Azerbaijan starts to fulfill its obligations related to oil production

Azerbaijan has started fulfilling its obligations under the OPEC plus deal to curb oil output. In May-June, OPEC plus commitments provide for a decrease in daily oil production by 9.7 million barrels or 23 percent from the level of October 2018, and for Azerbaijan by 164 thousand barrels. Azerbaijan, oil production of which amounted to 718,000 barrels of crude oil per day in October 2018, also undertook new commitments to reduce the oil production in July-December by 18 percent or 131 thousand barrels, and in April 2021 and 2022 - by 14 percent or 98 thousand barrels.

According to the new "Declaration of Cooperation" the output reduction quotas have been proportionally distributed between output volumes of SOCAR’s oil and gas extracting enterprises and the oil producers functioning in our country based on production share distribution agreements and other similar contracts. Taking into consideration that in October of 2018, the daily oil output at ACG fields made up 567 thousand barrels, by "Azneft" PU - 125 thousand barrels, and by Joint Ventures and Operation Companies - 26 thousand barrels, it is envisaged to reduce production from these levels by 23% during May-June of the current year, by 18% - during July-December, 2020, and by 14% - during the period between January, 2021 and April, 2022. At the same time, it should be noted that these figures have been approximated, the ton/barrel conversion coefficients of the oils extracted from various production wells are different, and the reduction of the condensate volumes is not included in the obligations.

The Minister of Energy said that measures to reduce daily production at the Azeri-Chirag-Depwater-Gunashli, at the Azneft Production Union, joint ventures and operating companies will contribute to the fulfillment of Azerbaijan’s obligations: "Beginning from today, in the history of the world oil industry, the first large agreement on volumes and terms of production begins to be implemented.  In the second quarter of this year, the global daily oil demand is expected to reduce by 15-25 mln. barrels, and in 2020 – by 10.3 mln. barrels. In such a situation, the fulfillment of the obligations by "OPEC plus" countries including Azerbaijan will provide initial support to oil market.  The results of the solidarity demonstrated at the national and global levels for stabilization of oil market will gradually find its reflection in the oil price."

The minister also added that another purpose of these measures regarding reduction of production in Azerbaijan is to achieve increase of revenues of SOCAR and other oil producers functioning in our country, and consequently the revenues of the state.  

It should be noted that Azerbaijan should maintain daily crude oil production at 554 thousand barrels in May-June, 587 thousand barrels in July-December, 620 thousand barrels from 2021 to April 2022 in accordance with the obligations.