SOCAR of Azerbaijan: Oil prices are currently suitable for planning.. and this is our actual production volume

The Azerbaijani state oil and gas company, SOCAR, considers the current oil prices adequate for medium-term planning, as stated by the vice president of the company, Vitaly Baylarbayev, on June 20 (2023)

“We have operated successfully in different price environments, including much lower price environments, so what we have now is quite adequate from the perspective of our medium-term planning,” Baylarbayov said, as published by S&P Global Commodity Insights. ).

Oil prices are currently significantly lower than the peak in 2022, which was driven by supply concerns as a result of the Russian invasion of Ukraine, according to the specialized energy platform.

For its part, the Platts service – which is part of the S&P Global Commodity Insights platform – evaluated the oil prices from Brent crude dated at $ 74.495 per barrel on June 20 (2023).

Platts valued Brent crude at its post-invasion high of $137.64 a barrel on March 8, 2022.

Oil price forecast

On the other hand, the recent decline in oil prices led some members of the OPEC + oil production alliance to extend voluntary production cuts until the end of 2024.

Saudi Arabia, the largest producer in the group, proposed extending the latest cut by 1 million barrels per day beyond July.

Azerbaijan – a member of the group and continues to support OPEC + policy – did not join the voluntary cuts, and is still producing less than its share.

Azerbaijan’s production reached 500,000 bpd in May, according to the latest Platts survey by S&P Global Commodity Insights, and the OPEC+ alliance set its share at 684,000 bpd from November 2022 through December 2023.

The vice president of Azerbaijan’s SOCAR, Vitaly Baylarbayov, said that despite the recent decline, he expects oil prices to rise.

“I don’t think oil prices will go down, the trend will be up. And if that’s true, I don’t expect big drops,” he said, adding that this could change if there is a drop in demand in Asia and Western countries, particularly the United States, affecting in prices.”

Oil prices are now below levels before the announcement of the latest cuts at the June 4 meeting, and Brent crude was trading at $76.06 a barrel, on the eve of the OPEC+ alliance meeting.

In addition, the price included in the Azerbaijani state budget is much lower than the current prices.

In early June, Azerbaijan’s Finance Minister, Samir Sharifov, said the base scenario was set at $60 per barrel, according to local media.

Increased transit of crude oil

The war in Ukraine has led to increased interest in Kazakhstan, which relies heavily on Russian export routes, in using infrastructure in Azerbaijan as an alternative.

The vice president of the Azerbaijani company, SOCAR, Vitaly Baylarbayov, said that his country expects to ship an additional 1.5 million metric tons of crude oil, equivalent to about 30,123 barrels per day, from Kazakhstan in 2023, compared to 2022.

He explained, “This situation is now affected by geopolitical factors… This is just an additional factor that calls for companies operating in Kazakhstan to consider Azerbaijan as an option that has always been on the table, and still is.”

It should be noted that most of Kazakhstan’s oil passes through Russia, as the Caspian Sea Pipeline Consortium (CPC) accounts for 80% of its exports.

This pipeline, which extends to the Russian Black Sea port of Novorossiysk, has suffered several disruptions since Russia’s invasion of Ukraine in February 2022, and remains exposed to weather risks, security and geopolitical challenges, according to a report seen by the specialized energy platform.

“From the very beginning, the Baku-Tbilisi-Ceyhan pipeline was built with additional capacity, and it was always designed to ship oil from Kazakhstan and other Central Asian countries,” Baylarbayov added.

Besides the current volumes of crude oil from Kazakhstan being supplied via this route, Baylarbeyov does not see total volumes exceeding 2 million metric tons/year in 2023.

“But the capacity we can offer is much higher than that, and we can talk almost immediately – without major investments – about the capacity to transport 15 million metric tons of crude oil,” Baylarbayov said.

Analysts say that to increase capacity even further, Azerbaijan sees the need for significant additional investment, which requires long-term commitments from buyers.

“It is clear that we have enough of our resources to develop the infrastructure for transporting oil to the level required by shippers, and the most important thing here is long-term commitment, because if you are investing, you need to make sure that your investments are supported by real companies,” Baylarbayov continued.

gas supply

The EU’s interest in securing gas supplies from Azerbaijan has grown in response to sanctions and persistent concerns about Russian shipments.

In mid-2022, Azerbaijan and the European Union signed a memorandum of understanding to increase gas supplies to Europe to 20 billion cubic meters by 2027.

Baylarbayov said fears that Azerbaijan will struggle to achieve this goal are unfounded.

“Obviously, we have reserves and plans to bring those reserves into the flow, which will be in line with the targets set under the Azerbaijan-EU MoU,” says Vitaly Baylarbayov, vice president of the Azerbaijani company SOCAR.

Azerbaijan expects an influx of new quantities from the Absheron field, as the next phase is scheduled to start production in July. Other options include developing gas in the fields of Azerbaijan – Chirag – Gunesli, Umid and Babak.

Baylarbayov noted that these volumes could come into effect very soon, if traders sign long-term purchase and sale agreements.

He explained that negotiations on short and long-term supplies are underway with buyers and transport service providers, noting that Azerbaijan will closely follow Turkey’s plans to develop a gas center, indicating that “Turkey is a partner for us in this gas sector.”

Turkey is a major transit route for gas from Azerbaijan to Europe, according to S&P Global Commodity Insights.

Earlier, the Turkish Oil Company reported that a summit on the gas center was likely to be held in September, after it was postponed twice due to the earthquakes that hit Turkey and Syria in early February, and then the presidential elections.