Gas Production in Azerbaijan to Increase by 7% in 2023-2026
The international rating agency S&P Global Ratings predicts a decline in oil production in Azerbaijan by about 7% in 2023-2026.
“Although oil prices were favorable, Azerbaijan’s production continued to decline. Azerbaijan is one of the oldest oil producers in the world, having started commercial production in the 19th century. Existing oil fields (especially the key Azeri-Chirag-Guneshli field) are aging, so their production is gradually declining due to natural reasons. Between 2010 and 2021, for example, oil production fell by 30% from over 1 million bpd to about 0.74 million bpd. Oil production fell another 5% in 2022 to 0.7 million bpd. We expect oil production to continue to decline in the medium term, but at a slightly slower pace. In general, the cumulative drop in production will be about 7% in the period from 2023 to 2026,” the agency’s forecasts cited by Interfax-Azerbaijan say.
The agency notes that the slower rate of decline in oil production in the country will be due to the fact that the Central-East Azeri project – the last stage of the ACG development – is scheduled to be commissioned in 2024. This platform is expected to produce 100,000 bpd at its peak. “Nevertheless, we expect that the increase in production will be gradual, while the decline in production at other fields will continue. Therefore, the net trend will still be a slight decrease in oil production,” the agency said.
Azerbaijan remains a participant in the OPEC+ deal, under which the country’s quota for crude oil production in 2024 will be 0.55 million b/d. However, the actual oil production in Azerbaijan in 2023 averaged about 0.52 million b/d.
At the same time, S&P’s forecast for growth rates in the gas sector of Azerbaijan is much better. “Production at the Shah Deniz gas field within the framework of Stage-2 began in 2018, in 2019-2020 two pipelines related to this project, the Trans-Anatolian gas pipeline (TANAP) and the Trans-Adriatic gas pipeline (TAP), were commissioned through which gas is transported to Turkey and Europe, respectively. As a result, in 2017-2022, the volume of gas production in Azerbaijan increased by 90% – up to 34 billion cubic meters, according to official plans, it will increase by another 7% until 2026,” the agency emphasizes.
According to the agency’s estimates, the pipeline infrastructure for the export of Azerbaijani gas is currently operating at full capacity and a further increase in export volumes will require the expansion of this infrastructure.
S&P notes that the EU countries are the main buyers of oil and gas from Azerbaijan: Italy accounts for about 45% of Azerbaijan’s total oil exports, other EU countries account for another 25%; Italy is also the largest buyer of gas, accounting for approximately 50% of Azerbaijan’s total exports.
The Azerbaijani government predicts oil production in the country in 2023 at the level of 31 million 222.3 thousand tons, gas – 46 billion 761.6 million cubic meters. According to the government, commercial gas production in 2023 will amount to 35 billion 900.3 million cubic meters.
In 2022, oil production with gas condensate in Azerbaijan amounted to 32 million 667.7 thousand tons (a decrease of 5.5%), gas – 46 billion 743.3 million cubic meters (an increase of 6.6%). At the same time, commercial gas production amounted to 34 billion 958.3 million cubic meters (an increase of 7.3%).
