8-42% reduction in production in the largest oil fields of the Republic of Azerbaijan
| The sharp drop in oil prices and the long-term continuation of low prices, as well as the decrease in production, will reduce the revenues of the State Oil Fund of the Republic of Azerbaijan in the medium term. In this case, the assets of the government of this country can be quickly drained. |
According to the international group Tasnim news agency, oil production for the economy of the Republic of Azerbaijan It is vital. Almost half of the country’s exports are the sale of crude oil. “Azeri-Cheragh-Gonsheli” (AÇG) field, located about 100 km east of Baku, is the largest oil field in the Azerbaijan part of the Caspian basin.
The absolute majority of the country’s energy sector income related to this field. According to the information of the Ministry of Energy of Azerbaijan, 579 million tons of oil and more than 212 billion cubic meters of gas have been extracted since the operation of AÇG fields until September 1 of this year. From 2001 to September 1 of this year, the amount of revenue from the sale of profit oil from AÇG amounted to 168.6 billion dollars. Only in the 9 months of this year, 4 billion and 728 million dollars have been earned from these reserves. that AÇG will continue to be the main hope of Azerbaijan’s economy in the coming years.
The key indicators of oil and gas profit of Azerbaijan Oil Fund for 2024 are:
Azeri-Cheragh-Gonsheli: 4 billion and 89 million dollars including 70.8%
Shah Deniz: 596 million dollars including 5.6%
Absheron: 77.4 million dollars including 0.81%
Balakhani-Sabuncho-Ramana and Kurdkhani: 7.1 million dollars including 0.12%
Binkadi: 6.7 million Dollar includes 0.16%
Korufdagh: 6.2 million dollars including 0.11%
Surakhani and Karachokhor: 2.2 million dollars including 0.04%
Zigh Husan: 1.7 million dollars including 0.03%
Korsangi and Karabaghli: 1.7 million dollars including 0.03%
Mishudagh and Kamaluddin: 1.3 million dollars including 0.02%
Naftchala and Khalli: 0.5 million dollars including 0.02%
Total fields: 4 billion and 792 million dollars including 78.6% of government production
As shown in the table It is known that 4 billion and 89 million to 85.3% of the 4 billion and 792 million dollars expected to enter the country’s oil fund next year will be provided by the cost of the “Azeri-Cheragh-Gonsheli” fields.
how the production rate in AÇG has it changed? It plays an important role in the economy of the Republic of Azerbaijan, but the production in AÇG is decreasing year by year. The effects of this reduction are already reflected in the economic growth.
In the 11 months of 2023, Azerbaijan’s economy grew by only 0.8%. The main reason for such a small growth is the decrease in oil production. From the figures published by the country’s accounting chamber, it can be seen that since 2015, there has been a continuous decrease in oil production in AÇG.
In 2015, 232 million barrels of oil were produced from these fields. became. This index will reach 134 million barrels by the end of 2023. This means that since 2015, oil production in AÇG has decreased by 42%. The decrease in production has accelerated in recent years.
Oil production in “Azeri-Cheragh-Gonsheli” fields from 2015 to 2023 are:
2015: 232 million barrels
2016: 231 million barrels
2017: 215 million barrels
2018: 214 million barrels
2019: 195 million barrels
2020: 175 million barrels
2021: 167 million barrels
2022: 152 million barrels
2023: 134 million barrels
The prediction of the Chamber of Accounts of the Republic of Azerbaijan is that this decrease will continue in the coming years. It is expected to produce 119 million barrels of oil in AÇG in 2026. That’s roughly half in 10 years.
Risks from Declining Oil Production
The sharp decrease in oil prices and the long-term continuation of low prices, as well as the decrease in production, will reduce the revenues of the state oil fund in the medium term. In this case, the assets of the Azerbaijani government can be quickly drained.
Global demand for crude oil is expected to increase next year. OPEC+ countries agreed to cut production. This has also led to an increase in the oil price forecast.
According to the data published by various international organizations, the average annual price of a barrel of crude oil in 2024 may be around 80 to 90 US dollars. It is true that in recent years, unexpected fluctuations have occurred in the energy markets.
In this context, the reduction of oil production in the Republic of Azerbaijan creates more risks for this country. In this regard, the opinion of the Chamber of Accounts of this country regarding the future budget of the state oil fund indicates that the income of the oil fund may decrease in the medium term due to a sharp drop in the price of oil and long-term low prices as well as a decrease in production. Therefore, the possibility of rapid depletion of assets cannot be ignored.
International organizations also consider the risks that oil production can create for Azerbaijan’s economy as a risk factor. According to the long-term simulation of Azerbaijan’s economic growth by the World Bank, in Azerbaijan, the population growth rate is decreasing and the population is aging; This country is facing a decrease in hydrocarbon reserves; Asset diversification is not enough and the contribution of the non-oil/gas sector in growth is limited.
It is concluded from this simulation that if the government of Azerbaijan does not solve the above problems, the average annual economic growth of this country It will be 0.5% in 2050-2024. This means that the economy of the Republic of Azerbaijan will remain stable at best and will not grow.
| Publisher | Tasnim News |
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