With a further 9-month extension of output cuts around the corner, Azerbaijan stays firm in its commitment to reduce domestic oil production by as much as 35,000bbl/b. Even though the country fell short of meeting its set cutback target in October, having pumped around 801,000bbl/d, numbers published last week by the State Statistical Committee clearly exude some optimism regarding overall compliance with the OPEC pact. According to data issued on November 16, Azerbaijan’s oil output between January and October 2017 amounted to 32,240,600 tones, representing a 7,1% decline in comparison with the respective period of 2016. During those ten months, natural gas production decreased by 3.9% (23,637,600,000 cubic meters). Azerbaijani government has forecast a 40MT drop in oil production for 2017, together with a 29,5BCM rise in gas production.
Systematically decreased oil volumes denote Azerbaijan’s eagerness to fulfill its obligations under an agreement reached in December 2016 among OPEC and non-OPEC petrostates, in order to curb global surfeit and push prices up. Being one of the first non-OPEC producers to give its consent to the Organization’s rewritten oil policy, along with Russia, Kazakhstan, Oman and Mexico, Azerbaijan has generally not surpassed the 800,000bbl/d threshold since January 2017. Unlike fellow Caspian states of Kazakhstan, who has been repeatedly told off by OPEC for not adhering to the promised 20,000bbl/d cut, mainly due to growth from Kashagan oilfield, and Iran, who was allowed to slightly lift output, recently achieving a post-sanctions peak, Azerbaijan has elicited praise from OPEC’s Joint Monitoring Committee for effectively complying with its share of the deal.
Should a decision to prolong cuts beyond March 2018 is made at an OPEC/non-OPEC ministerial meeting, to be convened in Vienna at the end of the month, Azerbaijan has declared readiness to support it, as announced by Energy Minister Shahbazov in October. Even though Azerbaijan is attempting to diversify its economy by developing the non-oil sector, a prospective rebalance of the oil market is in the interests of the country, given that low commodity prices in conjunction with reduced public investment have been impeding solid economic growth since about 2015.
Available online at: http://www.caspianpolicy.org/energy/caspian-energy-insight-november-22-2017/#4
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