BAKU

Azerbaijan reduced oil and gas condensate production and increased natural gas output in the first nine months of this year, as the country’s declining oil resources have resulted in enhanced gas production, boosted by access to European markets, emerging as one of the country’s most lucrative exports.

Oil and gas condensate production declined 0.9 percent from January to September from a year earlier to 25.9 million tonnes, while natural gas output increased 15.1 percent to 31.7 billion cubic metres (bcm) in the same period, the State Statistics Committee said.

The volume of marketable oil was 25.8 million tonnes, 0.7 percent down from January-September last year. The production of commercial gas rose to 23.4 bcm, 19.3 percent up from the first eight months of 2020.

In January-August, the country reduced oil exports by 9.5 percent year-on-year to 18.771 million tonnes and increased exports of natural gas by 56.4 percent to 13.242 bcm in the period from January to August.

The bulk of Azerbaijan’s oil output comes from its Azeri-Chirag-Guneshli (ACG) oilfields, operated by British oil major BP. The country uses the Baku-Tbilisi-Ceyhan (BTC) pipeline via Georgia and Turkey to export oil from the ACG. It also exports oil with the Baku-Novorossiisk pipeline via Russia, the Baku-Supsa pipeline via Georgia and by rail in Georgia.

Around 75 percent of exported oil, or 17.435 million tonnes, was shipped through the BTC pipeline. The volume was 8.6 percent less than in January-August last year.

Around 55 percent of exported gas was produced on the Shah Deniz field. Over 11.194 bcm of gas was exported from Shah Deniz in January-August this year, 40.6 percent more than in the same period last year.

As the COVID-19 pandemic impacted demand for oil as well as the supply chain, OPEC+, a group of the Organisation of the Petroleum Exporting Countries (OPEC) and allied producers of which Azerbaijan is a member, agreed to cut output to support prices and reduce oversupply, although participants of the group decided to increase output by 400,000 barrels per day (bpd) from August and by another 400,000 bpd from October. As oil production, already falling due to declining natural resources, was scaled back, the opening of the Southern Gas Corridor in December 2020, allowing the export of the country’s gas to Europe, gave Azerbaijan the means to increase its share in the market until now dominated by Russia.

Azerbaijan mainly produces natural gas at the Shah Deniz field. The BP-led consortium, which develops the Shah Deniz project, has been pumping gas from the offshore field’s first phase since 2006, delivering more than 10 bcm a year of gas to Azerbaijan, Georgia and Turkey. The second phase started output in 2018, adding 16 bcm of gas production capacity at its peak to bring total capacity to 26 bcm. There are other oil and gas fields in the country, although their output is mainly used for domestic consumption.

In 2020, Azerbaijan produced 34.585 million tonnes of oil and gas condensate, while natural gas output was 36.713 bcm.  The country exported 17.878 million tonnes of oil and 13.396 bcm of gas.