Caspian Overview: Baku Heralds Age of Gas

As Azerbaijan is over half way through the development of the second phase of Shah Deniz (SD2) and eyeing the development of the third stage, the country's energy minister said that the oil era was now over and that Baku was turning instead to gas projects.

"The peak oil production period in Azerbaijan passed after it reached 51mn metric tons (372mn bbls) in 2010 and now it is in natural decline," Natig Aliev said on April 25.

Azerbaijan's major oil producing block, Azeri-Chirag-Guneshli (ACG), is in the second half of its life and the country is preparing to replenish the coffers with revenues from gas.

Azerbaijan's major gas producer Shah Deniz stage 1 (SD1) reached peak production level at 10.4bn m3/yr. This is the smaller phase, with only 220bn m³ of reserves, of which 70bn m3 have been extracted so far. The reserves of SD2 and SD3 stand at 400bn m³ and 500bn m³.

SD2, now 70% complete, is projected to start in 2018, and SD3 is planned to become operational in 2032. SD2 is projected to export 16bn m3/y of gas to Turkey (6bn m3/yr by 2018) and EU (10bn m3/yr by 2021).

UK major BP, the operator of Shah Deniz, plans to start reviewing the results of last year’s 3D seismic survey of the deeper horizons of SD3 at the end of this year.

A senior geologist at Socar, Khoshbakht Yusifzada, told a press conference late 2015 that the peak level of gas production from SD2 will reach 16bn m³/yr in 2022 and remain at that level until 2029, then its output would start to decrease. "The production level of SD1 is expected to start decline in 2026," he said.

Azerbaijan produces about 20bn m3/yr of commercial gas (excluding re-injection) and plans to double this volume by 2025.

Aliev told NGE in March that during the next decade, the Absheron gas field, with 350bn m3 of reserves, is expected to be started and other fields also will be developed then.

He also said on April 25 that there are plans for further exploration and development of natural gas reserves in ACG below the oil producing strata.

Last year, BP produced 12.3bn m3 of associated gas from this block, of which about 3bn m3 were delivered to state oil company Socar and the remained volume was re-injected to maintain oil output.

On the other side of the Caspian, Turkmenistan announced that it is preparing to build a gas-to-liquids plant in May, aimed at converting 3.7bn m3/yr of natural gas into liquid synthetic fuels (GTL) in Ahal province.

Turkmenistan’s plan to build a GTL plant came a month after South Africa's Sasol announced that it was reconsidering its plan to participate in building a $5.6bn GTL plant in Uzbekistan, citing current low oil prices as its reason.

Turkmenistan is also preparing to build a gas compressor station to raise gas export capacity to China by 30bn m3/y, oil and gas ministry reported on April 25. Turkmenistan plans to export 65bn m3/yr of gas to China by 2021.


Iran desk


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