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SOCAR to supervise the implementation of OPEC+ oil production cut agreement in Azerbaijan

SOCAR to supervise the implementation of OPEC+ oil production cut agreement in Azerbaijan

Baku, May 1 - Neftegaz.RU. Azerbaijan, as a member of OPEC+, participated in the April meeting and committed voluntarily to production cuts in relevant proportions. The Ministry of Energy subsequently announced the terms of the agreement and the commitments undertaken by Azerbaijan. The Ministry proposed proportional sharing of the production cut quotas among the country’s oil producers. SOCAR was ordered to carry out the implementation of the production cuts by the Azerbaijan Cabinet of Ministers.

According to the international agreement, daily production in Azerbaijan should not exceed 554,000 barrels in May and June 2020, 587,000 barrels in July-December 2020 and 620,000 barrels between January 2021 and April 2022. These figures are applied only to crude oil, but not to gas condensate production.

Hence, the daily oil production is expected to be reduced by 96,000 barrels in May-June 2020, by 63,000 barrels in July-December 2020 and by 30,000 barrels from January 2021 to April 2022, as compared to the initial national production plan for 2020.

SOCAR's Azneft Production Unit will initially reduce its daily production by 17,000 barrels to 100,000 barrels. In the following period, it will gradually increase its production adding 5,000 barrels to total output per day. Beginning from next year, it plans to add 6,000 barrels more to daily production, which would bring Azneft’s total crude oil production to 111,000 barrels per day.

Daily production on the Azeri-Chirag-Deepwater Gunashli fields is expected to be reduced by 76,000 barrels in May and June. During the 2nd stage of agreement, the operator of the fields - AIOC - will be able to increase production by 27,000 barrels per day, adding 26,000 barrels per day in the next year. Thus, in 2021, the level of AIOC production is forecasted at 487,000 barrels per day.

Other operating companies will initially reduce their production by 3,000 barrels per day and then increase it by 1,000 barrels in July-December, adding 1,000 barrels per day in the next year.

As a result of measures arising from the OPEC+ agreement, between the beginning of May and the end of December 2020 Azerbaijan's oil production will decrease by 17.4 million barrels, amounting to 141.8 million barrels in total.

In 2021, the country's total crude oil production is forecasted at 30.7 million tons or 226.3 million barrels. These figures do not include hydrocarbon production by the Shah Deniz consortium and the Umid Babek Operating Company, nor is the condensate production by SOCAR's Azneft PU and Bahar Energy Operating Company included.

By the end of 2020, SOCAR's Azneft PU plans to suspend production at several oil and gas production facilities and conserve equipment in accordance with industrial requirements. The decision rationale for suspending particular fields is based on the assessment of field’s economic efficiency, technical sustainability, industrial safety and minimization of negative impact on the environment.

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