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Karabakh oil field to help Azerbaijan maintain stability in production and revenues [INTERVIEW]

25 August 2020 14:24 (UTC+04:00)
Karabakh oil field to help Azerbaijan maintain stability in production and revenues [INTERVIEW]

By Akbar Mammadov

The commissioning of the Karabakh oil field is important for Azerbaijan in terms of production and oil revenues, the Chairman of Center for Economic and Social Development, Azerbaijani MP and economist Vugar Bayramov said in an exclusive interview with AzerNews on August 25.

Bayramov said that the newly-discovered field will help the country compensate for the declining oil production and maintain stability in oil revenues within the coming years, taking into account that there is a decrease in oil production within framework of OPEC + deal, and the distribution of production the country.

The economist noted that Azerbaijan produced 50 million 795 thousand tons of oil in 2010, but this figure decreased to 37 million 500 thousand tons in 2019. Bayramov added that it means that over the past nine years, oil production in Azerbaijan has fallen by 13.295 million tons per year, both in terms of production sharing and the OPEC + agreement, which, of course, indicates a decline in oil production.

“Some 60 million tons of oil is planned to be produced from the Karabakh oil field. It is an initial estimate, and it is expected that the volume of oil produced by Azerbaijan from the field will increase as exploration continues,” he said.

Bayramov said that Karabakh fields’ importance is twofold. On the one hand, it is important in terms of compensating for the declining oil production of Azerbaijan while on the other hand, it is significant in terms of maintaining stability in oil revenues within the coming years.

“There is no doubt that oil revenues are important for the development of the non-oil sector, as it creates a source of funding for reforms and programs in this sector. The Azerbaijani president also stated that in the upcoming years, part of oil revenues will be used for the development of the non-oil sector. It indicates that the increase in oil revenues also creates opportunities for maintaining the pace of development in the non-oil sector, and especially for the further development of the non-oil sector in the post-pandemic period,” Bayramov said.

In terms of foreign investments in the development of Karabakh oil field, Bayramov said that Azerbaijan’s State Oil Company (SOCAR) has a 50 per cent stake in the field and the other 50 per cent of shares belong to a foreign company.

Bayramov highlighted that firstly, Azerbaijan must continue cooperation with foreign investors in the oil sector, because it seems crucial in terms of innovation and the transfer of technology in the energy sector. He added that at the same time, the foreign investment provides opportunities to attract more knowledge and skills to the energy sector, taking into account that local specialists were more involved in the development of the field.

“More than 95 per cent of the support block in Karabakh is formed by local specialists, which indicates the transfer of knowledge and skills in the energy sector,” he noted.

Bayramov underlined that attracting foreign investment is also important in order to minimize risks in the context of volatility in the oil market, as this will allow for significant minimization of excess investment and other risks.

Bayramov said that although Karabakh oil field was the first oil field discovered during the independence period, the lack of technological capabilities and the fact that the field was not profitable during exploration, does not allow the utilization of this field at that time.

However, the subsequent exploration work, especially with the participation of local experts, has already confirmed that oil fields in Karabakh contain more than 60 million tons, the economist stressed.

“It indicates that the field is profitable. In fact, the timing of the commissioning of the Karabakh field will directly depend on the volume of oil in the field. After the initial assessment, oil is going to be produced in the Karabakh field,” he noted.

Bayramov said that it means that in the upcoming years Azerbaijan will be able to see the compensation of costs and earning of profits on the Karabakh field.

Speaking about the Southern Gas Corridor (SGC), a project that will take Caspian hydrocarbons to the European markets via Azerbaijan, Bayramov said that SGC is one of the most considerable projects not only for Azerbaijan but also for the region, considering that this project is an alternative source for the European Union as well.

“Azerbaijan ensures the supply of gas to the Turkish and European markets. TANAP has already been launched,” the economist noted.

Bayramov highlighted that through TANAP, Azerbaijan supplies gas to the Turkish market, and 95 per cent of the planned work at TANAP has been completed. He added that from this perspective, it will allow Azerbaijan to support the energy security of Turkey, as well as Southern Europe and some Eastern European countries.

“Given that Bulgaria will receive gas from the Southern Gas Corridor through the domestic network, according to preliminary estimates, this country will be able to import 1.5 billion cubic meters of gas annually. Azerbaijan will supply an additional 7 billion cubic meters of gas to the Turkish market, 10 billion cubic meters to the European market in the first phase, and 20 billion cubic meters in the second phase.”

The economist noted that the capacity of the Southern Gas Corridor is 31.5 billion cubic meters. At current prices, Azerbaijan will be able to earn more than $100 billion from the implementation of the Southern Gas Corridor project. It seems crucial in terms of diversification of energy revenues., Bayramov said.

He pointed out that it will allow energy revenues to be generated not only from oil but also from gas. “Meantime, it is also important in terms of strengthening Azerbaijan's strategic position in the region,” Bayramov added.

Thus, Bayramov underlined that $38 billion has been invested in the Southern Gas Corridor, $25 billion of which belong to Azerbaijan and Georgia.

“The Southern Gas Corridor plays an important role in terms of investment and employment as well. It is expected that in the upcoming periods, the Southern Gas Corridor will play a special role in the formation of Azerbaijan's state revenues,” he concluded.

Offshore the support block of the Karabakh field of the Baku Heydar Aliyev Deep Water Jackets Plant on August 10.

Karabakh oil field with over 60 million tons of crude was discovered by SOCAR and Norwegian “Equinor” company in the Azerbaijani sector of the Caspian Sea, 120 kilometres east of Baku in March 2020. The drilling of the first appraisal well on the “Karabakh” field began on December 23, 2019. SOCAR's CDC drilling company drilled this well with “Dada Gorgud” floating drilling rig at a depth of 180 meters. Productive layers of the deposit are located at a depth of 3.4 km.

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Akbar Mammadov is AzerNews’ staff journalist, follow him on Twitter: @AkbarMammadov97

Follow us on Twitter @AzerNewsAz

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