SOCAR Calls “Regulated” Decline in Oil Production in Azerbaijan

In 2019, the State Oil Company of Azerbaijan (SOCAR) was able to increase oil production in independently developed fields, for the first time since 2015; however, this did not save from a decrease in the overall indicator of oil production in the country, due to natural reasons.

According to the SOCAR report, in 2019, 37,453,702 tons were extracted in Azerbaijan, which is 3.4% less than in 2018.

At the same time, the state-owned company itself in its fields not included in international agreements produced 7,683,153 tons of oil, which is 1.8% more than in 2018.

Recall that in 2018, SOCAR independently extracted 7.542 million tons of oil, in 2017 - 7.427 million tons, and in 2016 - 7.522 million tons. Until 2016, SOCAR production always exceeded 8 million tons per year, in particular, in the record year 2010, when a total of 50.8 million tons of oil was extracted in the country.

“In 2019, SOCAR stabilized oil production in its own fields. But taking into account the production indicators of international operating companies operating in the country, a natural decline in oil production at a regulated rate continues in Azerbaijan as a whole. So, since 2010, a natural drop in oil production has been observed at the block of Azeri-Chirag-Gunashli (ACG) fields,” SOCAR explains.

Recall that in 2010 ACG produced 40.6 million tons of oil, but already in 2011 the volume decreased to 35.4 million tons, in 2012 - to 32.9 million tons, in the period 2014-16 it was at the level of 31 million tons per year, but in the periods 2017-19 it was an average of 28-29 million tons / year.

ACG are a key block of Azerbaijani fields, therefore, any changes in their production indicators affect the overall picture.

Oil is the main export product of Azerbaijan, bringing the country the “lion's share” of foreign exchange earnings.

Thus, according to customs, in 2019, the export of declared oil from Azerbaijan amounted to 30.837 million tons worth $ 14 billion 814 million.

In 2018, declared oil export from Azerbaijan amounted to 29.5 million tons, but in the amount of $ 15 billion 72 million. That is, in 2019 oil export increased in quantitative terms by 4.5%, but in value terms it fell by 5.8%.

In 2019, Azerbaijan accounted for 21.1 million tons of profitable oil (a decline of 11.6%).

GAS

Azerbaijan is rapidly increasing gas production, but “blue fuel” does not yet provide the tangible income that oil gives.

In 2019, gas production in Azerbaijan amounted to 35 billion 616 million 510.185 thousand cubic meters, an increase of about 17% compared to a year earlier. At the same time, according to SOCAR itself, gas production amounted to 6 billion 818.64 million cubic meters, which is 4.5% more than in 2018.

As for export, according to customs, the export of declared gas volumes from Azerbaijan in 2019 amounted to 12 billion 537 million 405.17 thousand cubic meters in the amount of $ 2 billion 366 million 833.7 thousand.

In 2018, the declared gas export from Azerbaijan amounted to 7 billion 900 million 12.99 thousand cubic meters worth $ 1 billion 499 million 385.84 thousand.

According to SOCAR, Azerbaijan exported 11 billion 586.368 million cubic meters of gas in 2019, which is 23% more than in 2018 and is associated with an increase in gas production from the Shah Deniz field.

A SOCAR report noted that in 2019, Azerbaijan exported 9 billion 180.179 million cubic meters of gas to Turkey (an increase of 27%), including 2 billion 783.692 million cubic meters through the Trans-Anatolian gas pipeline (TANAP).

In 2019, domestic consumption of natural gas in Azerbaijan increased by 8.7% compared to 2018, up to 11 billion 531.59 million cubic meters.

“The volume of domestic gas consumption in Azerbaijan (excluding technical costs and losses) amounted to 11 billion 531.59 million cubic meters compared to 10 billion 613.246 million in 2018. The increase in consumption is largely associated with an increase in production in gas petrochemicals (the new plant SOCAR Carbamide and the plant SOCAR Methanol take gas). In addition, due to the expansion of the gas infrastructure, the level of natural gas consumption by the population of Azerbaijan in 2019 increased by about 8.5%,” the state oil company said.

OIL AND GAS CHEMISTRY

In 2019, SOCAR increased the export of refined products and gas chemicals by 22% to 2 million 233.21 thousand tons.

The increase in export volumes is associated with the activities of the SOCAR Polymer and Carbamide plants, as well as with the increase in methanol production by SOCAR.

In 2019, the urea plant planned to produce about 200 thousand tons, in 2020 urea production is projected at 500 thousand tons, in 2021 - 620 thousand tons, in 2022 - 640 thousand tons, and in 2023 - 650 thousand tons.

Azerbaijan’s internal urea needs are 100-150 thousand tons per year, that is, its main part is intended for export.

Azerbaijan is currently exploring the idea of ​​building another urea plant in Sumgayit, recognizing the demand for these nitrogen fertilizers in the local and foreign markets.

SOCAR Methanol has 90% of its products exported. In 2019, the plant produced about 360 thousand tons of methanol compared to 191.4 thousand tons in 2018. By 2024, methanol production could grow to 540 thousand tons per year.

In July 2018, SOCAR Polymer commissioned a polypropylene production plant with a capacity of 184 thousand tons of polypropylene per year, and in February 2019, a high-density polyethylene production plant with a capacity of 120 thousand tons of finished products per year. These SOCAR Polymer plants are designed to produce 10 types of polypropylene and 4 types of high density polyethylene, with over 70% of the products to be exported.

Thus, gas and petrochemical products will increase their share in the GDP of Azerbaijan from year to year and give the country foreign exchange earnings.