azerbaijan energy potential dr. ingilab ahmadov khazar university 2008/2009
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Azerbaijan energy potential
Dr. Ingilab Ahmadov
Khazar University2008/2009
Dr.İngilab Ahmadov 2
Dr.İngilab Ahmadov 3
Azerbaijan: country profile
Independence re-gained: 18 October 1991 Location: South Caucasus Total area: 86,600 km²86,600 km² Population: (January 1, 2008): 8,6 mln.(January 1, 2008): 8,6 mln. Official language: AzerbaijaniAzerbaijani Currency: Manat (AZN)Manat (AZN) GDP per capita: 5550 USD5550 USD FDI: FDI: $3790.7 mln.
Dr.İngilab Ahmadov 4
Main economic indicators related to oil wealth
Years 2002 2003 2004 2005 2006 2007 2008
GDP growth (%) 10.6 11.2 10.2 26.4 34.5 25.4 10.8
Inflation rate (%) 3.3 2.2 6.7 9.7 8.3 16.7 20.8
Budget income (mln.AZN) 910.2 1225.5 1481.2 2055.2 3881.2 6006.6 10763
Budget expenses (mln.AZN) 931.7 1234.0 1501.0 2140.7 3789.7 6086.2 10680
SOFAZ budget income (mln.AZN) 176 244 185.8 215.6 986 1886.2 11867.4
SOFAZ budget expenses (mln.AZN) 30.8 243.6 168.7 214.6 981.4 1061.2 4291.8
Transfers from SOFAZ to state budget (mln.AZN)
- 100 130 150 585 585 3800
SOFAZ assets (bln.$) - - - - 2.97 5.36 11.2
Poverty rate (%) 46.7 44.7 40.2 29.3 20.8 18 - 20 13.2
Dr.İngilab Ahmadov 5
Inflation dynamics
Dr.İngilab Ahmadov 6
Economic growth (2008)
Robust economic growth in recent years, supported by high oil production and export and higher oil prices
Oil sector’s share in GDP (52.8%) (2007)
Oil sector’s share in Budget revenues (64%)
Oil sector’s share in Investment (51%)
Oil sector’s share in Export (97%)
Oil & gas sector
Dr.İngilab Ahmadov 7
Proven oil reserves: 7 billion bbl (2005) Oil production: 44.5 mln. tons (329 mln.bbl) (2008) Oil exports: 35 mln. tons (259 mln.bbl) (2008)
Proven natural gas reserves: 2 trillion cu m (2008) Natural gas production: 16.3 billion cu m (2008) Natural gas export: 1.7 billion cu m (2007)
Total active of the State Oil Fund- 11.2 bln.USD (January 2009)
Dr.İngilab Ahmadov 8
Azeri oil history
• First oil well in the world was drilled in 1846 in Baku near “Bibi Heybat”
• First wagon cistern for oil transportation in the world was exploited in 1872 in Baku
• First tanker in the world was built in 1871 in Baku by Royal Dutch Shell company
• First (wooden) pipeline in the world –Baku-Batum was built in 1905
Dr.İngilab Ahmadov 9
Crude oil proven reserves in CIS
Dr.İngilab Ahmadov 10
Regional distribution of proven oil reserves
Azerbaijan15%
Turkmeni-stan1%
Uzbekistan1%
Kazakhstan83%
Dr.İngilab Ahmadov 11
Global distribution of proven oil reserves
Middle East61.8%
Europe&EurasiawithoutCaspian
7.8% Caspian3.9%
S.&CentralAmerica
8.6%North America
5%
Asia Pacific3.4%
Africa9.5%
Dr.İngilab Ahmadov 12
Crude oil Production in CIS
Dr.İngilab Ahmadov 13
0.0
0.5
1.0
1.5
2.0
2.5
3.0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Other Caspian
Turkmenistan
Azerbaijan
Kazakhstan
mbpd CGES estimates
Oil production growth
Oil production in the Caspian Sea region
533,000
210,000
870,000
1,400,000
113,000
235,000
+163%
+270%
+86%
Dr.İngilab Ahmadov 14
Azerbaijan outlook
Oil production outlook for Azerbaijan
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
Deep water prospects
Shakh Deniz
AIOC
Socar offshore
JV/PSA onshore
Socar onshore
mbpd
Dr.İngilab Ahmadov 15
Natural Gas reserves in CIS
Dr.İngilab Ahmadov 16
Natural Gas reserves in CIS
Dr.İngilab Ahmadov 17
Regional distribution of proven gas reserves
Kazakhistan33%
Turkmenistan32%
Uzbekistan20%
Azerbaijan15%
Dr.İngilab Ahmadov 18
Global distribution of proven gas reserves
Total Middle East40.1%
Total Africa8%
Total Asia Pacif ic8.3%
Total North America
4.1% Total S. & Cent. America
3.9%
Total Europe & Eurasia35.6%
Dr.İngilab Ahmadov 19
Azerbaijan energy sector.Oil production, consumption and reserves
1991 2000 2007 2007, share of world total, %
Oil production, million tonnes
12.5 14.1 42.8 1.1
Domestic oil consumption, million tonnes
8.5 6.3 4.5 0.1
Proven reserves, billion tonnes
1.0 0.6
Source: BP (2008 June)
Dr.İngilab Ahmadov 20
Azerbaijan energy sector.
Gas production, consumption and reserves
1991 2000 2007 2007,share of total, %
Gas production, bcm
9.2 5.3 10.3 0.2
Domestic gas consumption, bcm
15.8 5.4 8.3 0.3
Proven reserves, trillion cubic metres
- - 1.28 0.7
Source: BP (2008 June)
Dr.İngilab Ahmadov 21
Ownership, liberalization, key players Oil sector The State Oil Company of Azerbaijan Republic (SOCAR) is the state-owned oil and natural
gas corporation in Azerbaijan. It produces oil and natural gas, operates two oil refineries and the running of oil and gas pipelines through out the country.
SOCAR was established in September 1992 upon the merger of Azerbaijan's two state oil companies, Azerneft and Azneftkimiya. Azerneft was created after the Socialist Revolution through the nationalization of the Azerbaijani oil industry.
Gas sector Azerigas is one of three state-run companies concerned with the maintenance of
Azerbaijan's energy sector. It has 100% Government ownership.
Electricity AzerEnerjy – state electric company – the monopolist on power generation, the country's
national electricity network is divided into five regional grids: Baku, Nakhchivan, North (Sumqayit), South (Ali Bayramli), and West (Ganja). Each of these has been opened to foreign investors via joint stock companies.
Regulation: Ministry of Industry and Energy
Dr.İngilab Ahmadov 22
Azerbaijan energy sector. Key players
Oil and gas extraction and export: State Oil Company of the Azerbaijan Republic (SOCAR); British Petroleum (BP) and other foreign oil companies (Statoil,
ExxonMobil, TotalFinaElf, Lukoil, Itochu and others) that are contractors in PSAs signed by the government;
Oil and gas processing: State Oil Company of the Azerbaijan Republic (SOCAR);
The sale of oil products on the domestic market: State Oil Company of the Azerbaijan Republic (SOCAR); Azpetrol (private company); ABU Petrol (private company)
Dr.İngilab Ahmadov 23
Azerbaijan energy sector. Key players
Power generation and distribution: Azerenergy JSC – a producer and distributor of electricity
(100 per cent of shares belong to the state)
Natural gas distribution: Azerigas JSC – a gas distributing company (100 per cent of
shares belong to the state)
Dr.İngilab Ahmadov 24
Oil factor
short time oil boom
huge revenues
cash flow absorbing
capture incomes
Dr.İngilab Ahmadov 25
Azerbaijan energy sector.
SWOT Analysis
Strengths:
Existence of oil and gas reserves (availability for at least 25 years within current development of reserves)
Common border with countries that possess considerable energy reserves: Russia, Iran, Kazakhstan and Turkmenistan
Location as a transit country Availability of regional oil and gas pipeline Established gas transmission network Refining capacity
Dr.İngilab Ahmadov 26
Azerbaijan energy sector.SWOT Analysis
Weaknesses:
• Physical obsolescence of electricity and gas transmission networks
• Limited gas storage
• A weak legislative and regulatory framework
• The unresolved status of the Caspian Sea with Iran and Turkmenistan
Dr.İngilab Ahmadov 27
Azerbaijan energy sector.SWOT Analysis
Opportunities:
• Increased production of domestic resources (oil and gas)
• Expansion of the transit infrastructure
• Increasing volumes of the transit of Central Asian hydrocarbon reserves
Dr.İngilab Ahmadov 28
Azerbaijan energy sector.SWOT Analysis
Threats:
• Pressures on fiscal revenue streams as a result of explicit and implicit subsidies
• The country’s transformation from an exporter of energy resources into an importer (in 25-30 years)
• Proximity to conflict zones and terrorist threats
• Dutch disease – potential problems of non-energy sectors of
the economy
Dr.İngilab Ahmadov 29
PSA Contracts
Operating Company Fields Signing Operator Status
1) AIOC "Azeri-Chirag-Guneshli"
On 20 September 1994
BP
PRODUCTION
2) BP Exploration (Shah-Deniz) Ltd.
"Shah-Deniz", On 4 June 1996 BP
PRODUCTION
3) Salyan Oil Ltd "Kursengi" and "Garabaghly"
On 15 December 1998
CNPC
PRODUCTION
4) Karasu Operating Company
"Kelameddin" and "Mishovdag"
On 12 September 2000
Nations Energy
PRODUCTION
5) Gobustan Operating Company
"Southwest Gobustan"
On 2 June 1998 CNPC
PRODUCTION
Dr.İngilab Ahmadov 30
PSA Contracts
6) AzShengli Operating Company
"Pirsaat" On 4 June 2003 Shengli Oil
PRODUCTION
7) Binagadioil "Binagadi" On 18 June 2004 AZEN Oil
PRODUCTION
8) Garachukhuroil "Garachukhur" On 29 September 2004
Noble Sky
PRODUCTION
9) Surakhanioil "Surakhany" August 2004 RAFI Oil
PRODUCTION
10) Kura Valley Company (KVC)
"Padar" On 27 April 1999 Nations Energy
PRODUCTION
11) Absheron Operating Company
"Zykh" & "Hovsan" On 3 November 2005
“РуссНефть”
PRODUCTION
Dr.İngilab Ahmadov 31
PSA Contracts
1) BP Exploration (Alov) Ltd.
Araz, Alov and Sharq
On 21 July 1998 ВРDELAYED
2) BP Exploration (INAM) Ltd.
"Inam"
21 July 1998 ВР
DELAYED
3)LUKARCO Operating Company
"D-222"
On 4 July 1997 LUKoil
DELAYED
1) UT Lokbatan Ltd "Umbaki", "North Karadag", "Korgoz"
On 10 August 1994 BMB Oil
CANCEL
2) CASPIAN INTERNATIONAL PETROLEUM COMPANY (CIPCO)
("Garabakh")
On 10 November 1995
Pennzoil
CANCEL
3) North Absheron Operating Company (NAOC)
("Ashrafi" and "Dan Ulduzu")
On 14 December 1996
Amoco
CANCEL
Dr.İngilab Ahmadov 32
PSA Contracts
4) Elf Petroleum Lenkoran/Talysh B.V.
"Lenkoran-deniz“ and "Talysh deniz"
On 13 January 1997 Elf Petroleum
CANCEL
5) Agip Azerbaijan B.V.
"Kurdashy", "Araz-deniz" and "Gurgan"
On 2 June 1998 Agip
CANCEL
6) Muradkhanly Operating Company (MOC)
"Muradkhanly" On 21 July 1998 Ramco Energy
CANCEL
7) Oguz Operating Company
"Oguz" On 1 August 1997 ExxonMobil
CANCEL
8) Chevron Overseas Petroleum Azerbaijan Ltd.
"Absheron" On 1 August 1997 Chevron
CANCEL
9) Japan Azerbaijan Operating Company
"Ateshgah", "Yanan Tava" and "Mugan-deniz"
On 5 December 1998
Japex
CANCEL
Dr.İngilab Ahmadov 33
PSA Contracts
10) ExxonMobil Azerbaijan Operating Company
"Nakhchivan"
On 1 August 1997 ExxonMobil
CANCEL
11) Exxon Azerbaijan Operating Company
"Zafar" and "Mashal"
On 27 April 1999 ExxonMobil
CANCEL
12) LUKoil Overseas Azerbaijan Company
"Zykh" and "Hovsan"
On 9 January 2001 LUKoil
CANCEL
13) Shirvan oil Operating Company
"Kurovdag"
On 5 November 2004
Caspian Energy Group
CANCEL
1) OFFSHORE STRUCTURES
"Lerik Deniz", "Dalga", "Savalan" and "Janub"
On 27 April 1999 ExxonMobil
UNVALIDATED
Thanks for your attention!
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