Azerbaijan to Double Gas Output to 54 Bcm/Year by 2020: Official

Platts, Feb 15, 2011
Azerbaijan plans to double its natural gas output to some 54 billion cubic meters/year by 2020, a senior energy ministry official said Tuesday, with Europe expected to benefit most from the increased volumes.

Azerbaijan's deputy [industry and] energy minister Natig Abbasov told the Azerbaijan Press Agency following a session of an Azerbaijan-EU working group the country has confirmed gas reserves of 2.2 trillion cubic meters, [mostly in Shah Deniz II and the Umid fields.]

"In 2006 Azerbaijan produced 9 Bcm of gas and already in 2010 produced 27 Bcm," Abbasov said.

"By 2020 the volume of gas produced in Azerbaijan will double," he said.

In January, Azerbaijan agreed to supply enough gas to the EU to open up the so-called "Southern Gas Corridor."

Securing supplies from Azerbaijan has been seen as key to Europe's plans to diversify its gas imports away from Russia and other traditional suppliers.

Competition for Azerbaijan's future gas has been fierce, with Russia and Iran also interested in increasing supplies.

The January declaration was the first time Azerbaijan had agreed in writing to export large volumes of gas to Europe, though it has said verbally in the past it was prepared to supply countries in Europe.

Abbasov said that as recently as 2006, Azerbaijan had to import gas, but it now exports gas to Russia, Iran, Turkey and Georgia [please see my remarks below -- D.R.].

Abbasov said Azerbaijan plans to supply 2 Bcm of gas to Russia in 2011.

The main sources of Baku's gas production growth will come from the second phase of the Shah Deniz gas field and the Umid field, Abbasov said.

Umid's recoverable reserves are estimated at 200 Bcm, and Azerbaijan also has a number of other high-profile gas fields in the exploration phase, including the Total-led Absheron project, where drilling has just started.

EU PIPELINE PROJECTS

Although Russia has publicly said it could buy all of Azerbaijan's export gas, the EU is expected to receive large volumes of Azeri gas in the future.

There are currently three gas pipeline projects competing for new gas from Azerbaijan, with a decision on which is to be favored by Baku due soon.

The projected 31 Bcm/year Nabucco and the planned 11 Bcm/year ITGI lines are competing with a third project, the proposed 20 Bcm/year Trans-Adriatic Pipeline between Greece, Albania and Italy, for the role of principal carrier of Azeri gas to Europe.

Azerbaijan has also pledged gas to the Azerbaijan-Georgia-Romania Interconnector (AGRI) venture.

The energy ministers of the three countries, plus Hungary, signed a declaration on the project in the Romanian capital Bucharest Monday.

The AGRI project, created last September, envisions 7 Bcm/year of Azeri gas transported from the Sangachal terminal via existing pipelines to the port of Kulevi, Georgia.

There it would be converted to LNG in a newly built terminal and shipped to the port of Constanta, Romania, across the Black Sea, and on to Hungary via pipeline.

Hungary, which already took part in last September's AGRI talks as an observer, will be represented in the project company by state-owned power holding MVM.

The four partner companies -- Romgaz (Romania), Socar (Azerbaijan), GOGC (Georgia) and MVM -- will each control 25% of the AGRI project company.

The four parties hope to complete a feasibility study of the project by April 1, 2012.

Hungary's participation in the project is made possible by a recently opened Hungary-Romania gas interconnector.

Hungary is heavily dependent on Russian gas imports transported via Ukraine, and is also part of the Nabucco project.

"AGRI, too, could be a realistic solution for easing Hungary's one-sided gas import dependence, both in terms of gas sources and supply routes," Hungary's energy minister [Minister of National Development] Tamas Fellegi was quoted as saying. "We believe AGRI is a feasible project." [Full story]

(Azerbaijan became a net exporter of natural gas in 2007 with the startup of the Shah Deniz natural gas and condensate field in late 2006; in prior years it had been importing natural gas from Russia. Prior to 2007, the Kazi Magomed-Mozdok pipeline used to transport natural gas from Russia to Azerbaijan, but the agreement allowed for the pipeline flow to be reversed, making Azerbaijan an exporter of natural gas to Russia. The Shah Deniz field was discovered in 1999. It is one of the world's largest gas-condensate fields, with over 30 trillion cubic feet---1 trillion cubic meters---of gas in place. It lies in water depths between 50 meters and 600 meters, i.e. 1969 ft, some 70 kilometers, i.e. 43 mi, southeast of Baku---please see map below. BP operates Shah Deniz on behalf of its parners in the Shah Deniz Production Sharing Agreement. The country is also a significant oil producer. Azerbaijan produced some 51 million tons of oil, i.e., about 1 million barrels of oil per day, in 2010. -- D.R.)

                        Source: Rigzone, here (Azerbaijan's northern land border with Russia is missing -- D.R.)