Rising gas output to compensate oil in advancing economic growth in Azerbaijan
By Gulgiz Dadashova
Azerbaijan, which plays a major role in the process of realization of the Southern Gas Corridor, will further enjoy rising gas production volumes, which in turn will boost up its growing economy.
Standard & Poor's Rating Service, engaged in high-quality market intelligence, made such an announcement in its most recent report, noting that over the long term higher gas production should support economic growth and compensate for stagnating oil production in Azerbaijan.
Oil production in Azerbaijan increased from 315,000 bbl/d in 2002 to 1.0 million bbl/d in 2010. However, production declined since then, falling to 932,000 bbl/d in 2012 and 881,300 bbl/d in 2013. EIA projects Azerbaijan's production to decline to about 852,000 bbl/d in 2014. Azerbaijan's State Statistical Committee noted that the crude oil exports peaked in 2010 when they averaged about 908,000 bbl/d, but exports have fallen every year since then as production declined. Azerbaijan exported an estimated 738,000 bbl/d of crude oil in 2013.
Oil and gas production and exports are core of Azerbaijan's economy. Historically an oil producer Azerbaijan was among the 20 largest exporters of oil in the world in 2012 and with the startup of the Shah Deniz natural gas and condensate field in 2006, Azerbaijan became a natural gas net exporter.
The Shah Deniz field, discovered in 1999, is one of the world's largest natural gas and condensate fields. Shah Deniz Full Field Development is expected to have peak capacity of 565 Bcf (in addition to the 315 Bcf in Stage 1), making it one of the largest gas development projects anywhere in the world. According to BP, the field produced about 346 million cubic feet per day of natural gas and about 53,740 bbl/d of condensate in 2013.
"The major new Shah Deniz Stage 2 gas field is expected to come on stream in 2018, and will bring gas directly from Azerbaijan to Europe for the first time. The final gas pipeline route was determined in late 2013 and currently the development of the Trans-Anatolian and Trans-Adriatic pipelines are on track. These will be constructed by a consortium of Azerbaijan's state-owned oil and gas company SOCAR, international oil and gas corporations, and the newly created Southern Gas Corridor CJSC, that will likely benefit from capital support via the State Oil Fund of the Republic of Azerbaijan (SOFAZ), the country's sovereign wealth fund," S&P said.
The report also notes that the country's hydrocarbon exports will continue to underpin the current account surplus, although until gas output picks up in 2018, the balance will likely gradually decline. "We forecast the current account surplus will decrease to about nine percent of GDP in 2016 from an estimated 17 percent in 2013," it reads.
Azerbaijan will maintain its strong external position, Standard & Poor's assures.
"We estimate gross external financing needs will remain less than 70 percent of current account receipts (CARs) plus usable reserves, and the country's narrow net external asset position will remain at approximately 100 percent of CARs over the next three years," the report said.
The resource-rich South Caucasus republic has proven gas reserves of 2.2 trillion cubic meters and plans to double its natural gas output to some 54 billion cubic meters a year by 2020. The country's proven crude oil reserves were estimated at 7 billion barrels in January 2014.
Gas production amounted to 17.9 billion cubic meters of tank gas in 2013 compared to 17.24 billion cubic meters in 2012. Gas production amounted to 17.9 billion cubic meters of tank gas in 2013 compared to 17.24 billion cubic meters in 2012.
Azerbaijan has demonstrated a rapid economic growth in the world, as it grew more than three times during the last 10 years. The country's sovereign reserves are high, public debt low, and the current account is expected to remain firmly in surplus. Annual real GDP growth is forecast at 3.5 percent in 2014-2018.