Oil Output Dropped by 4,0 % in Azerbaijan

Oil Output Dropped by 4,0 % in Azerbaijan


CESD forecasts decline in oil sector by 5,0 % in 2013 based on its econometric models and PSA matrix

Azerbaijan produced 7,2 million tons of oil in January-February , 2013- The State Statistical Committee of Azerbaijan reported.  3,8 million tons were produced in January and 3,4 million tons in February. Oil production has dropped by 300,0 thousand tons or by 4,0 % over the same period of 2012.

Meanwhile, State Oil Company of Azerbaijan exported 192,590 tons of oil products in the same period.  Export of oil products has dropped by 7,812 tons over the same period of the last year.

CESD’s assessment model also forecasts decreasing of oil production in Azerbaijan. 50,8 million tons oil in 2010, 45,6 million tons in 2011 and 43,9 million tons last year, which was 6,9 million ton less than 2010’s output. Meanwhile, the latest predictions confirm that oil production will decrease to about 38 million tons in 2015. 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 transfer levels persist. Maintaining such a high rate of transfers can result in negative consequences because of cutting budget expenditures due to potential lack of financial resources.

CESD is not optimistic about SOCAR’s oil output forecast for 2013, which projects an output of 44,0 million tons of oil in 2013, even though decline in this sector was already registered in the first months of year. CESD forecasts decline in oil output by 5,0 % in 2013 based on its econometric models and PSA matrix.

Meanwhile, revenue of State Oil Fund of Azerbaijan (SOFAZ) is forecasted at AZN 11,82 billion ($ 15,12 billion) since expenditure will be AZN 13, 59 billion ($ 17,32 billion) in 2013. SOFAZ will face budget deficit which will be AZN 1,78 billion ($ 2,22 billion) next year. Meanwhile Ministry of Finance reports SOFAZ will spend AZN 2,149 billion ($ 2,755 billion) on investment projects in 2013.  SOFAZ transfers to the state budget will  be AZN 11.350 billion ($ 14,512 billion) . In comparison with 2012, SOFAZ transfers to the state budget will increase by AZN 1,445 billion ($ 1,865 billion).

CESD experts mentioned that SOFAZ is not adequately meeting its central objective – preserving oil money for future generations. It seems difficult to protect the money from the consumption appetite. The transfers from SOFAZ to the State Budget have shot up  from $ 686 million in 2007 to $ 12, 54 billion in 2012 and a decision has been  taken to further raise the transfer to $ 14,51 billion in 2013. It means that amount of transfers from the fund to the state budget is 19 times higher than  in 2012 compare with 2007 which is barely credible in the oil countries’ experience in the world. Transfers from SOFAZ to the state budget in 2013 will be 21 times higher than compare in 2007. Meanwhile, transfers from the fond to the state budget increased 62 times in last 7 years.

CESD researchers said that more than $ 25,0  billion transferred only last 2 years (2011/2012) and $39.5 billion are transferred between 2011-2013 years which is more than total of assets of SOFAZ. The fund’s current assets are about $ 33,0 billion. CESD estimates prove that SOFAZ’s budget will be equal to zero in 5 years if the government keeps this level of fantastic transfers from the fund to the budget.

The BTC pipeline extends to 1768 km including 443km in Azerbaijan, 248 km in Georgia and 1076 km in Turkey. The shareholders of the BTC Co pipeline company are BP (30.1%), SOCAR (25%), Chevron (8.9%), Statoil (8.71%), TPAO (6.53%), Itochu (3.4%), ONGC Videsh Ltd. (2.36%), ENI (5%), ConocoPhillips (2.5%), Inpex (2.5%), Total (5%).

CESD, 2013

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