 old fields with balance reserves of about two billion tons of oil and more than 170 billion cubic meters of gas.

Meanwhile, the recoverable reserves total nearly 90 million tons of oil and 50 billion cubic meters of gas, noted the source.

Oil Rocks is the largest among the old fields, said the source adding that, the field has the greatest potential in terms of reserves. Nearly 21 million tons of oil and more than 1.6 billion cubic meters of gas are concentrated at the field, according to the source.

Buzovna-Mashtaga, Gala, Bulla Deniz fields are also among those major old fields, which are being developed by Oil and Gas Production Department named after A. Amirov, added the source.

There are also such fields that have become completely unprofitable due to the small volume of recoverable reserves, and they will be liquidated, according to the source.

These fields are Janub-1, Janub-2, Hazi Aslanov and Turkan, added the source.

SOCAR, through the commissioning of a new well at the Oil Rocks offshore field, will produce additional 4,380 tons of oil annually, SOCAR said in a message.

Twelve tons of oil is extracted per day from the depth of 1,436-1,430 meters, according to the message.

Azerbaijan’s SOCAR-AQS LLC has started drilling a new well at the Western Absheron field in the Caspian Sea.

“The well #33 will be drilled from the offshore platform #20 at the Western Absheron field,” said the company. “The well’s projected depth is 730 meters.”

SOCAR has commissioned a fixed offshore platform #1183 after major overhaul at the Palchig Pilpilasi offshore field.

“Major overhaul was carried out at an area of 1,619 square meters and anti-corrosion measures were implemented on 2,350 square meters of the platform,” reads the message.

SOCAR will produce additional 5,840 tons of oil annually, through a new well to be commissioned at the Oil Rocks offshore field.

Sixteen tons of oil are extracted daily from the depths of 1,610-1,602 meters, according to the message.

b) Processing

Azerbaijan produced 3.06 million tons of oil products in January-August 2017 compared to 3.42 million tons in the same period of 2016, said a report of Azerbaijan’s State Statistics Committee.

SOCAR, which is the sole producer of oil products in Azerbaijan, is currently modernizing its processing facilities, as the fuel consumption has increased in the country.

Azerbaijan produced 783,800 tons of gasoline in January-August 2017, which is 7 percent more than in the same period of 2016.

Azerbaijan produced 5.17 million tons of oil products in 2016 compared to 5.45 million tons in 2015.

Below is the summary table of the output of oil products in Azerbaijan.

Oil products

January-August 2017 (1,000 tons)

Compared to January-August 2016 (%)

Gasoline

783.8

107

Naphtha

124.5

103.8

Kerosene

392.5

94.1

Diesel fuel

1,215.9

81.5

Fuel oil

252

60.5

Lubricants

22.8

by 3 times

Oil bitumen

130.8

116.1

Oil coke

137.2

113.3

2. Chemical complex

Azerbaijan produced 66,500 tons of ethylene in January-August 2017, which is 2.7 percent more than in the same period of 2016, says a report of the State Statistics Committee.

Meanwhile, 33,800 tons of propylene was produced in Azerbaijan in January-August 2017, which is 0.3 percent more than in the same period of 2016.

During the period, 64,500 tons of polyethylene was produced in Azerbaijan (a growth by 2.9 percent as compared to January-August 2016).

Product

January-August 2017

Compared to January-August 2016

(%)

Nitrogen (million cubic meters)

15.44

103.8

Polyethylene (thousand tons)

64.5

102.9

Propylene (thousand tons)

33.8

100.3

Isopropyl alcohol (thousand tons)

9.35

125

Paint products (thousand tons)

7.3

147

Iodine (tons)

130.9

95.7

Oxygen (thousand cubic meters)

2,131.5

32.2

Ethylene (thousand tons)

66.5

102.7

3. Electricity

­

Azerbaijan’s power plants generated 15.24 billion kilowatt hours of electricity in January-August 2017, which is by 1 percent more than in the same period of 2016, says a report of the State Statistical Committee.

According to the report, 14.6 billion kilowatt hours of the total electricity generated in January-August 2017 accounted for commercial electricity, which is by 1.3 percent more than in the same period of 2016.

Thermal power plants generated 13.23 billion kilowatt hours of the total commercial electricity in January-August 2017, or by 2.4 percent more than in the same period of 2016.

Azerbaijan’s hydro-power plants generated 1.33 billion kilowatt hours of commercial electricity in January-August 2017, which is by 7.1 percent less than in the same period of 2016.

Wind farms produced 8.9 million kilowatt hours of electricity, while solar power plants generated 28.9 million kilowatt hours of electricity in the reporting period.

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