Market Report, "Azerbaijan Oil & Gas Report Q3 2013", published
(PRBuzz.com) May 20, 2013 -- Azerbaijan's oil industry remains hampered by problematic output at the ACG fields, which accounts for the majority of production. Although there is some upside from planned and potential new projects, we continue to forecast a peak in output in 2020, following which a slow downward trend for oil production will take hold. However, we maintain our bullish view on gas production volumes, which we predict will rise to 17.6bcm in 2013 and continue to rise throughout our 10-year forecast period, reaching 33bcm in 2022. However, reports of weaker than expected interest in gas from Azerbaijan could delay development of the future offshore fields that while posing upside to our outlook, are unlikely to materialise within our current 10-year forecast period.
The key developments in Azerbaijan's oil & gas sector are:
* Although stabilised, on the back of problematic output at the Azeri-Chirag-Guneshli (ACG) fields, we maintain our bearish near-term view for Azeri oil production.
* Our data indicate that ACG accounts for nearly 80% of the country's total production, and after peaking at 823,000b/d in 2010, output has struggled. We forecast oil production in 2013 will reach 842,00b/d, down from an estimated 870,000b/d in 2012. First oil from the Chirag Oil Project (COP), part of the ACG complex, should help to offset problems at other fields in the BP-led development as production ramps up from 2014 onwards.
* However by 2020, we expected falling production elsewhere to fail to offset the inclusion of new volumes from the COP, leading output to enter a downward trend over the remainder of our forecast period to 2022. .
* Continued progress on developments at Shad Deniz II (SDII), the country's leading gas project that should see 10bn cubic metres (bcm) to Europe from 2019 and 6bcm to remains on track despite cost overruns and slight pushbacks in timelines.
* The Shah Denis Consortium (SDC) has narrowed its pipeline options to Nabucco West and Trans Adriatic Pipeline (TAP), with the backers of each of the pipelines making steady progress in securing necessary commitments from the government and SDC
* Rising costs could impact events at the SDII to the downside, with the development now expected to cost an additional US$5bn, according to a statement made by SOCAR officials, and further delays may come from a decision to delay FID on the SDII project from mid-2013 to end-2013.
* Interest in the Southern Corridor may also be waning - BP officials warned there was a 25% reduction in long-term European demand from Azerbaijan. This could slow plans to develop recent offshore discoveries such as Absheron and the potentially 300bcm Zafar-Mashal structure for which Statoil recently signed a MoU. Further, it may reduce interest in an expansion of the Southern Corridor beyond Azerbaijan to Turkmenistan or Iraq.
* We maintain a bullish outlook for gas production in Azerbaijan, with continued discoveries holding the potential of an upward revision as the country moves forward with outlining plans to develop gas finds. SOCAR head Rovnag Abdullayev told a December 2012 conference in Istanbul that the country would work to double gas production by 2025 by tapping discovered fields at Absheron, Umid, and Babak (or Babek), as well as recovering deep gas deposits from the ACG fields.
Full Report Details at
Azerbaijan's dependence on energy prices leads to high volatility in the country's export revenues. However, continued demand from emerging markets and persistent efforts from Europe to secure access to gas from the Caspian Sea suggests a robust outlook for Azeri resources. Although the oil market has moved away from the cycle of tight supply we saw in 2011 and the first half of 2012, there is volatility in demand on the back of uncertain global macroeconomic performance and a more comfortable supply picture. With supply now comfortably meeting demand, we believe OPEC basket oil prices will hold steady, at US$104.40 per barrel (bbl) in 2013 - a slight decrease from US$109.45 in 2012.
Partial Table of Contents:
BMI Industry View
- Table: Azerbaijan Proven Oil And Gas Reserves And Total Petroleum Data, 2011-2016f
- Table: Azerbaijan Proven Oil & Gas Reserves And Total Petroleum Data, 2017f-2022f
- Table: Azerbaijan Oil Production, Consumption and Net Exports
- Table: Azerbaijan Gas Production, Consumption And Net Exports, 2011-2016f
- Shah Deniz & The Southern Corridor
- Refining And Oil Products Trade
- Table: Azerbaijan Refining - Production And Consumption, 2011-2016f
Industry Risk Reward Ratings
- CEE - Risk/Reward Ratings
- Table: Central And Eastern Europe Risk/Reward Ratings
- Caspian Retains Lead In Upstream Ratings
- Table: Upstream Risk/Reward Rating
- Russian Trouble Persists
- Regional Minnows Breaking In
- Downstream Stabilisation
- Table: CEE Downstream Risk/Reward Ratings
- Azerbaijan - Risk/Reward Ratings
- Azerbaijan Energy Market Overview
- Table: Upstream Projects Database
- Oil & Gas Infrastructure
- Table: Table: Azerbaijan Downstream
- Table: Table: Rival Gas Pipeline Projects
- Table: Key Domestic And Foreign Companies
- Table: Key Upstream Players
- Table: Key Downstream Players
- BP Azerbaijan
- Lukoil Azerbaijan
- Other Summaries
- Regional Energy Overview
- A Dependent Relationship
- Looking For A Break Up
- Central Asia: Beneficiaries Of Europe's Russian Fatigue
- Moving From Pipeline To LNG
- Russia Strikes Back
- Eastern Europe: Black Sea Gold Rush
- Shale Gas Showdown
Global Industry Overview
- Global Energy Market Overview
- Table: BMI's Oil Price Forecasts & Bloomberg Analyst Consensus, Average Price (US$/bbl)
- Table: Global Oil Demand Forecasts
- Global Oil Product Price Outlook
- Crude Price Forecasts
- Table: BMI's Oil Price Forecasts, Average Price (US$/bbl)
- Early Rally Turns Into Run-Off
- Table: BMI's Refined Products Forecasts, US$/bbl
- Supply: Refining Capacity Expansion Sets Tone
- Naphtha: Global Economic Outlook Weighs On Prices
- Gasoline And Gasoil/Diesel: The Green Effect
Full Table of Contents is available at:
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