S&P expects gas to account for about 20% of Azerbaijan's hydrocarbon exports

Azerbaijan's oil production will remain at 0.72 mbpd on average in 2022 and about that level over 2023-2025, Report informs, citing S&P.

"Azerbaijan is one of the oldest oil producers in the world having started industrial oil production in the 19th century. Existing oilfields are ageing and experiencing continued production declines. Between 2010 and 2021, for instance, oil production dropped by 30% to an estimated 0.74 million barrels per day (mbpd) from over 1 mbpd.

Oil production continued to decline over the first four months of 2022, dropping 4.5% in year-on-year terms and averaging close to 0.72 mbpd. We understand that this has been spurred by natural reductions in output as oil fields age but also some technical and possibly temporary factors. As a result, Azerbaijan's production has been below its OPEC+ quotas for the past few months," the agency said.

Its analysts believe that in contrast to oil, the outlook is stronger for Azerbaijan's gas sector.

They note that production at the new Shah Deniz II (SDII) gas field commenced in 2018 and the two related pipelines, the Trans-Anatolian Natural Gas Pipeline (TANAP) and Trans Adriatic Pipeline (TAP), carrying gas to Turkiye and Europe respectively, became operational in 2019-2020.

"Consequently, between 2017 and 2021, Azerbaijan's gas production rose by 80% and is set to increase another 13% through 2025, according to official plans," the agency said.

"Nevertheless, even considering this recent production ramp-up, we expect gas exports will play a relatively modest role in Azerbaijan's economy, accounting for about 20% of hydrocarbon exports compared with close to 80% for oil over the medium term," S&P noted.