This article was originally published in Russian by
Caucasian Knot
***
Bringing new wells into operation in Azerbaijan won’t significantly affect the economic performance indicators for the Azerbaijani State Company SOCAR, but has important significance in terms of preventing the decline of oil extraction in the country, stated analysts surveyed by
Caucasian Knot
in Baku.
As told by
Caucasian Knot
referencing a source in SOCAR, news broke that the company had brought a horizontal well into operation on the
West Absheron offshore field
, where oil is extracted at a rate of 15 tons a day in 648-767 meter intervals. In this way, the state company can additionally extract more than 5.47 thousand tons of oil yearly.
Ilham Shaban, head of the Caspian Barrel Center for Oil Research told a
Caucasian Knot
correspondent that bringing the new wells into operation will not significantly affect the economic performance indicators for SOCAR.
“The new well will enable a total of around 5,500 additional tons of oil to be extracted yearly. For comparison, I will note that last year 8,160,500 tons of oil were extracted from only those fields developed solely by SOCAR, i.e. without taking into account oil fields jointly developed with foreign companies. As you can see, extraction from SOCAR’s new Absheroneft oil-and-gas production well is mere drops in the sea in terms of the total extraction by the State Oil Company”, said Shaban.
Additionally, he directed attention to the fact that the launch of new wells enables SOCAR to stabilize its oil production.
“Thing is, over the last 25 years, oil extraction on SOCAR oil fields has been steadily falling. Whereas in 1991 the State Oil Company extracted twelve million tons of oil, in the past year it extracted a little more than eight million tons. Taking this into account, SOCAR developed a plan to put 120 new wells into operation in the 2014-2018 period, with the goal of stabilizing, or stopping the fall in, production. In all, around one billion dollars are planned to be invested in this project”, explained Shaban.
He noted that loans in the amount of 200 million dollars have already been acquired from International Bank of Azerbaijan JSC for the purpose of implementing SOCAR’s plan of putting new wells into operation.
“The economic crisis caused by the fall in oil prices slowed the tempo of these projects somewhat. But more than twenty new, additional wells have already been put into operation”, said the head of Caspian Barrel.
According to him, the State Oil Company’s number 3,500 in total, although many of them have been in operation for several decades, and he emphasized that the new wells are expected to compensate for the stoppage of production from the old ones.
Turan economic analyst Togrul Juvarli also told
Caucasian Knot
that he considers the increase in oil extraction by SOCAR to be insignificant considering the cost of putting new wells into operation.
“The economic effect for the State Oil Company, of course, is not great. But the positive is that the launch of new wells confirms that Azerbaijan’s old oil fields still have enough oil reserves for development on industrial scales. And, at the cost of investing on its own, without bringing on foreign partners, SOCAR can extract oil and stop the fall in oil extraction. This is important both from the point of view of resolving social issues and, in particular, ensuring the employment of oil workers, as well as helping to avoid employment cuts”, said Juvarli.
On the other hand, he noted that stopping the reduction of SOCAR oil production is also important from the point of view of the fall in production within the framework of the Azeri–Chirag–Guneshli project, developed in cooperation with international companies.
Caucasian Knot
also wrote that at the end of October, on a backdrop of growing difficulties encountered by Azerbaijan because of falling prices for fossil fuels, and of warnings from analysts regarding the “natural reduction of oil extraction in the country”, President Ilham Aliyev announced that the country does not intend to further ramp up oil extraction and export. According to Aliyev, restricting the growth of extraction is necessary in order to stabilize the world oil market and in order to raise oil prices.
