Azerbaijan backs OPEC measure, plans to cut oil output
Azerbaijan supports the decision of the Organization
of the Petroleum Exporting Countries (OPEC) to reduce oil
production, Minister of Energy and Industry Natig Aliyev has
said.
Aliyev, who represented Azerbaijan at last Wednesday`s OPEC meeting in Algeria, where the country has observer status, told the Russian RIA Novosti news agency that the South Caucasus republic would cut its oil output by 300,000 barrels per day.
"Although there is potential to bring domestic production to 1 million bpd, raising production at this time could cause the supply to further exceed demand in world markets," the minister said.
Azerbaijan currently produces 840,000 bpd. The country extracts most of its oil from the major Azeri-Chirag-Gunashli (ACG) fields in the Caspian Sea and pumps it to the Turkish Mediterranean port of Ceyhan through the Baku-Tbilisi-Ceyhan (BTC) export pipeline.
Oil ministers of the 12 OPEC member states agreed at the Algeria meeting to remove 2.2 million bpd from oil markets in an effort to balance supply with the world`s falling demand for fuel. Russia, a major producer and exporter of energy resources, welcomed OPEC`s suggestion to scale down output, and pledged to reduce its own production by 320,000 bpd. Saudi Arabia, the world`s largest oil exporter, has reduced supplies too.
The oil cartel`s member states are thus trying to return oil prices to the $75 a barrel mark from the current level of $43.
Aliyev did not rule out Azerbaijan`s joining OPEC in the future. He said, however, that the country`s accession depends on what changes will occur in oil prices. According to Aliyev, the current price levels are not fair, while OPEC`s decision should make prices more predictable in the long term. "Azerbaijan deems prices ranging between $65 and $80 as fair."
The minister noted that the cost of oil production in Azerbaijan is lower than in other countries and has been estimated at $20 per barrel. However, the country has set the oil price at $70 in its 2009 budget and a fall in prices below this level may cause a shortfall of funds that would have to be made up by the State Oil Fund, the body that maintains the revenues from the export of oil.
Some economists have warned against setting the oil price at $70, claiming this would cause difficulties with the 2009 budget.
Aliyev also expressed confidence that OPEC`s decision to cut oil output would boost crude prices.
It is of note that the opposite opinion has recently been expressed by Rovnag Abdullayev, the president of the state oil company SOCAR. He said that a slump in crude prices on world markets would not cause Azerbaijan to reduce oil production, dismissing other claims.
"Azerbaijan cannot exert any influence on world prices, as it is not such a major producer," the SOCAR chief told reporters.
Abdullayev emphasized that the sharp decrease in oil prices would cause no problems with the execution of next year`s budget.
He also predicted that oil prices would reach $60-70 in 2009.
Aliyev, who represented Azerbaijan at last Wednesday`s OPEC meeting in Algeria, where the country has observer status, told the Russian RIA Novosti news agency that the South Caucasus republic would cut its oil output by 300,000 barrels per day.
"Although there is potential to bring domestic production to 1 million bpd, raising production at this time could cause the supply to further exceed demand in world markets," the minister said.
Azerbaijan currently produces 840,000 bpd. The country extracts most of its oil from the major Azeri-Chirag-Gunashli (ACG) fields in the Caspian Sea and pumps it to the Turkish Mediterranean port of Ceyhan through the Baku-Tbilisi-Ceyhan (BTC) export pipeline.
Oil ministers of the 12 OPEC member states agreed at the Algeria meeting to remove 2.2 million bpd from oil markets in an effort to balance supply with the world`s falling demand for fuel. Russia, a major producer and exporter of energy resources, welcomed OPEC`s suggestion to scale down output, and pledged to reduce its own production by 320,000 bpd. Saudi Arabia, the world`s largest oil exporter, has reduced supplies too.
The oil cartel`s member states are thus trying to return oil prices to the $75 a barrel mark from the current level of $43.
Aliyev did not rule out Azerbaijan`s joining OPEC in the future. He said, however, that the country`s accession depends on what changes will occur in oil prices. According to Aliyev, the current price levels are not fair, while OPEC`s decision should make prices more predictable in the long term. "Azerbaijan deems prices ranging between $65 and $80 as fair."
The minister noted that the cost of oil production in Azerbaijan is lower than in other countries and has been estimated at $20 per barrel. However, the country has set the oil price at $70 in its 2009 budget and a fall in prices below this level may cause a shortfall of funds that would have to be made up by the State Oil Fund, the body that maintains the revenues from the export of oil.
Some economists have warned against setting the oil price at $70, claiming this would cause difficulties with the 2009 budget.
Aliyev also expressed confidence that OPEC`s decision to cut oil output would boost crude prices.
It is of note that the opposite opinion has recently been expressed by Rovnag Abdullayev, the president of the state oil company SOCAR. He said that a slump in crude prices on world markets would not cause Azerbaijan to reduce oil production, dismissing other claims.
"Azerbaijan cannot exert any influence on world prices, as it is not such a major producer," the SOCAR chief told reporters.
Abdullayev emphasized that the sharp decrease in oil prices would cause no problems with the execution of next year`s budget.
He also predicted that oil prices would reach $60-70 in 2009.
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