S&P reveals forecasts for oil & gas production in Azerbaijan until 2027, promising projects

Oil output in Azerbaijan will remain at an average 0.65 million bbl per day (mbpd) through 2027, reads a report by the international rating agency S&P Global Ratings affirming Azerbaijan’s sovereign credit ratings, Report informs.

“Production has been on a steady declining trend in recent years as key oil fields, such as Azeri-Chirag-Gunashli, continue to age, falling to 0.65 mbpd in 2023 from 0.79 mbpd in 2019. As a result, Azerbaijan has been continuously producing below the quotas allocated to it by OPEC+. We expect some stabilization in the next few years as continued decline in some fields will be offset by small capacity additions at others. Longer term, however, production will likely continue falling,” S&P analysts noted.

“Gas production stabilizing at close to 35 billion-36 billion cubic meters (bcm) annually. Azerbaijan’s gas output has grown substantially since 2018, when production commenced at the key Shah Deniz II (SDII) gas field (production of roughly 16 bcm at plateau), operated by BP. The two related pipelines--the Trans-Anatolian Natural Gas Pipeline and the Trans-Adriatic Pipeline--carrying gas to Turkiye and Europe, respectively, became operational in 2019 and 2020. In July 2023 production also started at the smaller Absheron gas and condensate field (approximately 1.5 bcm), operated jointly by TotalEnergies and State Oil Company of the Republic of Azerbaijan (SOCAR). Given that the vast majority of production ramp-up has already happened, we estimate that Azerbaijan is approaching peak gas production, which will be maintained for several years,” reads the report.

“There are several projects that could further expand gas production over the longer term, beyond our forecast horizon. These include the next phase of the Absheron field (expanding production from 1.5 bcm a year to 5.0 bcm); and Azeri-Chirag-Guneshli (ACG) deep gas development, exploring the possibility of extracting gas from underneath the currently producing ACG oilfield.

We also note that the key export South Caucasus Pipeline is operating at near full capacity, so any additional net gas exports, including to Europe, will require further expansion of the pipeline infrastructure. Such an expansion would, in turn, necessitate reaching agreements between Azerbaijan and key European buyers of its gas about long-term volumes of supplies and its pricing,” S&P added.