BAKU

Azerbaijan reduced oil and gas condensate production and increased natural gas output in January-July of this year, 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 2.6 percent in January to July from a year earlier to 20.096 million tonnes, while natural gas output increased 7.8 percent to 24.085 billion cubic metres (bcm) in the same period, the State Statistics Committee said.

The volume of marketable oil was 20.059 million tonnes, 2.3 percent down from January-July last year. The production of commercial gas rose to 17.757 bcm, up 11.1 percent from the first seven months of 2020.

Around 3 million tonnes of oil had been processed, while the rest was exported. The country reduced oil and oil products exports by 12.5 percent year-on-year to 17.107 million tonnes and increased exports of natural gas by 56.4 percent to 12.061 bcm in the period from January to July.

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.

Around 75 percent of exported oil or 15.24 million tonnes were shipped through the BTC pipeline. The volume was 9 percent less than in January-July last year. Export of transit oil from Turkmenistan, Kazakhstan and Russia declined by 20.7 percent year-on-year to 1.92 million tonnes.

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.

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.

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.