PremiumReview of oil and gas operations in Azerbaijan (January-February 2014)

1. FEC

а) Oil and Gas Production

Azerbaijan produced 6.8 million tons of oil and gas condensate in January-February 2014 compared to nearly 7.2 million tons in the same period of 2013, the Azerbaijani State Statistics Committee said.

Azerbaijan produced 43.1 million tons of oil and gas condensate in 2013 compared to 42.98 million tons in 2012.

The bulk of oil production in 2013 fell to the Azeri-Chirag-Guneshli oil and gas field block and Shah Deniz gas condensate field being developed jointly with foreign partners.

Azerbaijan produced 3.1 billion cubic meters of tank gas in Jan.-Feb. compared to 3.86 billion cubic meters in the same period of 2013, according to the State Statistics Committee.

Azerbaijan produced 17.9 billion cubic meters of tank gas in 2013 compared to 17.24 billion cubic meters in 2012.

The State Oil Company of Azerbaijan (SOCAR) carried out drilling operations, excluding joint ventures and operating companies to a total of 21,802 metres in January-February 2014, compared to 24,559 metres in January-February 2013, SOCAR said. Some 21,734 metres of the total volume of drilling operations conducted by SOCAR in January-February 2014 fell to exploitation drilling (22,197 metres in January-February 2013) and the rest to exploration.

SOCAR has started drilling a new well in the shallow part of Guneshli field, with a projected depth of 3030 meters. Geologists estimated that the well's expected daily debit will be 80 tons of oil. SOCAR planned to drill 20 new wells for increasing oil and gas production in Guneshli field's shallow part. Earlier SOCAR prepared a program for 2013-2015 to stabilize and increase the production volume at the fields that are developed independently by this company.

b) Processing

Some 198,100 tons of petrol were produced in Azerbaijan in January-February 2014, which is 13.6 percent less compared to the same month of 2013, the State Statistics Committee reported.

Azerbaijan produced 751,000 tons of the main petroleum products in Jan.-Feb.

About 1.41 million tons of petrol were produced in Azerbaijan in 2013 compared to about 1.3 million tons in 2012. Azerbaijan produced 5.09 million tons of main petroleum products in 2013.

Summary table of production of oil products in Azerbaijan:

SOCAR appealed to the government with a proposal to suspend the production of AI-95 gasoline and fully switch to the production of AI-92 gasoline, the head of SOCAR Rovnag Abdullayev said. AI-95 gasoline is supposed to be imported while AI-98 gasoline is already being imported into the country from abroad, according to Abdullayev. The head of SOCAR said these measures are supposed to meet the growing demand for gasoline in Azerbaijan.

Currently, the capacities of oil refineries in Azerbaijan no longer cope with the growing volume of gasoline consumption in the country. That is why, SOCAR appealed to the government with a proposal to conduct a full transition to the production of AI-92 gasoline.

The SOCAR head said that in the next few years, the company will work to increase the gasoline production capacity at its oil refineries in order to meet the country's needs before 2023-2025, that is, by the time of full commissioning of a new complex for oil and gas processing and production of petrochemicals.

The catalytic cracking unit's work is planned to be stopped in April for a month for reconstruction and to conduct work on increasing its capacity, which will affect the production of gasoline in the country. This may require a replacement of these volumes. Modernization of the unit will make it possible to increase its processing capacity by one million tons (from two tons to three million tons), and gasoline production - by 450,000 tons.

c) Sale

Around 721,100 tons of oil products were delivered to the Azerbaijani domestic market in Jan.-Feb. which is by 6.7 percent less than in Jan.-Feb. 2013, the State Statistics Committee said.

Fuel oil supplies (by 67.3 percent) and liquefied natural gas (by 9.4 percent) increased on the domestic market in Jan.-Feb. A decrease in supplies of other types of oil products was observed.

Some 5.2 million tons of oil products were delivered to the Azerbaijani domestic market in 2013 compared to 4.8 million tons in 2012.

Over one million tons of Azerbaijani oil products were delivered to consumers (including exports) in Jan.-Feb. or 1.8 percent less than in Jan.-Feb. 2013.

Around 71.4 percent of the total volume of petroleum products delivered to customers was sold on the domestic market, while the remaining 28.6 percent went to export.

Around 6.8 million tons of Azerbaijani oil products were delivered to consumers (including exports) in 2013 or 3.9 percent more than in 2012. Around 77.5 percent of the total volume of petroleum products delivered to customers was sold on the domestic market, while the remaining 22.5 percent went to export.

2. Chemical complex

Azerbaijan produced 15,200 tons of polyethylene in Jan.-Feb. 2014, which is by 7.6 percent more than in Jan.-Feb. 2013, the Azerbaijani State Statistics Committee said.

Some 76,000 tons of polyethylene were produced in the country in 2013, which is 13.9 percent more than in 2012.

According to the State Statistics Committee, a decrease in production was observed in basic chemical products in Jan.-Feb. 2014.

Production of basic chemical products:

The country produced 2,140 tons of hard polyethylene pipes, tubes and hoses in Jan.-Feb., which is 55.2 percent less than in the same period in 2013. The country produced 129.5 tons of porous polyurethane plates and strips, which is 7.9 percent more than in Jan.-Feb. 2013.

3. Electricity

Around 4.03 billion kilowatt/hour electricity was generated in Azerbaijan in Jan.-Feb., which is by 4.3 percent more than in the same period of 2013, the Azerbaijani State Statistics Committee said.

Some 3.88 billion kilowatt/hours of the total volume of generated electricity fell to the share of thermo power plants in Jan.-Feb. 2014 which is by 4.8 percent more than in the same month of 2013.

The hydro power plants of Azerbaijan generated around 141 million kilowatt/hour of electricity in Jan.-Feb. which is by 9.1 percent less than in the same period of 2013.

Azerbaijan produced approximately 20.63 billion kilowatt / hours of electricity in 2013, which is 0.6 percent more than in 2012. Around 19.26 billion kilowatt / hours of the total volume of electricity generated in 2013 fell to the share of thermal power plants or by 2.7 percent more than in 2012. The Azerbaijani hydroelectric power plants generated about 1.37 billion kilowatt / hours of electricity in 2013 which is by 21.7 percent less than in 2012.

Azerenergy company generates and distributes electricity in Azerbaijan. There are more than 200 substations with a capacity of 500, 330, 220 and 110 kilovolt amperes, as well as eight hydropower plants and 13 thermal power plants on Azerenergy's balance sheet.

At present, the installed capacity of the country's power system is about 6,500 megawatts, of which about 5,500-5,600 MW were used. In this case, the country's demand for electricity is at the level of 4,200-4,400 MW.

The implementation of the 'Azerbaijan-Georgia-Turkey Energy Bridge' project is in the process of commercial talks, a source close to the project said. The source said that all the technical issues in Azerbaijan, Georgia and Turkey have been resolved. A 550/400/220-kilovolt substation and a 400-kilovolt power transmission line were commissioned in Georgia in December 2013. The reconstruction of power transmission lines in Azerbaijan and several connection works on the Georgian-Turkish border were also conducted within the project.

Power Bridge project envisages the supply of some 1200 megawatt of electricity to Turkey and 600 megawatt of it will fall to Azerbaijan.