MAY 25 2016 (The Conway Bulletin) — Hit by sustained low oil prices, Kazakhstan-focused energy company Nostrum Oil & Gas posted a 27% fall in revenues in Q1 2016, compared to the previous year. Importantly, average daily production fell by 15% compared to last year, to 38,754 barrels of oil per day.
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(News report from Issue No. 282, published on May 27 2016)
MAY 25 2016 (The Conway Bulletin) — Kazakhstan’s energy minister Kanat Bozumbayev said that investment into the expansion of Tengizchevroil, the Chevron-led consortium exploiting the Tengiz oilfield in the west of the country, will be delayed until next year. Mr Bozumbayev said that costs for the so-called Future Growth Project would be $37b, up from an earlier estimate of $34b. The project has been delayed because of the low oil prices.
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(News report from Issue No. 282, published on May 27 2016)
MAY 26 2016 (The Conway Bulletin) — The EBRD has loaned around €294m ($328m) to KazTransGas, Kazakhstan’s state-owned gas distributor, to finance the modernisation of a gas storage facility and a distribution network. This is the first time that the EBRD has invested into KazTransGas projects. Modernisation at the Bozoi gas storage facility, near the Aral Sea, will increase its capacity by 1.5 times to 4b cubic metres.
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(News report from Issue No. 282, published on May 27 2016)
MAY 23 2016 (The Conway Bulletin) — Russian energy company Lukoil said it had reached an agreement with the Uzbek government to improve the terms of its production sharing agreement (PSA) for the development of its oil fields at Kandym, Khauzak, Shady and Kungrad. Details of the new PSA were kept confidential. Lukoil had said that sustained low oil prices had made these projects more costly.
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(News report from Issue No. 282, published on May 27 2016)
MAY 25 2016 (The Conway Bulletin) — BP and Azerbaijan’s state-owned SOCAR signed a deal to jointly explore for oil in a new block at the offshore North Absheron Basin in the Caspian Sea, a sign that BP is taking a long-term approach to Azerbaijan despite the low global oil prices.
The North Absheron Basin is an oil field located just north of Baku. It should not be confused with the Absheron gas field located 100 km south of Baku and currently exploited by France’s Total and GDF Suez together with SOCAR. Absheron is the name of the peninsula where Baku is located.
SOCAR CEO Rovnag Abdullayev and BP’s regional representative Gordon Birrell said they were satisfied.
“Today we are signing a new memorandum of understanding which will lay the foundation of a new off- shore project. This will become another opportunity underpinning our long-term relationship with BP,” Mr Abdullayev said before Mr Birrell echoed his remarks.
Details on the deal are scant. Block D230 in the North Absheron Basin has a reservoir depth of 3,000-5,000 metres. It is still unclear just how much hydrocarbon resources it holds and how much both companies will have to invest to make it profitable.
The deal is also important in other respects. It allows SOCAR to reinforce its ties with BP, sharply criticised in the last few months by President Ilham Aliyev for failing to maintain oil and gas production.
The latest data showed that BP’s oil output was flat in the first quarter of 2016, compared to last year, while gas production grew by 3.8% to 2.7b cubic metres in the same period.
Sustained low oil prices over the past two years have taken a toll on SOCAR, which has embarked on a campaign to cut costs and sell off assets. SOCAR, though, appears ready to commit to new exploration ventures. Earlier this month it also agreed a deal with Uzbekistan.
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(News report from Issue No. 282, published on May 27 2016)
MAY 17 2016 (The Conway Bulletin) – Azerbaijan and Georgia sent a delegation to Greece for the groundbreaking ceremony of the Trans Adriatic Pipeline (TAP), part of a network of pipelines that will pump gas from the Caspian Sea to Europe, in a show of support for a project that the European Union considers vitally important.
Georgia’s PM Giorgi Kvirikashvili and Azerbaijan’s deputy PM Yagub Eyyubov attended the inauguration event with Greek Prime Minister Alexis Tsipras, European Commissioner Maroš Šefčovič and Special Envoy at the US State Department Amos Hochstein.
“Georgia, as a transit country, reiterates its commitments to the diversification of energy supplies to Europe and expresses supports for existing and future energy projects connected to the Southern Gas Corridor,” Mr Kvirikashvili said.
The so-called Southern Gas Corridor, a network of pipelines, is scheduled to be completed in 2019 and will send 16b cubic metres of gas to Europe every year.
TAP will ship 10b cubic metres from Greece’s border with Turkey across the Adriatic Sea to Italy. From there it will be pumped to central Europe.
Mr Kvirikashvili said the project “creates a new dimension for economic cooperation and for the security in the region.”
Azerbaijan is an integral part of the project. The Corridor’s pipelines will be filled with gas from its major fields, chiefly Shah Deniz.
Azerbaijan is also invested in the construction and management of the pipelines. SOCAR, the state energy company, owns 20% of TAP. BP (20%), Snam (20%), Fluxys (16%), Enagas (16%) and Axpo (5%) consti- tute the remaining shareholders.
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(News report from Issue No. 281, published on May 20 2016)
MAY 20 2016 (The Conway Bulletin) – Construction work on the Trans-Adriatic Pipeline (TAP) has begun. It will link the Azerbaijani and Turkish sections of the so-called Southern Gas Corridor to Greece and Italy.
The Southern Gas Corridor is the EU and the US’ pet project and will bring Azerbaijani gas to Europe.
This is the culmination of years of planning and fending off rival projects, Russian and European.
But the fundamentals of the energy sector have changed dramatically in the past couple of years. The oil price collapse means that profit margins have dropped through the floor, making it near impossible to invest in major infrastructure projects.
That is unless you’re working on the Southern Gas Corridor. The point is not that the Southern Gas Corridor is more profitable than other pipelines, it isn’t, but that politics is more important than economics on this project.
The drivers of the project want to reduce Europe’s reliance on Russia for gas.
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(Editorial from Issue No. 281, published on May 20 2016)
MAY 18 2016 (The Conway Bulletin) – Azerbaijani and Uzbek state-owned energy companies signed a memorandum of understanding to explore and exploit oil and gas fields in Uzbekistan. SOCAR’s president Rovnag Abdullayev and Uzbekneftegaz’s chairman Alisher Sultanov met in Tashkent on the sidelines of an international oil and gas conference to sign the deal. It is perhaps telling that with oil prices so low, the Azerbaijani and Uzbek governments are having to fund development of their oil and gas sectors themselves.
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(News report from Issue No. 281, published on May 20 2016)
MAY 17 2016 (The Conway Bulletin) — Bulgarian oil company Prista and Uzbekistan’s Uzneftprodukt opened a new oil recycling plant in Angren, eastern Uzbekistan. The new plant will process 43,000 tonnes of used oil and produce 30,000 tonnes of fuel per year. The venture spent around $15m building the plant. Bulgarian PM Boyko Borisov travelled to Tashkent to take part in the inauguration ceremony.
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(News report from Issue No. 281, published on May 20 2016)
MAY 16 2016 (The Conway Bulletin) — French energy company Total asked for help from the Azerbaijani government with selling its share of gas from the Absheron field in the Caspian Sea, a source close to the deal told Natural Gas Europe. Total has not commented. Total said it will start production at the Absheron field in 2021 and has yet to sign export contracts for its gas.
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(News report from Issue No. 281, published on May 20 2016)