IOCs Pare Back Plans in Azerbaijan
BP and Norway's Equinor are delaying exploration plans in Azerbaijan after making steep cuts to their investments this year.
Equinor, which is targeting a 20-30% cut in 2020 capital spending, told NGW on May 5 that it had postponed drilling work at the Dan Ulduzu-Ashrafi-Aypara (Adua) block in the Azeri section of the Caspian Sea.
The Norwegian player signed a production-sharing agreement (PSA) with Azerbaijan's Socar to develop Adua in May 2018. The pair aimed to sink their first well there, Aypara-1, in 2020.
Meanwhile, a source told NGW that BP had postponed drilling plans at the offshore Shafag-Asiman and D230 blocks until 2021, and also intended to cut spending at the Shallow Water Absheron Peninsula (Swap) area as well. BP previously planned to drill as many as three exploration wells at Swap. It has cut its global capex plan for 2020 by 25%.
BP and Socar recently delayed taking a final investment decision on the construction of a new petrochemical complex in western Turkey, from 2020 until 2021, in light of the oil price collapse. The UK major is preparing to announce its 2020 budget plan for projects in Azerbaijan in late May, the source said.
Meanwhile, Socar announced on May 5 it had started drilling a new well at the offshore Umid field, The Umid-1 platform's capacity has been raised from 3.5mn to 6.6mn m3/d, and Socar plans to drill two new wells to increase production accordingly. The new well will reach a depth of 6,270 metres and add 1.5-2.0mn m3/d of extra gas supply.
Umid flowed 850mn m3 of gas and 140,000 mt of condensate from three wells last year, and Socar's target is to increase this to 960mn m3 and 145,000 mt in 2020. But the Azeri firm too is preparing to announce spending cuts, the source said.
Under the Opec+ agreement, Azerbaijan is obliged to reduce production by 96,000 b/d in May and June from the level in April, with the BP-led Azeri-Chirag-Gunashli (ACG) project accounting for 76,000 b/d of the cut. Production losses and low prices are expected to reduce Azerbaijan's net oil export revenues to around $3bn this year, down from $11bn in 2019. The government is preparing to launch austerity measures in the coming weeks to account for this loss.
Another source told NGW that during the last month, 21 Azeri oil cargoes were sold at Turkey's Ceyhan terminal, of which five were bought below the $18/b breakeven price for Azeri crude. Socar and its partners, the second source said, aimed to lower the breakeven cost to just $12/b this year, by cutting capital and operational costs.