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Azerbaijan - Part 1 - The Prospects.

One of the world's oldest oil exporters, development of Azerbaijan's petroleum reserves remains central to its economic future. Through various agreements with international oil companies (IOCs), Azerbaijan has opened its petroleum industry to fund its development and, through exploration and production sharing agreements (EPSAs) with IOCs, to promote regional stability.

Azerbaijan currently is producing 950,000 b/d of crude oil and condensate, up from 927,600 b/d in 2011. This compares to 1.023m b/d in 2010, 860,000 b/d in 2007, 600,000 b/d in mid-2006, 350,000 b/d in mid-2004, 310,000 b/d in mid-2002, 192,000 b/d in 1997 and 259,300 b/d in 1990. Its oil output had reached 500,000 b/d during World War-II.

The State Oil Company of Azerbaijan Republic (Socar) and its minority partners in 2012 are expected to produce 165,000 b/d, down from 195,000 b/d in mid-2004 and 285,000 b/d in 1987. Azerbaijan International Operating Co. (AIOC), a BP-led consortium, in 2012 will produce 740,000 b/d, down from 823,100 b/d in 2010 but up from 390,000 b/d in mid-2006 and 155,000 b/d in mid-2004. AIOC aims to keep its output stabilised at about 750,000 b/d in the coming years (see the producing ventures in omt2AzerProdJuly9-12 & gmt2AzerProd-July9-12).

Judging by the number of IOCs involved in E&P ventures and their strong lobbying in the West, including US majors, Azerbaijan should be able to make good use of oil and gas export pipelines later in this decade. So far, Baku has signed more than 30 oil and gas (EPSAs) with more than 40 firms from many countries (see gmt1AzerGeo-July2-12).

To a great extent, Azerbaijan's economic and geo-political prospects will depend on a viable solution to the issue of sharing Caspian Sea wealth with its neighbours (see down1AzerCasp-July2-12). But Azerbaijan still suffers from some shortage of energy (see down2AzerEnBasRefPetchm-July9-12). Azeri President Ilham Aliyev personally signs the EPSAs. His aides are eager to see the country become a major oil and gas exporter (see omt3AzerExprt-July16-12).

A law on company ownership secrecy has caused dismay in Azerbaijan, however, with critics saying it contradicts every principle of open government. Legislative amendments passed by parliament on June 13 mean that, from now on, shareholders' identities and the stakes they hold in companies will be kept confidential. The law was changed after a series of media investigations alleged links between members of President Aliyev's family and big businesses (see profiles in down3AzerWho'sJuly16-12 and gmt3AzerWho's-July16-12).
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Publication:APS Review Oil Market Trends
Geographic Code:9AZER
Date:Jul 2, 2012
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