Greater Caspian Weekly Overview - 8th January 2016
AZERBAIJAN
Azerbaijan breaks commercial gas output record
The Vice-President of Oil, Gas Production and Transportation at the State Oil Company of the Azerbaijan Republic (SOCAR), Rahman Gurbanov, told Natural Gas Europe on January 4th that the country’s commercial gas output rose in 2015, hitting a record 18.9 billion cubic metres (bcm) in 2015, some 0.2 bcm more than the previous year.
He added that commercial gas production was raised from both the Shah Deniz and Azeri-Chirag-Guneshli fields’ associated gas. All of these fields are operated by BP.
Azerbaijan produced 9.9 bcm of commercial gas from Shah Deniz Stage 1 in 2015, he said.
However, he said that the total gas production in Azerbaijan (including flared and re-injected gas to oil wells) reached 29.4 bcm in 2015, some 0.2 bcm less than 2014.
The Public Relations Manager for BP Azerbaijan, Tamam Bayatli, told Natural Gas Europe on 25 December 2015 that the production level from Shah Deniz Stage 1 (SD1) is expected to increase in 2015 despite suspending operations for three weeks in August.
She said that currently some 29 million cubic metres per day (mmcm/d) of gas are produced from SD1.
Azerbaijan is preparing to increase its enriched (raw) gas output to 54 bcm/y (147 mcm/d), of which 16 bcm are expected to be pumped to the Trans Anatolian Natural Gas Pipeline Project (TANAP) and onwards into the Trans-Adriatic Pipeline (TAP).
A top Azerbaijani oil official has announced that approximately 850 kilometres of pipes have been produced to be laid for the TANAP.
Speaking live on local station ANS TV, Vagif Aliyev, General Manager of the Investments Division at the State Oil Company of Azerbaijan Republic (SOCAR), said that TANAP's progress is in line with scheduled plans.
He said on January 6th that the current route from the Georgia-Turkey borders to Eskishehir, which is 1,350 kilometres in length, is being constructed and that "all preparation activities are completed and the practical phase has started." SOCAR has indicated that Azerbaijan's priority is to export gas via pipeline.
During his interview with ANS, Aliyev said that SOCAR sees no need for LNG terminal construction on Georgia’s Black Sea coast in the near future.
IRAN
Iran receives first European revenues after petrochemical sanctions
For the first time in the past five years, Iran announced on January 2nd that it has received money for petrochemical export via a European bank.
Mehdi Sharifi Niknafs, executive director of the Iranian Petrochemical Commercial Company, said that despite the removal of petrochemical-related sanctions in November 2013, Iran had faced problems in accessing the revenues of petrochemical exports due to banking system sanctions.
Iran has opened an account at a Spanish bank in a bid to receive money from exporting petrochemical products to Europe, he said.
He did give any details about the Spanish bank, but said that the two sides have signed an Escrow Account Agreement despite the international restrictions in place.
Iran is expected to double petrochemical products in the coming years.
Amir Hossein Fallah, director for investment at National Petrochemical Company of Iran, said on January 2nd that the country has introduced €16 billion worth of petrochemical projects to Chinese investors.
To date, an amount of €12 billion has been introduced to the Central Bank of Iran for receiving the finance and letters of credit that have been opened for five of the projects, he said.
NPC’s director, Abbas She’ri Moqaddam, also said on December 29th that German companies have offered investment bids equalling €12 billion for Iran’s petrochemical sector.
Iran’s petrochemical sector has set an annual output target of around 129 million tons by the end of the country’s sixth five-year development plan (2021).
The country produced 44.5 million tons of petrochemicals in the past Iranian calendar year (which ended on March 20, 2015), with an over 10% rise from 40.5 million tons in its preceding year.
Iran sets conditions for sealing oil and gas contracts with foreigners
Iran has set five conditions for inking oil and gas deals with foreign firms after sanctions on the country are lifted, including local content provisions, technology transfer and health and safety.
Tehran hosted 137 companies from 45 countries for a two-day conference in November, during which legal generalities of Iran’s new model of oil and gas contract (Iran Petroleum Contract, or IPC) that is concerned with the development of 50 oil and gas fields, were introduced. More details about the contracts will be unveiled at a conference likely to be held in London in February 2016.
Iran has offered 50 hydrocarbon fields for development, including 21 gas fields with 226 trillion cubic feet of gas reserves, based on the IPC.
Winter gas shortages
Currently Iran suffers from gas shortage in winter. "Gas consumption by households and commercial units in Iran will rise sharply due to the coming cold days", Manoochehr Taheri, director of the dispatching center at the National Iranian Gas Company, said on January 3rd.
Taking gas imports into account, there is a possibility to supply consumers with 725 mcm of gas, Taheri noted. Iran imports gas from Turkmenistan.
Iran plans to boost its gas output to 1 bcm per day within the next 2 years. The figure is expected to reach 1.3 bcm/d by 2025.
Gas export to Europe
Azizollah Ramezani, international affairs director at the National Iranian Gas Company said January 7th that exporting gas to Europe will be justifiable with the lowering of oil prices. Exporting gas to Europe in the form of LNG is justifiable, he said.
“Russia is exporting gas to Europe via a 3000-kilometre pipeline. So, Iran can also enter the European market by establishing such a pipeline,” Ramezani said.
Iran also plans to export gas to Iraq, Oman, Pakistan as well as India in coming years.
CENTRAL ASIA
After halting Turkmen gas, Gazprom confirms it will up Uzbek gas intake
CEO of Russian giant Gazprom Alexey Miller said on January 5th that the company's gas relationship with Uzbekistan will continue, a day after Turkmenistan announced that the company had halted import of Turkmen gas.
“Uzbekistan is our reliable partner in the gas industry and we will continue developing our mutually beneficial cooperation," Miller told journalists. "And, naturally, the volume of Uzbek gas purchase will grow this year."
In 2013 Gazprom purchased about 4 bcm of Uzbek gas, though that figure decreased to 1 bcm in 2014.
The Gazprom CEO also confirmed that, at the end of December 2015, an agreement was reached to increase the company's purchase of Uzbek gas. “We highly evaluate results of the talks and agreements reached with our Uzbek friends.”
Though Miller did not indicate how much gas Gazprom would purchase from Uzbekistan, RadioFreeEurope says sources within Gazprom expect the company to purchase at least 3.1 bcm of gas from the country.
Gazprom had not responded to a question from Natural Gas Europe about the quantity of gas it will purchase from Uzbekistan at the time this article went to press.
The increase in gas imports was announced one day after it was revealed that Gazprom has stopped imports from Turkmenistan. On Monday, January 4th, Turkmenistan announced that Gazprom will not purchase any gas from the country in 2016.
Russia's own gas production dropped by 1% to 635.349 bcm in 2015 year-to-year, the Central Dispatcher Department of the Fuel and Energy Complex (CDU TEK) of Russia reported this week.
However, in 2015, Gazprom increased its market share in Europe and Turkey by one percentage point, from 30.2% to 31.2%. According to preliminary calculations, which are consistent with the estimates of management at Gazprom, in 2015, exports abroad is expected to stand at 159.3 bcm.
Uzbekistan accelerating gas projects
Uz-Kor Gas Chemical JV plans to increase the extractable resources of the Ustyurt gas chemical complex in Karakalpakstan (the autonomous republic northwest of Uzbekistan) in 2016-2017, a representative told RIA Novosti.
“At the end of 2015, the JV invited a tender to drill and develop 50 wells on the Surgil gas field, which is the main source of raw material,” said the same source. He added that development of new wells on the Surgil field will ensure stable and reliable supply of the Ustyurt gas chemical complex with gas.
The results of the tender are planned to be summarised in quarter 1, 2016 and the contract will be executed until the end of 2017, the JV representative said.
In October 2015, Kor-Uz Gas Chemical (established by Uzbekneftegas and Korean Kogas, Lotte and STX Energy on the parity basis) completed construction of the Ustyurt gas chemical complex. Its project capacity will allow the processing of 4 bcm. of natural gas a year and will manufacture 400,000 tons of polyethylene and 100,000 tons of polypropylene. Total cost of the project is $4.2 billion. General contractors of the project are Korean Samsung Engineering, GS Engineering and Hyundai Engineering.
Also this week, Uzbekneftegaz said it planned to create a joint venture with foreigners to conduct geological exploration and develop gas fields in the Ustyurt region in the northwest of Uzbekistan.
In an invitation to foreign companies released on the Uzbekneftegaz website, it said it has been preparing an investment project to pursue geological exploration works on the Sechankul, Akjar and Chimbay blocks and on the development of the Urga, Akchakaksoy and Chandur group fields.
The press office added that that the project will be implemented by the creation of a joint venture with the foreign companies on a parity basis.
According to Russian media outlet RIA Novosti, the volume of investments could reach $700 million.
Ilham Shaban is a Natural Gas Europe's expert on Caspian region's energy issues