Azeri Oil Output Declined in the first five months of 2014

Azeri Oil Output Declined in the first five months of 2014

Azerbaijan produced 17.7 million tonnes of oil and gas condensates in the first five months of 2014, versus 18.12 million tonnes in the same period of 2013, the Azerbaijan State Statistical Committee reported on June 12, 2014. The output declined by 2.3 % in the indicated period of 2014 compared to the same passé in previous year.

The most part of the produced oil fell to the Azeri-Chirag-Guneshli oil and gas fields’ block and the Shah Deniz gas condensate field that are developed jointly with the foreign partners.

The country produced around 7.6 billion cubic meters of tank gas in Jan.-May, versus nearly 7.4 billion cubic meters in the same period of 2013, according to the State Statistical Committee.

CESD- Center for Economic and Social Development highlighted that decline of oil output will continue in the remaining months of 2014.

Reminded that CESD stated in its November 16, 2011 report that the latest forecasting confirm that oil boom in Azerbaijan is doomed to end in a few years. Azerbaijan’s high dependence on oil exports poses a potential threat to the economy given the potential volatility in the international oil market. Oil reserves, however, started decreasing in 2011 and last year was pick in oil production. In long term, decreasing of oil output will cause tax revenues decline and budget deficits increase, driving up interest rates.

Production from the Azeri platforms — East Azeri, West Azeri, and Central Azeri will be suspended in a planned sequence in order to enable efficient maintenance work to be undertaken which is another reason of decline.

CESD assessment model also include tendency of decreasing of oil production in Azerbaijan. State Oil Company of Azerbaijan (SOCAR) produced 51 million ton oil in 2010. SOCAR targets 43 million ton for 2013 which 8 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 2017. Even with current prices of crude oil in the world market, SOFAZ’s assets will be totally spent within the budget lines if current unbelievable transfers’ level kept. Keeping such fantastic transfers can result in negative consequences because of theatrical cutting of budget expenditure lines due to potential lack of financial resources. According to Production Share Agreement (PSA) oil reserves are turned down starting 2011. Considering that Azeri-Chirag-Guneshli filed currently has 3 billion barrels (of the initial 5 billion) reserve and the end of Azeri-Chirag-Guneshli in the year 2019 (3 billion barrel /340 million barrel annual). Given that 2010 was the peak year of Azeri oil production, the descent begins as of 2011. Of course, the output will not stop immediately, but its reduction by 10 percent a year will be a severe blow

Azerbaijani State Statistics Committee Chairman Arif Veliyev has however said that “the decline in production in Azerbaijan is not associated with a decline in oil reserves level, but with the extension of their development time-frame to get yield for a longer period. It is planned measure”.

Azerbaijan produced some 17.9 billion cubic meters of tank gas in 2013, versus 17.24 billion cubic meters in 2012. 43.1 million tonnes of oil and gas condensates were produced in Azerbaijan in 2013, compared to 42.98 million tonnes in 2012.

© CESD, 2014

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