Oil production in Azerbaijan in the second quarter may decrease by at least 2 million tons

Baku / 18.04.20 / Turan: Oil production in Azerbaijan in the second quarter may decrease by a quarter compared to the first three months of 2020, mainly due to the need to fulfill obligations to OPEC + undertaken by the country on April 12 under "Declarations of Cooperation.”

According to several experts, production may decrease from 9.3 million tons in the first quarter to 2-2.5 million tons in the second quarter if the conditions of the new OPEC + deal are strictly observed.

It should be noted that out of 9.3 million tons of oil recovered in January-March 2020, 6.4 million tons accounted for the block of Azeri-Chirag-Guneshli (ACG) fields - a key one in the country's oil production. At the same time, in the first quarter of 2019, about 7 million tons of oil was extracted from ACG.

BP, as an operator of production at ACG, previously said that in 2020 production at a block of fields could decrease by about 3%, however, due to new conditions, the decline will be more.

BP has not yet shared its plans to reduce production and its implementation, as conducts discussions with the State Oil Company of Azerbaijan (SOCAR) and partners in ACG.

Active discussions are also ongoing in SOCAR at the level of oil and gas producing departments (NGDU) and the joint venture, informed source in the State Oil Company of Azerbaijan told ASTNA. Therefore, they are discussing the option of reducing daily production at “PE Azneft” by 2,500 tons/day, closing 290 wells on land. In order to optimize costs, SOCAR is also exploring the possibility of closing four receiving ground facilities, reducing the number of vehicles and more.

According to rough estimates by experts, in the second quarter Azerbaijan will produce about 590 thousand barrels of oil per day (excluding condensate) compared to an average of 676.4 thousand bpd in the first quarter of 2020.

Of this volume, about 0.5 million bar / day will be exported.

It should be noted that in the first quarter of 2020, Azerbaijan exported 7.6 million tons of oil (including 0.95 million tons of condensate), of which 7.3 million tons were oil with ACG; the rest was SOCAR oil with NGDU and SP.

In January-March 2020, more than 5.2 million tons of oil exported via Supsa and Ceyhan from ACG to world markets accounted for SOCAR's share of the implementation of the “Contract of the Century”.

The same source said that in April of this year, the average daily oil production at ACG may be about 0.5 million b / s, and almost all of this volume is intended for export.

It should be noted that the main volumes of Azerbaijan are exported through the Baku-Tbilisi-Ceyhan oil pipeline, and condensate from the Shah-Deniz field flows to the same pipe, which allows improving the quality of oil.

On average, about 80 thousand barrels of condensate are extracted from Shah Deniz per day.

However, it is important to recall that, according to the new OPEC + deal of April 12, 2020, production and export statistics from May 2020 and for 2 years should not include condensate.

In January 2020, Azerbaijan produced 678 thousand barrels of crude oil per day (without condensate), in February - 667.4 thousand barrels, and in March - 683.7 thousand barrels of crude oil.

In May-June, crude oil production in Azerbaijan, under obligations to OPEC +, should not exceed 554 thousand bpd, in July-December 2020 - no more than 587 thousand bpd, from January 2021 to April 2022 - no more than 620 thousand bps.

Experts believe that by the end of the year oil is unlikely to rise above $ 30-35 / bar, and all oil companies in the world, in addition to reducing production, are considering the possibility of optimizing costs and reviewing personnel policies.

According to the head of the NGO for the Protection of the Rights of Oil Workers Mirvari Gahramanli, about 10 thousand SOCAR employees may lose their jobs.

In the fall of the world oil industry occurred in March, when Saudi Arabia and the Russian Federation stopped fulfilling their obligations to OPEC +, which they had been observing for several years. The situation was aggravated by the coronavirus pandemic, in which the economies of most countries of the world went into recession due to quarantine measures and a decrease in business activity.

This situation also badly affects the economy of Azerbaijan, which is half-dependent on oil. –0-