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Azerbaijan to reduce oil production within OPEC+

11 August 2020 12:36 (UTC+04:00)
Azerbaijan to reduce oil production within OPEC+

By Ayya Lmahamad

Azerbaijan will reduce its oil production by about 2.7 million tons within the OPEC+ agreement, Finance Minister Samir Sharifov said in an interview to a local TV on August 10.

Sharifov stated that as a result of lower demand due to the coronavirus pandemic, the world faced a sharp decline in oil prices in April, amounting to $12-20 per barrel.

However, he noted that the new OPEC+ agreement allowed a slight stabilization of the oil prices over the last couple of months.

It should be noted that in April 2020, OPEC and non-OPEC countries entered into agreement on reduction of daily oil production by 9.7 million barrels in May-June and 164,000 barrels for Azerbaijan.

Moreover, the minister stated during the last 7 months there was a reduction in the country’s oil revenues, as the average oil price in the world was $40 per barrel, and the state budget revenues of Azerbaijan were calculated from the oil price of 455 per barrel.

Additionally, he noted that as part of the OPEC+ agreement, Azerbaijan has made commitments to reduce oil production. Thus, implementation of these commitments will lead to a reduction in production by 2.7 million tons, including 420,000 tons by SOCAR, and other part will fall on the consortium (Azeri-Chirag-Guneshli block of fields).

Thus, taking all these into account, it was decided to revise the base price of oil in the state budget and reduce it to $35 per barrel. As a result, the state budget of Azerbaijan will receive by AZN 390 million less from oil sector than planned in 2020.

It should be noted that within the framework of OPEC+ daily oil production reduction by 9.7 million barrels, Azerbaijan reduced production of crude oil by 163,900 barrels per day in July.

According to the “Declaration on Cooperation”, Azerbaijan produced 718,000 barrels of crude oil per day in October 2018, while in May-July this year the country must maintain the average daily production of crude oil at 554,000 barrels.

To meet these obligations, daily crude oil production should be reduced from 567,000 barrels per day at Azeri- Chirag-Guneshli field to 434,000 barrels, and for SOCAR from 151,000 to 120,000 barrels.

On July 31, the first phase of the OPEC+ agreement of April 12 to reduce daily oil production by 9.7 million barrels was completed.

In the second phase of the agreement, covering the period from August 1 to December 31, the daily production of crude oil in OPEC+ countries will be reduced by 7.7 million barrels, which is 18 percent less than in October 2018.

During this period Azerbaijan should reduce daily crude production by 131,000 barrels and keep it at 587,000 barrels. Thus, during this period Azerbaijan's restrictions on daily production of crude oil will be reduced by 33,000 barrels compared to the previous three months.

At the meeting of OPEC and OPEC+ countries on June 6, it was decided to extend the quota until the end of July.

Azerbaijan is fulfilling its obligations under OPEC+ agreement. Thus, the average daily oil production in May amounted to 650,000 barrels, in June to 553,800 barrels and in July to 650,100 barrels.

Moreover, earlier in July, the Organization of Petroleum Exporting Countries (OPEC) has increased the assessment of confirmed gas reserves in Azerbaijan to 1.718 billion cubic meters in 2019, which is by 19.7 percent more than in 2018. According to the report, proven crude oil reserves in Azerbaijan are estimated at 7.000 million barrels in 2019.


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