BAKU

Azerbaijan reduced oil and gas condensate production and increased natural gas output in the first five months of 2021, as the country’s OPEC+ obligations and declining oil resources have seen gas production, boosted by access to European markets, emerging as one of the country’s most lucrative exports.

Oil and gas condensate production declined 6.2 percent in January to May from a year earlier to 14.309 million tonnes and natural gas output increased 3.4 percent to 17 billion cubic metres (bcm) in the same period, the State Statistics Committee said.

The volume of marketable oil was 14.282 million tonnes from January to May, 5.9 percent down from the same period last year. The production of commercial gas rose to 12.547 bcm,  up 7.7 percent from the first five months of 2020.

The bulk of Azerbaijan’s oil output comes from its major 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.

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. 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.

And data suggests this new focus on gas has paid off: gas exports have surged so far this year since Azerbaijan started exporting commercial natural gas to Europe from its Shah Deniz II field.

Azerbaijan mainly produces natural gas at its giant 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.

The country reduced oil exports by 9.3 percent year-on-year to 10.738 million tonnes and increased exports of natural gas by 79.5 percent to 7.838 bcm in the period from January to April,  the State Customs Committee said.

The export of natural gas from Azerbaijan in nominal terms amounted to $1.132 billion, up 37 percent from January to April 2020. According to the Committee, Turkey received 5.146 bcm of gas worth $708 million, Georgia received 1.7 bcm for $227.407 million, and Italy 733.861 million cubic metres for $151 million.

Gas exports amounted to 17.78 percent of Azerbaijan’s total exports in the first four months of 2021.

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.