Azerbaijan to Attend OPEC + Meeting in Vienna in Early December

Azerbaijan’s Energy Minister Perviz Shahbazov will take part in a meeting of the OPEC + Ministerial Implementation Committee (JMMC) and a meeting of OPEC + member ministers in Vienna on December 5-6, an informed source in the Ministry of Energy of Azerbaijan told ASTNA.

It is expected that in Vienna, OPEC and non-OPEC countries will confirm the decision to extend agreements on reducing global oil production by a total of 1.2 million barrels per day compared with the level of October 2018. Such a deal was concluded in December 2018 for a period of six months, and in July it was decided to extend it until April 2020.

For OPEC countries, the total reduction was planned at 0.8 million bpd, and for non-OPEC - 0.4 million bpd.

"In anticipation of the meetings of OPEC + countries, the results of this group of oil exporting countries remain below its target, which is positive for world oil prices. In general, the level of compliance with the summer agreements reached by 24 producers around the world was 111% in October. However, production in October was at its highest level since February, when Saudi Arabia pumped more than 10 million bpd,” the International Energy Agency (IEA) report said in November.

World oil supplies rose by 1.5 million bpd to 101 million bpd in October as a result of recovery in the production in Saudi Arabia (after attacks on its refinery in September) and growth in the production in Norway, Canada and the United States.

AZERBAIJAN AND OPEC + TRANSACTION

In October 2019, oil production in Azerbaijan amounted to 718 thousand barrels / day against obligations under OPEC + at the level of 776 thousand bpd.

In January-October, the average daily production amounted to 762 thousand bpd, and Azerbaijan fulfilled its obligations to the Cartel by 170%.

The reason for the significant decrease in oil production in Azerbaijan in October was a planned shutdown from October 15, 2019 for a period of 15 days of the West Chirag platform on the Azeri-Chirag-Gunashli block (ACG is a key block in Azerbaijan’s oil production) for preventive maintenance.

The average daily oil production in Azerbaijan in 2018 amounted to 792.6 thousand barrels, and in 2019 it will be lower.

According to Bakhtiyar Aslanbeyli, Vice President of BP (ACG operator), the ACG will produce 500 million tons of oil by the end of 2019, that is, in fact, will reach half of the recoverable reserves of this block.

ACG accounts for 2/3 of the oil production in Azerbaijan. Oil production from Azeri, Chirag and Gunashli fields in January-September 2019 amounted to 148 million barrels (20 million tons).

According to Vice President of the State Oil Company of Azerbaijan (SOCAR) Yashar Latifov, who spoke to ASTNA, in 2020 oil production at ACG and in Azerbaijan as a whole may decrease compared to 2019, but this is a “controlled decrease” associated with optimizing field development.

According to government forecasts presented in the budget package of documents (ASTNA has copies), in 2020 oil production in Azerbaijan is expected to reach 37 million 712.8 thousand tons (a 0.1% decrease compared with 2019).

That is why Azerbaijan easily copes with the fulfillment of its OPEC + obligations, because its oil resources are gradually being depleted, while gas and condensate production is growing.

It is noteworthy that condensate has always been taken into account in the oil statistics of Azerbaijan and it is with it that the oil production surge expected from 2021 is associated (government forecast - 38 million 246.2 thousand tons).

The growth in 2022, according to government estimates, will be 0.7% - up to 38 million 520.6 thousand tons, and in 2023 - 38 million 634.4 thousand tons (an increase of 0.3%).

It is during these years that the peak of development of the Shah Deniz gas condensate field (BP - operator) and a number of other gas condensate fields of the country falls.

It is curious that the Russian Federation - the largest non-OPEC oil producer - also takes condensate into account in its oil statistics, but wants to raise with the Cartel the question that condensate should not be taken into account when fulfilling obligations to OPEC. Indeed, taking into account the volume of condensate prevents the Russian Federation from increasing its production of “black gold” in the framework of the transaction with OPEC.

Azerbaijan is quite satisfied with the existing methodology, which, in fact, allows masking a decrease in oil production - an irreplaceable source - in the country.

Of course, condensate in liquid form is exported by Azerbaijan along with oil, even improving its characteristics, but the reality is that the fields being developed in Azerbaijan, mainly new, contain more gas than oil.

It is possible that already in the middle of the 21st century, oil production in the country will be minimized, and the stake will be placed on gas and renewable energy sources, given that there are many sunny and windy days in Azerbaijan.

In the meantime, Azerbaijan is trying to maximize the benefits of oil exports, which gives the lion's share of government revenue.

In this regard, its participation in the OPEC + deal is explained by the desire to maintain the stability of world oil prices at an average level of $ 55-60, because lower prices are fraught with problems for the economy of Azerbaijan.