May 08, 2024 (MENAFN via COMTEX) --
(MENAFN - AzerNews)
Ulviyya Shahin Read more
The Shah Deniz field is one of the largest natural gas fields inAzerbaijan, and the broader Caspian Sea region. This field wasdiscovered in 1999 by the Shah Deniz consortium during explorationdrilling in the Caspian Sea. The consortium comprises severalinternational oil and gas companies, with bp being theoperator.
The development of the Shah Deniz field has been conducted inmultiple phases to maximize its production capacity and economicviability. The initial phase, known as Shah Deniz Phase 1, involvedthe development of production infrastructure and facilities toproduce and export natural gas to regional and internationalmarkets. Subsequent phases, including Shah Deniz Phase 2 andpotential future expansions, aim at further increasing productioncapacity and exploring additional reserves within the field.
Shah Deniz field represents a significant strategic asset forAzerbaijan and its partners, contributing to the country's energysector development, economic growth, and regional cooperation inthe Caspian region and beyond.
The State Oil Fund of the Republic of Azerbaijan (SOFAZ) earned$202.715 million from the Shah Deniz (gas and condensate) fieldfrom the beginning of the current year until May 1.
Revenues from the Shah Deniz field have experienced a drasticdecline, plummeting by 4.6 times compared to the correspondingperiod last year.
Notably, revenues from condensate sales on the Shah Deniz fieldhave seen a staggering 3.2 times decrease during this period,amounting to $60.784 million.
This downturn in revenues underscores the challenges facing theenergy sector, necessitating a closer examination of marketconditions and potential strategies for recovery.
The 4.6-fold decrease in revenues from the Shah Deniz fieldcompared to the corresponding period of last year can be attributedto several factors:
Market Conditions: Fluctuations in global gasand condensate prices can significantly impact revenues from theShah Deniz field. If prices have declined sharply compared to theprevious year, it would directly affect the revenue generated,leading to a drastic decrease.
Production Levels: Reduced production levelsfrom the Shah Deniz field could also contribute to the decline inrevenues. Factors such as maintenance shutdowns, technical issues,or natural decline in reservoir productivity can lead to lowerproduction volumes and consequently lower revenues.
Contractual Agreements: Changes in contractualagreements, including pricing structures or sales volumes, couldinfluence revenue outcomes. If the terms of the agreements havebecome less favorable, it could result in decreased revenues evenif production levels remain constant.
Market Demand: Changes in market demand for gasand condensate products can impact revenues. If demand decreasedcompared to the previous year due to factors such as economicdownturns or shifts in energy consumption patterns, it would leadto lower sales volumes and revenues.
The decrease is also related to another field, ACG .
The "Azeri-Chirag-Gunashli" (ACG) oil field block is one of thelargest and most significant oil-producing assets in Azerbaijan andthe wider Caspian Sea region.
The ACG field is located in the Azerbaijani sector of theCaspian Sea. It encompasses several individual oil fields,including the Azeri, Chirag, and Gunashli fields, which areoperated collectively under the ACG project.
The ACG project is operated by bp (British Petroleum) incollaboration with other international oil companies andAzerbaijan's state-owned oil company, SOCAR (State Oil Company ofAzerbaijan Republic). The current shareholders in the ACG projectand their respective stakes are as follows:
BP-30.37%, SOCAR-25%, MOL Group-9.57%, INPEX-9.31%, Equinor-7.27%, ExxonMobil, 6.79%, TPAO (Turkish Petroleum Corporation)-5.73%, ITOCHU-3.65%, ONGC Videsh Limited (OVL)-2.31%.
The Azeri-Chirag-Gunashli (ACG) oil field block represents acornerstone of Azerbaijan's oil industry and a key driver of itseconomy, playing a crucial role in the country's energy securityand prosperity.
In January-April of this year, the State Oil Fund of Azerbaijan(SOFAZ) reported an income of 1 billion 798.6 million US dollarsfrom the "Azeri-Chirag-Gunashli" (ACG) oil field block located inthe Azerbaijani sector of the Caspian Sea.
It is noted that this figure is 669.4 million US dollars, or27.1% less than the revenue recorded in the same period of2023.
It is worth noting that in January-April 2023, SOFAZ received anincome of 2 billion 468 million US dollars from ACG.
Regarding the 27.1 percent decrease in revenues of the State OilFund of Azerbaijan (SOFAZ) for the "Azeri-Chirag-Gunashli" (ACG)field block during the four months of the current year compared tothe same period last year:
Production Volume: One possible reason for thedecrease in revenues from the ACG field block is a decline inproduction volume. If production levels have decreased due tofactors such as reservoir depletion or operational issues, it woulddirectly impact the revenue generated from oil sales.
Oil Prices: Fluctuations in global oil pricescan significantly influence revenues from oil-producing assets likethe ACG field block. If oil prices have decreased compared to theprevious year, it would lead to lower revenues even if productionlevels remain constant.
Contractual Changes: Changes in contractualagreements, such as adjustments to revenue-sharing arrangements ortaxation policies, could affect the revenue outcomes for the ACGfield block. If the terms of the agreements have become lessfavorable, it could result in decreased revenues for SOFAZ.
Operational Costs: Increased operational costsassociated with oil extraction and transportation could alsocontribute to the decline in revenues. If expenses have risensignificantly compared to the previous year, it would impact thenet revenue generated from oil sales.
Overall, a combination of factors including market conditions,production levels, contractual agreements, and operational costslikely contributed to the decrease in revenues from both the ShahDeniz and ACG field blocks.
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