Azerbaijani oil output: In permanent decline?

Azerbaijani oil output: In permanent decline?

The State Statistics Committee of Azerbaijan has reported that the country produced 12.6 million tons of oil in the first four months of 2017 that was by 9.5% less compared with the period of 2016. Oil stocks as of 1 May 2017 reached 414,700 tons against 629,300 tons by 1 April and 410,200 tons by 1 January 2017.
In 2016 the country produced 41.03 million tons of oil that was less than production for 2015 by 1.5%. Last year production of commercial oil totaled 40.977 million tons (-1.4% year-on-year).

The official explanation is that the oil production in Azerbaijan is falling essentially, including in connection with commitments undertaken within the OPEC/NOPEC deal.

However, CESD experts underline that the main reason of declining of oil output in Azerbaijan is not only OPEC commitments. Oil output in Azerbaijan has been declined before the OPEC agreement, too. According to the State Oil Company of Azerbaijan (SOCAR), oil output reduced from 50.7 million tons in 2010 to 41.03 million tons in 2016. It means that Azerbaijani oil output declined by around 9 million tons last 6 years. Azerbaijan has entered to the post-oil period with low oil output.

CESD experts mention that oil output will decline in up-coming years, too due to decreasing of capacity of major oil platforms in Azerbaijan. According to the Production Sharing Agreement (PSA) signed between Government of Azerbaijan and major oil companies, the oil production will decrease after the pick which it is currently observed. Therefore, CESD expects new decline waves in the oil output in Azerbaijan.

© CESD, 2017

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