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    Details of Azerbaijan’s Gas Sector for 1H 2015



Details of Azerbaijan's gas ouput, export and drilling

by: Ilham Shaban

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Top Stories, Pipelines, South Caucasus (Baku-Tbilisi-Erzurum|BTE), News By Country, Azerbaijan, Caspian Focus

Details of Azerbaijan’s Gas Sector for 1H 2015

During the first half of 2015, Azerbaijan’s gas export increased despite a decline in the country’s gas production as well a halt in gas export to Russia.

Azerbaijan halted gas export to Russia in mid 2014.

However, a source in State Oil Fund told Natural Gas Europe that Azerbaijan’s revenues from gas export decreased significantly during the mentioned period despite an increase in volume.

“Azerbaijan’s revenues from the exported gas and gas condensates from Shah Deniz Stage 1 decreased by 36 percent to $189.532 million, mostly due to a decrease in oil and gas price as well as an increase in capital expenditure of Shah Deniz Stage 2,” the official said anonymously.

The shareholders of Shah Deniz are: BP, operator (28.8 percent), AzSD (10 percent), SGC Upstream (6.7 percent), Malaysia’s Petronas (15.5 percent), Lukoil (10 percent), NICO (10 percent) and TPAO (19 percent).

During the mentioned period Azerbaijan’s exported gas to Turkey dropped by 25 percent in value, while the gas condensate price decreased by 45 percent year-on-year.

The official refused to give the value of gas export from Shah Deniz in total (not only Azerbaijan’s revenues).

The State Custom Committee also reported on August 13th that the country’s total gas exports stood at 4.547 billion cubic meters (bcm) during the first half of 2015 (1H15), including 896 million cubic meters of gas which exported by the State Oil Company of Azerbaijan Republic (SOCAR).

The Custom reports always keep the value of Shah Deniz gas export unveiled, but this report says that SOCAR’s gas export reached $143.883 million dollar. During the same period in 2014, SOCAR had exported 1.145 bcm in gas worth $196.333 million.  

According to a report, published by BP plc on August 10th, Shah Deniz spent approximately $2.26 billion in capital expenditure, the majority of which was associated with the Shah Deniz Stage 2 project, while this figure in the same period of last year was $1.766 billion.

The output from Shah Deniz Stage 1 (SD1) increased by 9.5 percent to 5.2 billion cubic meters (bcm) in first half of 2015, while the total Azerbaijan’s commercial gas production stood at 10.673 bcm.

Azerbaijan also re-injected some 4 bcm of gas to oil fields.

Exploration and drilling

In the first half of 2015, BP completed the interpretation of the seismic dataset for Shafag-Asiman. This work required some 18 months to complete and is followed by another year required for planning of the first exploration well. The block lies some 125 kilometers to the South-East of Baku. It covers an area of some 1100 square kilometers and has never been explored before. It is located in a deepwater section of about 650-800 meters with reservoir depth of about 7000 meters.

BP also signed a new production sharing agreement (PSA) with SOCAR in December 2014 to jointly explore for and develop potential prospects in the shallow water area around the Absheron Peninsula in the Azerbaijan sector of the Caspian Sea.

In the second quarter, the existing Shah Deniz Stage 1 platform completed the SDA07 gas producer well and continued drilling another production well, whilst the Istiglal and Heydar Aliyev rigs continued drilling operations in support of the Shah Deniz Stage 2 pre-drill programme.

These two rigs have already drilled eight production wells in preparation for the first gas and consequent production ramp up.

SOCAR also announced on August 6th that it started drilling a new gas well in depth of 6,200 m on “Bulla Deniz” in Caspian Sea. The well will produce 0.8 mcm/d of gas.

The Bulla-Deniz offshore field is located at 80 kilometers south of Baku, and it was opened in 1975. During this time, over 61 bcm of gas was produced at the field.

Ilham Shaban is Director of the Azerbaijan Centre for Oil Studies, in Baku