Tag Archives: oil

Azerbaijan’s oil production in 2015 will fall

MARCH 11 2015 (The Bulletin) – Oil production in Azerbaijan is likely to drop by around 4% this year to 806,000 barrels per day, media reported quoting senior officials at state energy company SOCAR.

This is more bad news for Azerbaijan which is largely reliant on oil and gas sales for its revenues.

The fall in oil prices has already hit Azerbaijan which has cut government spending and devalued its manat currency.

The main problem for Azerbaijan’s oil production is that output at the BP-led Azeri, Chirag and Guneshli (ACG) is falling. ACG makes up the vast majority of Azerbaijan’s current oil output and only it could knock overall production so substantially.

BP has tried to stem the oil production decline but with limited success. Azerbaijan has put BP under increased pressure to find a solution, so for a senior SOCAR figure to brief the media so early in the year that ACG is likely to miss its targets is telling. Perhaps, Azerbaijan is trying to put BP under more pressure.
ENDS

(News report from Issue No. 222, published on March 11 2015)

SOCAR plans Eurobond

MARCH 6 2015 (The Bulletin) – Azerbaijan’s state energy company SOCAR plans to issue a Eurobond by the end of March, the company’s CEO Rovnag Abdullayev said. Mr Abdullayev said SOCAR was launching the Eurobond because of the slide in oil prices over the past six months or so which have hit the company’s profits.
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(News report from Issue No. 222, published on March 11 2015)

Max Petroleum suspends trading on AIM

MARCH 2 2015 (The Conway Bulletin) – The collapse in oil prices forced Max Petroleum, a British-Kazakh oil and gas company, to suspend trading on the London AIM stock exchange.

In a statement, Max Petroleum said it was in negotiations to restructure its debt with Sberbank and other creditors.

“If current negotiations are unsuccessful, or if other events outside the control of the Company require that the Company ceases trading while such negotiations are ongoing, then the consequences will be negative for all stakeholders in the Company,” the company statement said.

Last month Max Petroleum squarely blamed the slump in global oil prices for its problems which wiped out profit margins and deterred potential investors.

The Max Petroleum’s troubles are a microcosm of the problems facing Kazakhstan-orientated companies trying to weather an economic downturn linked to the oil price drop and the turmoil in Russia’s sanction-hit economy.

Almaty-based confectionery plant Rakhat, which South Korea’s LOTTE bought in 2013/2014 in a multi-million dollar deal, also said that it had had to lay off 500 of its 3,800 workers. It blamed unfair competition from cheaper Russian sweets.

Once feted as one of Kazakhstan’s most famous companies outside the extractive industries, Rakhat is now trying to eke its way out of the economic storm — just like most other Kazakh companies.

Max Petroleum, listed on the LSE since 2005, is a small Kazakhstan oil producer with an output of around 200,000 tonnes of oil a year.

In August 2014, AGR Energy, linked to the prominent Assaubayev family, made a deal to buy 51% of Max Petroleum for £37m ($62m), promising to embark on a significant investment to revitalise the company. The slump in oil prices, though, appears to have deterred AGR Energy from follow through with the deal and the promised investment.
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(News report from Issue No. 221, published on March 4 2015)

Output at BP’s ACG field falls

FEB. 19 2015 (The Conway Bulletin) — Bucking expectations BP said output from its Azeri-Chirag-Guneshli (ACG) oil field in Azerbaijan continued to fall in 2014. BP said oil output at ACG, which is essential to Azerbaijan’s overall output, fell to 31.5m tonnes in 2014 from 32.3m tonnes in 2013.
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(News report from Issue No. 220, published on Feb. 25 2015)

Kazakhstan cuts oil export tax

>>Slump in global oil prices triggers tax cut>>

FEB. 11 2015 (The Conway Bulletin) — Kazakhstan will slash its oil export duty by 25% to help companies manage a sharp drop in energy prices, economy minister Yerbolat Dossayev said.

The measure is part of a package of proposals designed to help Kazakhstan’s economy weather an increasingly nasty economic downturn. Energy minister Vladimir Shkolnik also said that taxes on miners would be cut soon.

Currently oil exporters pay $80 to ship a tonne of oil out of Kazakhstan. The government will cut this to $60.

It’s a drastic step for Kazakhstan which still relies heavily on oil exports for its revenue. Drastic but, possibly, unavoidable. Oil prices have halved in the past seven months, forcing spending cut backs and budget cuts.

The sharp drop in oil prices also creates another problem for Kazakhstan. It makes the more expensive projects, such as the Kashagan project in the Caspian Sea, unprofitable. Dropping export tax may go some way to addressing this problem.
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(News report from Issue No. 219, published on Feb. 18 2015)

Tengiz output to rise

FEB. 11 2015 (The Conway Bulletin) — Tengizchevroil, a Kazakh joint-venture with Chevron, is expected to boost oil output by 42% to 38m tonnes by 2021, Kazakh energy minister Vladimir Shkolnik said. This is important news for Kazakhstan as Tengizchevroil is its biggest single oil producer.
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(News report from Issue No. 219, published on Feb. 18 2015)

Azerbaijan oil output rises

FEB. 13 2015 (The Conway Bulletin) — Oil output in Azerbaijan rose for the first time in a year, Reuters quoted an Azerbaijani official as saying. The official, who declined to be named, said the increase was due to a rise in production at the ACG fields operated by BP.
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(News report from Issue No. 219, published on Feb. 18 2015)

S&P downgrades SOCAR

FEB. 9 2015 (The Conway Bulletin) — The ratings agency Standard & Poor’s downgraded the Azerbaijani state energy company SOCAR to a negative outlook from stable because of the decline in global energy prices, Reuters reported. Standard & Poor’s downgraded Azerbaijan’s sovereign rating last month.
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(News report from Issue No. 218, published on Feb. 11 2015)

New pipeline contract at Kashagan

FEB. 9 2015 (The Conway Bulletin) — Italian oil service company Saipem has won a $1.8b contract to replace leaky pipes at the Kashagan oil field in the Kazakh sector of the Caspian Sea, media reported. It said the new pipes would be in place by the end of 2016, allowing oil to flow from Kashagan by the start of 2017.
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(News report from Issue No. 218, published on Feb. 11 2015)

Azerbaijan cancels social projects

>>Fall in oil price has hit Azerbaijan hard

JAN. 29 2015 (The Conway Bulletin) — Azerbaijan’s government has cancelled a $100m project to provide rural communities with vastly improved and faster internet, media reported.

The fall in the price of oil prices has hit Azerbaijan hard. It is very much a petro-dollar economy and has had to adjust its budget to account for falling revenues.

The project was supposed to be funded by the state budget but it was, instead, one of the first to be cut when the budget was re-organised earlier this year.

And the project was supposed to be a major stepping stone to build a more integrated, connected society. Research in 2013 showed that only 500 of Azerbaijan’s 4,000 villages had access to the internet, a figure the government’s programme was supposed to improve.

Another project that the government has apparently reduced funding for is the Star refinery that it was building in Turkey. Instead, media reported, the Star oil refinery will be funded by foreign-backed debt.

Oil prices are critical to Azerbaijan. Last week BP, the biggest foreign investor in Azerbaijan, said that it was making 8% of its local workforce redundant.

The next few months are going to be important. While prices remain low, there could be more project cancellations to come.
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(News report from Issue No. 217, published on Feb. 4 2015)