Energy in Azerbaijan

[Mher]

Re: Energy in Azerbaijan

Propaganda for the day:
http://en.trend.az/business/economy/2339432.html

Ya man, I don't even bother reading their news anymore. It's like the news sources exist in delusion opposite world

The claim that oil is only 45% of GDP is nonsense. Because the other 55% is largely derived from public spending, which is of course mainly (74%) fueled by that 45% of oil money, or previous oil money that has been put in the SOFAZ (state oil fund of azerbaijan) fund. Once the SOFAZ fund is empty, which will be in 2 or 3 years, that 55% will be almost entirely dependent on that 45% and they will each decrease in dollar amount simultaneously . But irregardless, 74% of the current state budget comes from oil and that is the number that matters.

Also, lol if you will still grow at $60/barrel, please pass a budget for less that $90/barrel. At least Russia had the guts to update theirs to $80/barrel, and even prepare for $60. I suppose he doesn't because he knows if he does the people will lose it.

"We will just cut budget spending in the non-priority areas, infrastructure projects. "
lol only non important things like infrastructure. But of course the wh-rehouses, casinos, idiotic unfeasible man made island with d-ck in the sky skyscraper, and 500 hideous buildings named after Heydar Aliyev will continue unhindered. We can't touch those!

btw, i only found this google feature a few months ago, the only way to get real news on Azerbaijan

https://www.google.com/search?q=armenia+&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a&channel=sb#rls=org.mozilla:en-US:official&channel=sb&tbm=nws&q=azerbaijan+--.az+--trend+--azernews+--news.az+--worldbulletin.net

[Mher]

Re: Energy in Azerbaijan

Եթե 2015 թ. նավթի միջին գինը պահպանվի 70 դոլարի սահմանում, ապա ադրբեջանական բյուջեն չի ստանա մոտ 2.3 միլիարդ դոլար:

I wonder how they got this number. Is this based on the Azeri predictions? And does it include changes in funds borrowed from reserve funds depending on price?

[Chubs]

Re: Energy in Azerbaijan

Ya man, I don't even bother reading their news anymore. It's like the news sources exist in delusion opposite world

The claim that oil is only 45% of GDP is nonsense. Because the other 55% is largely derived from public spending, which is of course mainly (74%) fueled by that 45% of oil money, or previous oil money that has been put in the SOFAZ (state oil fund of azerbaijan) fund. Once the SOFAZ fund is empty, which will be in 2 or 3 years, that 55% will be almost entirely dependent on that 45% and they will each decrease in dollar amount simultaneously . But irregardless, 74% of the current state budget comes from oil and that is the number that matters.

Also, lol if you will still grow at $60/barrel, please pass a budget for less that $90/barrel. At least Russia had the guts to update theirs to $80/barrel, and even prepare for $60. I suppose he doesn't because he knows if he does the people will lose it.

"We will just cut budget spending in the non-priority areas, infrastructure projects. "
lol only non important things like infrastructure. But of course the wh-rehouses, casinos, idiotic unfeasible man made island with d-ck in the sky skyscraper, and 500 hideous buildings named after Heydar Aliyev will continue unhindered. We can't touch those!

btw, i only found this google feature a few months ago, the only way to get real news on Azerbaijan
https://www.google.com/search?q=arme...ldbulletin.net

Excluding tags when searching, nice. These people, are ridiculous. My question is about the fund, do you really think OPEC will keep the prices low this long? That doesnt seem good for Armenia, its obviously bad for Azerbaijan and Russia...

Georgia is getting hit pretty hard by this so early on too.

[Mher]

Re: Energy in Azerbaijan

Excluding tags when searching, nice. These people, are ridiculous. My question is about the fund, do you really think OPEC will keep the prices low this long? That doesnt seem good for Armenia, its obviously bad for Azerbaijan and Russia...

Georgia is getting hit pretty hard by this so early on too.

This article does a good job of explaining the situation

http://www.cnbc.com/id/102241579

The summary of it all is: supply>>demand

the world produces a lot more oil that it needs now, and therefore price drops
The thing about OPEC is that it's not as dominant as it was 40 years ago when it controlled a majority of the market. New technology is making it possible to get oil that was previously not profitable to get. And this technology is bound to only improve and make extraction cheaper in other places. Also the traditional locations for supply are going to come back. Iraq supply is going to double by 2020 (+3mill/day). Kurdistan will start increasing. Iran's sanctions will eventually be lifted and it'll go back to it's pre-sanction levels (+1.5mill/day). Somehow, even at these prices, production in America is expected to increase next year(.5mill/day).

Also the reason they didn't lower production is this:
(1)Most of them wanted the production lowered, but they didn't want to be the one to lower it. Also their market share has decreased, they're not as important anymore, so they can't control the price like they once could. So if they think lowering not going to do much, they need to produce more just to maintain their market share. Because if not:
lower price + lower production= 2X pain
(2) Saudi Arabia didn't want to lower it because thanks to their massive reserve fund and cheap extraction cost, they thought they could ride out the prices and collapse the US fracking market which require higher prices. But now their prediction is not looking all that good.

So I think these prices are here to stay.

and I think many of this corrupt backward governments will be in serious trouble. First up Venezuela, then Iran. Azerbaijan wouldn't be far behind.

I think it's a gift from above for Armenia. Armenia might suffer slightly, but Azerbaijan will be crushed. The indirect fractional damage to Armenia through the damage to Russia will not be much compared to the damage coming to Azerbaijan. Armenia might lose 2% GDP due to decrease in remittance, but they will lose billions upon billions of revenue. Armenians have suffered much much worse for 24 years, and a relatively small bump won't be the straw that broke the camels back. As poor as the situation in Armenia is, people to a certain extend understand that as much as the system hurts them, many of their problems are because of their geopolitcal situation. However, Azeri's have put up with a lot of bs because they were getting a few trickles of the oil rain. They knew how great their country should be doing relative to its natural blessings and geography. I don't know how long the people will be willing to keep up with the nonsense once their standards of living starts deteriorating.

Also, you can't expect to grow as a nation when you rank amongst the worlds worst in dependence on remittance. One way or another, our economy should get off that crutch . Similarly you can't exist as a country with your trade becoming overly reliant on one trade partner. That's a recipe for disaster. And Armenia cannot develop as a nation unless the Karabakh situation is resolved once and for all. You cannot exist as a nation with constant existential threats. And Armenia can't change it's position as Russia's subject with no leverage or independence in foreign policy or economy without not being inferior to Azerbaijan and in need of Russian aid.

So I rather Armenia suffer slightly if it means that cancer to the east will be gone and Armenia can begin to prosper instead of worrying about its survival. A lot of what I thought would happen at the start of this thread in 2015-2025 in Azerbaijan through production decline may happen in the next year because of prices. The problem is, if Aliyev gets desperate, war could be his option to extend his rule. I hope we are properly prepared to deter this from happening, or shutting it down quickly once it does happen. My vision for Azerbaijan: collapsed, nonexistent government libya style, minorities declaring and fighting for independence, salafi extremists declaring holy war on shias, and Armenia expanding, maybe even to russia.

[londontsi]

Re: Energy in Azerbaijan

.

Although the conspiracy theory dwells on oil prices being manipulated to hurt Russia in reality the reasons are more complex than that.

Like any commodity price, the pressure on energy price comes from supply and demand.

Presently the demand is not the culprit but supply is.
The Saudis with a few of their low extraction cost friends are keeping supply plentiful in order to keep prices low.
As far as the Saudis are concerned their target is not Russia but US and Canada.

The Saudi see a great threat in their energy dominance from fracking, oil shale and tar sand exploitation.

These processes are viable when energy prices are high due to their high extraction costs.
Effectively what the Saudis are trying to do is to destroy these industries by making them not viable.

How long this may carry on?
The answer is simple.
Keep pumping until their competition’s head separate.
They are experts at it.

.

[Hakob]

Re: Energy in Azerbaijan

Well, I don't think that soudis can halt oil boom in US or elsewhere by just maintaining or coping with low price. Fracking and new technologies are still advancing and the oil in market might get even more plentifull. Some countries might increase their production in order to make up for budget shortfalls.
This is where azeris got their problem. Their oil production capped and was expected to decline, now lower oil prices will increase the shortfall multiple times.
The war scenario is very real, once aliev clan get into trouble with money. But also, because of war the country can slip into chaos.
One very interesting question for me is how will Russia /Turkey gas deals and turkey's benefits in becoming bigger supplier for russian markets sunctioned by EU affect azerbaijan's positions.
A simple thought says that it's beneficial to azerbaijan. But it could be other way too.

[londontsi]

Re: Energy in Azerbaijan

Well, I don't think that soudis can halt oil boom in US or elsewhere by just maintaining or coping with low price. Fracking and new technologies are still advancing and the oil in market might get even more plentifull. Some countries might increase their production in order to make up for budget shortfalls.
This is where azeris got their problem. Their oil production capped and was expected to decline, now lower oil prices will increase the shortfall multiple times.
The war scenario is very real, once aliev clan get into trouble with money. But also, because of war the country can slip into chaos.
One very interesting question for me is how will Russia /Turkey gas deals and turkey's benefits in becoming bigger supplier for russian markets sunctioned by EU affect azerbaijan's positions.
A simple thought says that it's beneficial to azerbaijan. But it could be other way too.

I think Azerbaijan has to be seen primarily as a gas exporting country.
Oil deposits generally are smaller in size and therefore revenue generating timespan shorter.

As far as gas supplies to turkey, Russia is aggressive competitor to its other alternatives.

The new gas agreement with Turkey will come with minimum supply quotas.
In addition to the gas deal Russia will be building a nuclear power station.
These will compensate an additional portion of Turkey’s energy needs at the expense of Azeri/Iranian/Iraqi supplies.

The impact on Azerbaijan will be dependent on what supply agreements it makes with other consumer countries.

Turkey being the transit country will be the clear winner.

Whether it will impact its political relations with Azerbaijan remains to be seen. Probably not.
Their political ambitions will remain intact.

.

[Mher]

Re: Energy in Azerbaijan

Azeri Oil Output Declined in the first five months of 2014
Posted by Administrator on Thursday, June 12, 2014 · Leave a Comment

Azerbaijan produced 17.7 million tonnes of oil and gas condensates in the first five months of 2014, versus 18.12 million tonnes in the same period of 2013, the Azerbaijan State Statistical Committee reported on June 12, 2014. The output declined by 2.3 % in the indicated period of 2014 compared to the same passé in previous year.

The most part of the produced oil fell to the Azeri-Chirag-Guneshli oil and gas fields’ block and the Shah Deniz gas condensate field that are developed jointly with the foreign partners.

The country produced around 7.6 billion cubic meters of tank gas in Jan.-May, versus nearly 7.4 billion cubic meters in the same period of 2013, according to the State Statistical Committee.

CESD- Center for Economic and Social Development highlighted that decline of oil output will continue in the remaining months of 2014.

Reminded that CESD stated in its November 16, 2011 report that the latest forecasting confirm that oil boom in Azerbaijan is doomed to end in a few years. Azerbaijan’s high dependence on oil exports poses a potential threat to the economy given the potential volatility in the international oil market. Oil reserves, however, started decreasing in 2011 and last year was pick in oil production. In long term, decreasing of oil output will cause tax revenues decline and budget deficits increase, driving up interest rates.

Production from the Azeri platforms — East Azeri, West Azeri, and Central Azeri will be suspended in a planned sequence in order to enable efficient maintenance work to be undertaken which is another reason of decline.

CESD assessment model also include tendency of decreasing of oil production in Azerbaijan. State Oil Company of Azerbaijan (SOCAR) produced 51 million ton oil in 2010. SOCAR targets 43 million ton for 2013 which 8 million ton less than last year’s output. Meanwhile, the latest predictions confirm that oil production will be decreased to about 33 million ton in 2017. Even with current prices of crude oil in the world market, SOFAZ’s assets will be totally spent within the budget lines if current unbelievable transfers’ level kept. Keeping such fantastic transfers can result in negative consequences because of theatrical cutting of budget expenditure lines due to potential lack of financial resources. According to Production Share Agreement (PSA) oil reserves are turned down starting 2011. Considering that Azeri-Chirag-Guneshli filed currently has 3 billion barrels (of the initial 5 billion) reserve and the end of Azeri-Chirag-Guneshli in the year 2019 (3 billion barrel /340 million barrel annual). Given that 2010 was the peak year of Azeri oil production, the descent begins as of 2011. Of course, the output will not stop immediately, but its reduction by 10 percent a year will be a severe blow

Azerbaijani State Statistics Committee Chairman Arif Veliyev has however said that “the decline in production in Azerbaijan is not associated with a decline in oil reserves level, but with the extension of their development time-frame to get yield for a longer period. It is planned measure”.

Azerbaijan produced some 17.9 billion cubic meters of tank gas in 2013, versus 17.24 billion cubic meters in 2012. 43.1 million tonnes of oil and gas condensates were produced in Azerbaijan in 2013, compared to 42.98 million tonnes in 2012.

http://cesd.az/new/2014/06/azeri-oil-output-declined-in-the-first-five-months-of-2014/

__________________________________________________ _______
Note that this was written when oil was trading at $106, not $69. It only considers supply, not price

[Eddo211]

Re: Energy in Azerbaijan

They know they are in trouble.....at this rate I don't see them doing anything about it. Maybe they count on finding more energy under the Caspian sea with Israeli and US technology.

[londontsi]

Re: Energy in Azerbaijan

I think referring to oil reserves or production levels is flawed analysis without considering the cost of extraction.

Most of the Azeri fields are offshore which by definition is more expensive than onshore to extract.

The deeper these fields the higher the extraction costs.

Also as the well approaches its later stages of its usefulness it gets more expensive to extract the remaining oil,
typically they pump water at high pressure etc. to move the stuff out.

I wish we had these figures to give us a truer picture.

A good example is Venezuela.
They have one of the largest oil reserves yet their economy is in trouble because of the higher cost of taking the stuff out in conjunction with falling prices.