Azerbaijan Oil and Gas Report Q3 2012 Published: June 2012
No. of Pages: 90
Price: US $ 1175
Project delays remain 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 if there is to be sustained 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. Key developments in Azerbaijan’s Oil & Gas sector include: UK oil major BP is expected to make 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 State Oil Company of Azerbaijan Republic (SOCAR), Elshad Nasirov. The Shah Deniz II project requires total investment of US$20bn. The project is expected to allow exports of 10bcm of gas to Europe and 6bcm to Turkey by 2018. The Shah Deniz Consortium (SDC) was expected to reach a decision on which export pipeline it favoured for the transportation of Azeri gas to southern Europe by the end of Q112; however, this deadline was missed and a new one has been set for mid-2013. SDC includes BP (25.5%), Norway’s Statoil (25.5%), Iran’s NIOC (10%), SOCAR (10%), France’s Total (10%), Russia’s Lukoil (10%) and Turkey’s TPAO (9%). Options include the EU-backed Nabucco, the Italy-Turkey-Greece Interconnector (ITGI), the Azerbaijan-Georgia-Romania Interconnector (AGRI), the Trans Adriatic Pipeline (TAP), the South East Europe Pipeline (SEEP), the Trans Anatolian Pipeline (TANAP) and White Stream. BMI initially believed that SEEP and TAP were the most likely contenders for the title, but the March 2012 revision of the Nabucco project has disturbed the status quo. On October 25 2011, Azerbaijan and Turkey signed a number of key gas export-related agreements that enable Turkey to buy gas from Azerbaijan and to transit Azeri gas 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 is estimated to have declined by 10.5% y-o-y to 45.37mn tonnes (equivalent to 911,000 barrels-a-day) in 2011, according to the State Statistics Committee. This was largely due to maintenance-related output drops at the BP-operated Azeri-Chirag-Guneshli (ACG) oil fields. BMI had already reduced its estimate for 2011 production to around 937,000b/d (-10% yearon- year), including gas liquids. According to an April 2012 Interfax report, the government expects oil production to be in excess of 1mn b/d in 2012, in line with BMI forecasts. The further development of the Azeri-Chirag-Gunashi (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 thought to have earned US$30.8bn from oil exports in 2011, with gas bringing in a further US$3.2bn. With oil exports due to reach 1.1mn b/d by 2021, plus rising gas sales, the country could be generating petroleum revenues of US$47.2bn by the end of our 10-year forecast period. Azerbaijan’s dependence on energy prices leads to high volatility in the country’s export revenues. Our assumptions of tight supply due to booming demand in emerging markets is clearly an opportunity for the country. As a result, we assume OPEC basket oil prices to increase from an estimated US$107.52 per barrel (bbl) in 2011 to US$111.47/bbl in 2012, creating upside risk for the Azeri macroeconomic outlook.
Q3 2012 Report of Azerbaijan Oil and Gas Industry Table of Contents BMI Industry View 5 SWOT Analysis 7 Azerbaijan Oil and Gas SWOT .. 7 Global Energy Market Outlook ... 8 Regional Energy Market Outlook . 15 Azerbaijan Energy Market Overview 19 Industry Forecast Scenario .. 21 Oil And Gas Reserves ... 21 Oil Supply And Demand 24 Gas Supply And Demand .. 25 LNG .. 27 Refining and Oil Products Trade .. 27 Service Stations . 31 Gas Pipelines 33 LNG .. 38 Regional and Country Risk/Reward Ratings .. 40 Competitive Landscape 47 Executive Summary ... 47 Overview/State Role .. 48 Licensing And Regulation 49 Government Policy .. 49 Licensing Rounds . 49 International Energy Relations 50 Company Monitor .. 55 SOCAR .. 55 BP Azerbaijan ... 59 Statoil 62 Lukoil Azerbaijan .. 64 Azpetrol . 65 ExxonMobil – Summary ... 67 Eni – Summary . 67 Inpex – Summary . 67 Chevron – Summary . 67 Itochu/Delta Hess – Summary .. 67 TPAO – Summary 68 Total – Summary .. 68 ONGC Videsh Ltd (OVL) – Summary .. 69 Korea National Oil Corporation (KNOC) – Summary . 69 GdF Suez – Summary ... 69 RWE Dea – Summary ... 70 Central And Eastern Europe – Regional Appendix 71 Methodology And Risks To Forecasts 78 Glossary Of Terms . 79 Oil And Gas Risk/Reward Ratings Methodology 81 Ratings Overview .. 81 BMI Methodology ... 85 How We Generate Our Industry Forecasts ... 85 Energy Industry . 85 Cross checks . 86 Sources.. 86