Socar to Buy More from Russia as Reinjection Needs Grow
Azerbaijan's state oil company (Socar) is in talks with Russia’s gas monopoly Gazprom for a gas supply from Russia in order to maintain oil production in the country.
Gas import from Russia will help to meet domestic gas consumption, while more associated gas will be re-injected into oil reservoirs to maintain the pressure and prevent a dramatic decline of production in Azeri-Chirag–Guneshli oilfields (ACG), sources in Socar told NGE.
ACG produces the lion share of Azerbaijani oil production of about 41mn metric tons/year but output from the field has been declining since 2010, falling from 823,100 barrels/d to about 630,000 b/d last year.
According to a contract signed in 1994 between Azerbaijan and the international operating consortium, all the associated gas belongs to the government except for what is needed to maintain oil production.
Last year BP operated ACG delivered to Socar about 3.2bn m³ of associated gas from the field and the remaining 9.2bn m³ were reinjected from the Central Azeri platform. Now all the produced associated gas could be re-injected to support the pressure in ACG.
With rising gas demand at home and Socar’s obligations to gas supply to Georgia as well as to the remote Nakhchivan autonomous region the company is experiencing gas shortages.
The other cause of the gas shortage is that Turkey has been receiving all contractual amounts delivered from Shah Deniz-1, which is around 6bn m³/yr. It even asked for more gas from Shah Deniz.
In previous years Botas took less gas than contracted from Socar through the Baku-Tbilisi-Erzurum pipeline, as Iran's take-or-pay terms were more onerous and there was not enough capacity for both suppliers at Erzurum. Socar therefore enjoyed the extra gas from Shah Deniz. But now local power generation stations have had to switch back to fuel oil, which is cheaper than gas.
Last October Gazprom started exporting 6mn m³/d. However imports stopped after 20 days as local methanol producer AzMeCo said the gas price was too high for its production to be competitive.