Page 11 - bne IntelliNews monthly magazine May 2024

bne May 2024 Companies & Markets I 11
meet the country’s domestic gas demand, but that frees up more gas from the Shah Deniz field to be exported to European customers, strengthening its position in the international market.
The Energy Ministry highlights that Azerbaijan and Russia generally sign short-term contracts concerning limited gas volumes. For instance, in 2022, about 1 bcm of Russian gas was imported to Azerbaijan – about a tenth of the volume exported to the EU.
Oil export declines
Long primarily an exporter of oil, the gas business is relatively new for Baku, and although Azerbaijan still produces and exports oil, the volumes have been falling in recent years.
The decline in oil exports is becoming a significant factor for Azerbaijan's economy. The government forecasts that in 2024 oil production will remain at about 29.5mn tonnes, or just under 600,000 barrels per day (bpd), which is 3.3% less than the previous year. This decrease is part of a broader trend, with a gradual reduction in production volumes anticipated to reach 8.8% by 2027.
This trend is highlighted by a comparison with previous years, where in 2023 production had already decreased by 7.4% compared to 2022. The Azerbaijani government anticipates that production volumes will continue to decrease, reaching approximately 26.9mn tonnes by the end of 2027.
On the other hand, OPEC in its January report predicts relative stability in Azerbaijani production at 700,000 bpd throughout 2024-2025. The launch of the seventh platform at the Azeri Central East (ACE) field is expected to be a key factor contributing to the stabilisation of production.
Oil transit
As domestic oil production begins to fall, Azerbaijan is seeking to increase its role as a transit country for Kazakh oil. In March 2023, SOCAR announced the start of the transit of Kazakh oil through the Baku-Tbilisi-Ceyhan (BTC) pipeline that connects the oil fields in the Caspian Sea to oil ports in Turkey on the Mediterranean coast.
The first batch of Kazakh oil from its massive Tengiz field was delivered to Azerbaijan’s Sangachal terminal from the port of Aktau on the tanker President Heydar Aliyev on March 23. A few days before this, Kazakhstan had made its first test shipment of 6,900 tonnes of crude oil from the Kashagan field on the tanker Academician Khoshbakht Yusifzade to Baku. The next shipment of Kazakh oil
from the port of Aktau took place on the tanker Shusha on March 27.
The transportation of Kazakh oil through the BTC and then by tanker to the rest of the world is part of an agreement between SOCAR and state-owned oil and gas company KazMunayGas, providing for the transit of 1.5mn tonnes per year (tpy) of oil.
For these purposes, SOCAR upgraded the pipeline network at the Sangachal terminal in 2022.
In mid-March, Georgian media, citing the Minister of Economy of Georgia, Levan Davitashvili, reported that oil transportation through the Baku-Supsa pipeline, which ends on the Black Sea coast, could resume by the end of 2024.
"The position of the Azerbaijani side is very important for the use of the pipeline, and here we are engaged in
“The launch of the seventh platform at the Azeri Central East (ACE) field is expected to be a key factor contributing to the stabilisation
of production”
intensive dialogue, as this pipeline has been operating under Azerbaijani oil since the spring of 1999. Now the transit of Kazakh oil, which is of a different type, is being discussed.
I think that we will have clarity on the main issues, and we hope that the pumping of this oil (from Kazakhstan) will begin this year. In the future, we think we can handle over 1mn tpy of oil. I hope that oil transportation will begin this year," said Davitashvili.
The Baku-Supsa pipeline can carry up to 5mn tpy of oil. Since the spring of 1999, this pipeline has been used for transporting oil from Azerbaijan’s Chirag offshore field in the Caspian Sea, but in the spring of 2022, due to problems with oil shipments in the Black Sea – the number of tankers entering the Sea was reduced due to the military conflict between Russia and Ukraine – it was decided to redirect all Azerbaijani oil to the Baku-Tbilisi-Ceyhan pipeline which ends on the Mediterranean. Since then, the Baku-Supsa pipeline has been effectively idle.
Azerbaijan needs to increase the capacity of connecting pipelines at terminals and expand its tanker fleet. Relaunching Baku-Supsa pipeline requires these measures.
If Kazakhstan is to pump up to 5mn tpy of oil through Baku- Supsa and another 3mn tpy through BTC, to transit these
8mn tpy of fuel, it will be necessary to modernise the Kazakh terminal and the interconnector between it and the Azeri port of Sangachal so they can support these large volumes.
There is also the issue of the shallowness of the sea that requires dredging works on both sides of the Caspian. And agreements with pipeline owners, BP and shareholders of ACG, need to be signed as well as new transit tariffs set.
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