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Azerbaijan Oil and Gas Report Q3 2012

VIEWS: 5 PAGES: 4

Project delays remain the key threat to an Azeri energy sector capable of delivering much greater volumes and revenues. Gas export issues involving pipeline routes and other quasi-political decisions are critical if there is to be sustained field development and increased shipments. Meanwhile, liquids volumes have been falling short of expectations, and there are doubts over the scale and timing of medium-term output growth.

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									Azerbaijan Oil and Gas Report Q3 2012
Published : June 2012                No. of Pages : 87                 Price: US$1175




Project delays remain the key threat to an Azeri energy sector capable of delivering much greater
volumes and revenues. Gas export issues involving pipeline routes and other quasi-political decisions are
critical if there is to be sustained field development and increased shipments. Meanwhile, liquids volumes
have been falling short of expectations, and there are doubts over the scale and timing of medium-term
output growth.
Key developments in Azerbaijan’s Oil & Gas sector include:
1.UK oil major BP is expected to make an investment decision on the second development phase of the
Shah Deniz field by 2013, according to the Vice President of Azerbaijan’s state-controlled State Oil
Company of Azerbaijan Republic (SOCAR), Elshad Nasirov. The Shah Deniz II project requires
total investment of US$20bn. The project is expected to allow exports of 10bcm of gas to Europe and
6bcm to Turkey by 2018.
2. The Shah Deniz Consortium (SDC) was expected to reach a decision on which export pipeline it
favoured for the transportation of Azeri gas to southern Europe by the end of Q112; however, this
deadline was missed and a new one has been set for mid-2013. SDC includes BP (25.5%), Norway’s
Statoil (25.5%), Iran’s NIOC (10%), SOCAR (10%), France’s Total (10%), Russia’s Lukoil (10%)
and Turkey’s TPAO (9%). Options include the EU-backed Nabucco, the Italy-Turkey-Greece
Interconnector (ITGI), the Azerbaijan-Georgia-Romania Interconnector (AGRI), the Trans Adriatic
Pipeline (TAP), the South East Europe Pipeline (SEEP), the Trans Anatolian Pipeline (TANAP) and
White Stream. BMI initially believed that SEEP and TAP were the most likely contenders for the title,
but the March 2012 revision of the Nabucco project has disturbed the status quo.
3.On October 25 2011, Azerbaijan and Turkey signed a number of key gas export-related agreements
that enable Turkey to buy gas from Azerbaijan and to transit Azeri gas to Europe. These agreements
will allow Shah Deniz to proceed with its European pipeline selection process and to confirm gas sales
agreements with potential customers.
4.Azerbaijan''s oil production is estimated to have declined by 10.5% y-o-y to 45.37mn tonnes
(equivalent to 911,000 barrels-a-day) in 2011, according to the State Statistics Committee. This was
largely due to maintenance-related output drops at the BP-operated Azeri-Chirag-Guneshli (ACG) oil
fields. BMI had already reduced its estimate for 2011 production to around 937,000b/d (-10% yearon-
year), including gas liquids. According to an April 2012 Interfax report, the government expects
oil production to be in excess of 1mn b/d in 2012, in line with BMI forecasts. The further
development of the Azeri-Chirag-Gunashi (ACG) complex and liquids from the second phase of the
Shah Deniz gas field could deliver a surprise on the upside in terms of volumes but, equally, project
delays could undermine progress.
5.Azerbaijan is thought to have earned US$30.8bn from oil exports in 2011, with gas bringing in a further
US$3.2bn. With oil exports due to reach 1.1mn b/d by 2021, plus rising gas sales, the country could be
generating petroleum revenues of US$47.2bn by the end of our 10-year forecast period.
Azerbaijan’s dependence on energy prices leads to high volatility in the country’s export revenues. Our
assumptions of tight supply due to booming demand in emerging markets is clearly an opportunity for the
country. As a result, we assume OPEC basket oil prices to increase from an estimated US$107.52 per
barrel (bbl) in 2011 to US$111.47/bbl in 2012, creating upside risk for the Azeri macroeconomic outlook.

Azerbaijan Oil and Gas Industry Q3 2012

Table of Contents

BMI Industry View 5
SWOT Analysis 7
Azerbaijan Oil and Gas SWOT .. 7
Global Energy Market Outlook ... 8
Table: Oil Production Forecasts, 2010-2016 (‘000 b/d) 9
Table: Oil Consumption Forecast, 2010-2016 (‘000 b/d) 14
Regional Energy Market Outlook . 15
Azerbaijan Energy Market Overview 19
Table: Azerbaijan – Upstream Projects Database ... 20
Industry Forecast Scenario .. 21
Oil And Gas Reserves ... 21
Table: Azerbaijan Oil & Gas Historical Data And Forecasts, 2009-2016 .. 21
Table: Azerbaijan Oil & Gas Historical Data And Forecasts, 2014-2021 .. 23
Oil Supply And Demand 24
Gas Supply And Demand .. 25
LNG .. 27
Refining and Oil Products Trade .. 27
Revenues/Import Costs .. 28
Key Risks To BMI’s Forecast Scenario . 28
Oil And Gas Infrastructure 29
Oil Refineries 29
Table: Refineries In Azerbaijan ... 29
Service Stations . 31
Oil Storage Facilities 31
Oil Terminals/Ports .. 31
Oil Pipelines . 32
Gas Pipelines 33
Table: Rival Gas Pipeline Projects .. 35
LNG .. 38
Regional and Country Risk/Reward Ratings .. 40
Table: Upstream Risk/Reward Ratings 42
Table: Downstream Risk/Reward Ratings 44
Azerbaijan Upstream Rating – Overview . 46
Azerbaijan Upstream Rating – Rewards .. 46
Azerbaijan Upstream Rating – Risks 46
Competitive Landscape 47
Executive Summary ... 47
Table: Key Domestic And Foreign Companies 48
Overview/State Role .. 48
Licensing And Regulation 49
Government Policy .. 49
Licensing Rounds . 49
International Energy Relations 50
Table: Key Upstream Players .. 53
Table: Key Downstream Players .. 54
Company Monitor .. 55
SOCAR .. 55
BP Azerbaijan ... 59
Statoil 62
Lukoil Azerbaijan .. 64
Azpetrol . 65
ExxonMobil – Summary ... 67
Eni – Summary . 67
Inpex – Summary . 67
Chevron – Summary . 67
Itochu/Delta Hess – Summary .. 67
TPAO – Summary 68
Total – Summary .. 68
ONGC Videsh Ltd (OVL) – Summary .. 69
Korea National Oil Corporation (KNOC) – Summary . 69
GdF Suez – Summary ... 69
RWE Dea – Summary ... 70
Others – Summary ... 70
Central And Eastern Europe – Regional Appendix 71
Table: Oil Consumption, 2009-2016 (000b/d) . 71
Table: Oil Consumption Long Term Forecasts (000b/d).. 72
Table: Oil Production, 2009-2016 (000b/d) . 72
Table: Oil Production Long-Term Forecasts (000b/d) 73
Table: Refining Capacity, 2009-2016 (000b/d) 73
Table: Refining Capacity Long Term Forecasts (000b/d) 74
Table: Gas Consumption, 2009-2016 (bcm) 75
Table: Gas Consumption Long-Term Forecasts (bcm) 75
Table: Gas Production, 2009-2016 (bcm) 76
Table: Gas Production Long-Term Forecasts, (b/d) 76
Table: LNG Gas Exports (bcm) ... 77
Table: LNG Gas Exports (bcm) ... 77
Methodology And Risks To Forecasts 78
Glossary Of Terms . 79
Table: Glossary of Terms . 79
Oil And Gas Risk/Reward Ratings Methodology 81
Ratings Overview .. 81
Table: BMI’s Oil & Gas Business Environment Ratings – Structure ... 82
Indicators .. 82
Table: BMI’s Oil & Gas Upstream Ratings – Methodology. 82
Table: BMI’s Oil & Gas Business Environment Downstream Ratings – Methodology 83
BMI Methodology ... 85
How We Generate Our Industry Forecasts ... 85
Energy Industry . 85
Cross checks . 86
Sources.. 86
Table: Oil Production Forecasts, 2010-2016 (‘000 b/d) . 9
Table: Oil Consumption Forecast, 2010-2016 (‘000 b/d) . 14
Table: Azerbaijan – Upstream Projects Database . 20
Table: Azerbaijan Oil & Gas Historical Data And Forecasts, 2009-2016 . 21
Table: Azerbaijan Oil & Gas Historical Data And Forecasts, 2014-2021 . 23
Table: Refineries In Azerbaijan . 29
Table: Rival Gas Pipeline Projects . 35
Table: Upstream Risk/Reward Ratings . 42
Table: Downstream Risk/Reward Ratings . 44
Table: Key Domestic And Foreign Companies . 48
Table: Key Upstream Players . 53
Table: Key Downstream Players . 54
Table: Oil Consumption, 2009-2016 (000b/d) . 71
Table: Oil Consumption Long Term Forecasts (000b/d). 72
Table: Oil Production, 2009-2016 (000b/d) . 72
Table: Oil Production Long-Term Forecasts (000b/d) . 73
Table: Refining Capacity, 2009-2016 (000b/d) . 73
Table: Refining Capacity Long Term Forecasts (000b/d) . 74
Table: Gas Consumption, 2009-2016 (bcm) . 75
Table: Gas Consumption Long-Term Forecasts (bcm) . 75
Table: Gas Production, 2009-2016 (bcm) . 76
Table: Gas Production Long-Term Forecasts, (b/d) . 76
Table: LNG Gas Exports (bcm) . 77
Table: LNG Gas Exports (bcm) . 77
Table: Glossary of Terms . 79
Table: BMI''s Oil & Gas Business Environment Ratings – Structure . 82
Table: BMI''s Oil & Gas Upstream Ratings – Methodology. 82
Table: BMI''s Oil & Gas Business Environment Downstream Ratings – Methodology . 83

								
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