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GlobalData on Kazakhstan, Azerbaijan

By  AOG Staff Thursday, 18 June 2015 10:54
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While Kazakhstan and Azerbaijan have added over 1 MMb/d to the world’s oil supply since 2005, the two countries are now diverging in their ability to grow production and influence global supply, according to an analyst with research and consulting firm GlobalData.

Anna Belova, GlobalData’s senior upstream analyst covering the former Soviet Union, says that both countries have centered their growth strategy on giant offshore fields in the Caspian Sea. However, while the Kashagan field in Kazakhstan is yet to move into uninterrupted full-field development, the Azeri-Chirag-Guneshli (ACG) project in Azerbaijan has already achieved its peak production and is declining.

“While ACG is expected to decline in the near-to-mid term, the operator’s commitment to development and injection well drilling will ensure maximum reserve recovery under the contractual terms,” says Belova. “With Shah Deniz 2 expansion scheduled for first gas in 2018, additional condensate volumes will partially offset the overall crude decline forecast for Azerbaijan in the mid term.

“In Kazakhstan, the giant offshore Kashagan project is expected to start commercial flows in late 2017, following the resolution of leakages in pipelines due to produced fluids’ high sulfur content. By 2020, Kashagan is expected to add around 400,000 b/d of crude to Kazakhstan’s production, before adding over [1 MMb/d] daily to the global supply once the field is fully online.”

Belova also notes that reserve replacement over the past decade has been driven in both countries by discoveries and extensions at the aforementioned giant fields.

“Smaller fields that do not require involvement of major international companies are essential to developing domestic industry and local service companies, as well as strengthening Azerbaijan and Kazakhstan’s national oil companies,” says Belova.

“Recent changes to Kazakh licensing are incentivizing exploration in the country. The recent Velikoye discovery just across the border in Russia, with estimated recoverable reserves of over 2 billion bbl, shows the exploration potential in the region, and will allow Azerbaijan and Kazakhstan to continue their century-old oil and gas industry in the long term.”

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