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Azerbaijan Oil and Gas Report Q1 2012
Business Monitor International, Dec 2011, Pages: 79
Business Monitor International's Azerbaijan Oil and Gas Report provides industry professionals and strategists, corporate analysts, oil and gas associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Azerbaijan's oil and gas industry.
BMI View: Project slippage remains the key threat to an Azeri energy sector capable of delivering much greater volumes and revenues. Gas export issues involving pipeline routes and other quasi-political decisions are critical to field development and increased shipments. Meanwhile, liquids volumes have been falling short of expectations, and there are doubts over the scale and timing of medium-term output growth.
Main trends and developments BMI highlight for Azerbaijan’s Oil and Gas sector are:
- UK oil major BP is expected to take an investment decision on the second development phase of the Shah Deniz field by 2013, according to the Vice President of Azerbaijan’s state-controlled SOCAR, Elshad Nasirov. He added that the Shah Deniz II project involves investment totalling US$20bn. The project is expected to allow exports of 10bcm of gas to Europe and 6bcm to Turkey by 2017.
- October 25 2011 saw Azerbaijan and Turkey sign a number of key gas export related agreements, which enable Turkey to buy gas from Azerbaijan and to transit Azerbaijan gas through Turkey to Europe. These agreements will allow Shah Deniz to proceed with its European pipeline selection process, and to confirm gas sales agreements with potential customers.
- Azerbaijan's oil production will decline by 10% year-on-year (y-o-y) to 45.6mn tonnes in 2011, according to the finance ministry. The government statement, made in October 2011, did not make any disclosure regarding the reasons behind the decline.
- BMI sees scope for overall liquids supply to recover to 1.00mn b/d in 2012, rising further to a peak of around 1.38mn b/d by 2018. The further development of the ACG complex and liquids from the second phase of the Shah Deniz gas field could deliver a surprise on the upside in terms of volumes but, equally, project delays could undermine progress.
- Azerbaijan is likely to have earned US$32.4bn from oil exports in 2011, with gas bringing in a further US$2bn. With oil exports reaching an estimated 1.11mn b/d by 2021, plus rising gas sales, the country could be generating end-period petroleum revenues of US$44bn.
At time of writing, BMI assume an OPEC basket oil price for 2011 of US$101.90 per barrel (bbl), falling to US$99.40/bbl in 2012. Global GDP in 2011 is forecast at 3.1%, down from 4.3% in 2010, reflecting slowing growth in China, a faltering recovery in the US and a worsening Eurozone debt crisis. For 2012, growth is put at 2.9%.
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