Income from gas export does not meet expectations

Income from gas income does not meet expectations

Azerbaijan exports gas only ay price of $ 192

The State Customs Committee (SCC) informs that according to control-measuring devices, for Jan-Oct 2011 country’s gas export totaled 5.75 bn cu m (including 434.316 million in October, 507.847 million cu m in September, 369.379 million cu m in August, 376.319 million cu m in July, 403.167 million cu m in June, 490.45 million in May, 820.77 million in April, and 921.6 million cu m in March). Azerbaijan still exports gas at price of $192.

According to cargo customs entries, it was registered 2.557 bn cu m of gas for $490.75 million (including 243.596 million cu m for $37.1 million in October). This October average export price reached $152.3 per 1,000 cu m and for Jan-Oct – $191.89.

In 2010, record gas export totaled 1.792 bn cu m for $288.545 million. The record export volume of 307.97 million cu m for $54.765 million was registered in April. Last year average export price made $60.94 per 1,000 cu m. in 2009 gas export totaled 671.7 million cu m for $125.3 million, at the average price of $186.57 per 1,000 cu m.

In 2008, the country exported 369.788 million cu m of natural gas for $73.87 million at the price of $199.77 per 1,000 cu m versus $197.67 per 1,000 cu m in 2007.

The statistics takes into account only country’s own export not reporting details of gas export by international contractors from Shah Deniz field. Azerbaijan has been net exporter of gas since 2007 and, first of all, due to Shah Deniz field.

“Income from gas export is too much lower than revenue from oil sale which means increasing in gas production will not compensate income fall from oil export in the near future”- CESD announced. CESD assessment model also include tendency of decreasing of oil production in Azerbaijan. State Oil Company of Azerbaijan (SOCAR) produced 50 million ton oil in 2010. SOCAR targets 46 million ton for 2011 which 4 million ton less than last year’s output. Meanwhile, the latest predictions confirm that oil production will be decreased to about 33 million ton in 2015.

Gas income does not meet government expectation since export price is extremely low due to several reasons including political reasons. For instance, CESD sources confirms that gas agreement signed between Azerbaijan and Turkey does not fully match Azerbaijan’s interests particularly market interests. In fact, terms of the agreements directly determined by Turkish side, Azerbaijani delegation was able to have slight revising, only. First, price of gas exporting to Turkey is 35 % less than market price. Second, there is still dispute how difference between market and real price will be compensated. Turkey imported 6 billion cubic meters (bcm) of gas from Shah Deniz-I, paying $120/thousand cubic meter (tcm), well below the current market prices by previous agreement.  Turkey has continued to import natural gas from Azerbaijan although the gas supply agreement expired in April 2008.






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