Socar Production Costs Rose in 2017
Azeri state producer Socar said its average gas production cost increased last year.
The average production cost at Socar-operated gas fields rose by 33% to $36.60 (manat 62.19) per '000 m3 in 2017 – equivalent to $1.02/mn Btu - according to its annual report published September 3. Socar says the rise in the gas production cost was mainly due to rising materials and service charges, higher maintenance and transport costs, rising salaries, and 0.77bn m3 of gas losses last year.
Gas production in Socar-operated fields decreased by 2.8% on year to 6.09bn m3 in 2017, according for about a third of the country’s total sales gas output. Excepting the Umid field, which started up in 2012 and produced 0.425bn m3 last year, all of Socar-led fields are in their second half-life.
Socar also said that the cost of its sales gas (including received gas from BP-led Shah Deniz and imported gas) was $96.30 (manat 163.7) per '000 m3, net of production and midstream costs.
Socar purchased 2.79bn m3 Shah Deniz 1 gas at $60/'000 m3 and received 2.9bn m3 from the Azeri-Chirag-Guneshli (ACG) field free-of-charge in 2017; both fields are BP-operated. It also imported 2.1bn m3 from Turkmenistan and Russia, while the import volume in the previous year was zero. Azerbaijan consumed 12.17bn m3 gas last year.
Socar already reported its 2017 profits three months ago: on June 14 it said its 2017 net profit increased sixfold year-on-year to $1.23bn (manat 2.092bn) thanks to rising global oil prices. For that reason, Azerbaijan has prioritised re-injecting gas into oil fields during the past two years, over producing and exporting gas – especially so in recent months with Brent having risen to well over $70/b.
Socar revenues increased by 78% to manat 92.57bn, but also cost of goods sold also rose by 84.3% to manat 87.35bn.