Azerbaijan Aims to Halt Oil Decline, But...

The Azerbaijani government is determined to stabilize oil production. This intention was announced by President Ilham Aliyev earlier this year. "Work is underway to stabilize oil production, and I believe we will see results in the near future. We need stable oil production, and this task has been set before the investors," he remarked during one of his speeches.

For now, however, oil production continues to decline. The country's peak production occurred in 2009, with 50.9 million tons of oil extracted. Last year, this figure fell to approximately 30 million tons.

Despite the decrease in production, oil and gas revenues still constitute a significant portion of Azerbaijan's budget.

Ilham Shaban, head of the Oil Research Center, told Turan that according to international organizations' forecasts, oil production in Azerbaijan will remain stable next year. "This is primarily due to the commissioning of a new platform in the Azeri-Chirag-Gunashli (ACG) field block in April, which is gradually ramping up production. However, even with this, oil output has decreased by 1.1 million tons in the first 11 months. Even if this platform operates at full capacity by 2025, it will not be enough to halt the decline," Shaban explained.

Nonetheless, according to Shaban, "the government has become more accustomed to living without oil." He highlighted that payments to the state budget from customs and tax authorities are increasing yearly, resulting in a growing share of the non-oil sector. Over the past decade, contributions to the State Oil Fund of Azerbaijan (SOFAZ) have dropped from $18 billion to $6 billion annually—a threefold decrease. However, this has not affected the country's social and other projects. For instance, the State Social Protection Fund, which used to receive $2 billion in annual subsidies from the government, now has a budget of $4 billion and has effectively become a self-sustaining entity.

Economist Natig Jafarli, speaking to Radio Azadliq, recalled the country's peak oil production period: "We used to have nearly 1 million barrels of daily oil production. Now, our daily output is around 480,000 barrels. The government's primary goal is to halt the decline with the help of new fields and stabilize production at around 500,000 barrels per day. Recent efforts indicate that this is the main focus."

Jafarli believes that measures to stabilize oil production will yield some results. "There are production-sharing agreements with foreign oil companies for new fields. However, these are not major fields, with daily production capacities of 15,000 to 30,000 barrels at best. If three to five such fields become operational, it could add approximately 120,000 barrels to daily production, helping stabilize commercial oil output at around 500,000 barrels per day," he noted.

Jafarli also pointed out that while there is some numerical growth in the non-oil sector, Azerbaijan's total agricultural exports barely reach $1 billion. "In comparison, Turkey's Antalya region alone exports over $2 billion worth of agricultural products. From this perspective, it is unlikely that Azerbaijan's income from non-oil exports and production will even reach half of its oil revenues in the coming years," he emphasized.

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