Top energy officials unite in grandiose oil event in Baku

North Azerbaijani capital Baku hosts the Caspian Oil & Gas Conference on June 5-6 as part of the International Caspian Oil & Gas Exhibition Incorporating Refining and Petrochemicals, which draws companies from around the world every year.

The largest event of the energy sector in the Caspian region began with the “Azerbaijan is a key for energy supply and security of Eurasia” session moderated by President of Azerbaijan’s energy company SOCAR Rovnag Abdullayev and ITE Group Plc Senior Advisor Sir Andrew Wood.

Addressing the 20th annual event, Abdullayev said Azerbaijan is currently experiencing an oil boom for the second time in its history, adding that the country is one of the foremost among world nations for the rate of socio-economic development.

Noting that the oil strategy founded by national leader Heydar Aliyev successfully continues today, Abdullayev said that this policy serves to further strengthening of the country’s economic power, improvement of the financial well-being of the people, as well as macro-economic revival of the region as a whole.

“Azerbaijan, which has already proved itself in the world as an oil-rich country, has become an exporter of natural gas. And we aim to contribute to the strengthening of the energy security of Europe,” Abdullayev said.

The significance of Azerbaijan’s energy resources for Europe’s energy security was in focus of the speakers at the first session of the conference.

EU Energy Commissioner Guenther Oettinger said in a message sent to the participants of the Caspian Oil and Gas 2013 conference that Azerbaijan plays an essential role as an oil supplier and the country is expected to play a similar leading role in gas supplies to Europe.

The message, read out by the head of the EU delegation to Azerbaijan Roland Kobia, says significant progress has been made in realizing the Southern Gas Corridor, which refers to a planned series of links aimed at diversifying the routes and sources of energy supply for European countries.

“Currently we are waiting for the final decision on a pipeline route,” Oettinger wrote.”This will be just the beginning, not the end.”

“We see the Southern Gas Corridor as a multistage project,” Oettinger’s message said. “The EU expects more gas from other sources like Turkmenistan to be transported through this corridor. In this regard, we will continue the negotiations with Azerbaijan and Turkmenistan on the Trans-Caspian pipeline. We expect agreement to be reached in the nearest future.”

The message also emphasized that Azerbaijan is a partner of the EU not only in the energy sector but also is one of its key partners in the Eastern Partnership program.

Speaking at the session, US Deputy Assistant Secretary of State for Energy Diplomacy Amos Hochstein said that the U.S. strongly supports the implementation of the Southern Gas Corridor, which is one of the EU’s flagship energy projects.

“Opening of the Southern Gas Corridor will change the energy map of our continent,” he said.

Hochstein said the world energy market perked up after Azerbaijan’s entering it and Azerbaijan’s policy on diversification of its oil and gas infrastructure is worthy of commendation.

According to Hochstein, the Southern Gas Corridor will be an important link for delivering Caspian gas, initially from Azerbaijan’s Shah Deniz field, then from Turkmenistan and hopefully from northern Iraq, to Europe.

“The U.S. will support either pipeline to be selected by the Shah Deniz consortium. We believe that the pipeline which is selected will diversify energy supplies to Europe,” he said.

UK Prime Minister’s Trade Envoy to Azerbaijan, Kazakhstan and Turkmenistan, Charles Hendry, in turn, said that Azerbaijan is the UK’s strategic partner.

Hendry said Britain is the largest investor in Azerbaijan and the energy sector has a principal place in bilateral cooperation.

“BP alone has invested $25 billion in Azerbaijan. Despite the cooperation falling mainly to the energy sector, the parties also cooperate in other areas,” he said.

Hendry also said 2013 is important for Britain because this year a decision will be made through which route energy resources will be delivered to Europe.

“This year the final decision will be made on the pipeline issue, which is essential for the energy security of Europe. This decision is of strategic importance in terms of diversification of energy supply,” he said.

Hendry noted that the UK will support any decision of Azerbaijan in the selection of the export route.

The conference continued with the second session, which focused on international cooperation aiming to increase oil and gas production and diversification of security.

Addressing the session, Rovnag Abdullayev said that in 2015 Azerbaijan will be able to produce 20 billion cubic meters of natural gas, excluding the gas injected into layers to maintain pressure.

“This will further enhance the role of Azerbaijan in ensuring the energy security of Europe,” Abdullayev said.

SOCAR is about to complete commercial talks with potential buyers of Azerbaijani gas in Europe and “the proposals are being evaluated,” he said.

“Proposals on the gas price and transit tariffs are being evaluated. We expect the final decision on the choice of a route to export Azerbaijani gas to Europe to be made later this month. Moreover, the Turkish government is working on a project of construction of the Trans-Anatolian gas pipeline (TANAP),” Abdullayev noted.

In turn, BP’s Regional President for Azerbaijan, Georgia and Turkey Gordon Birrell said that the measures already taken allowed to keep production from Azerbaijan’s Azeri-Chirag-Gunashli (ACG) block of oil fields in the Caspian Sea at an approximately flat level — since early 2013 the daily average production has been at 666,000 bpd.

Birrell did not specify how the rise in oil production from the block forecasted for 2014 will be ensured, but cited the efforts to stabilize production.

“We’ve identified seven key production areas to focus on to be able to flatten ACG’s production as long as it is possible. These are areas that are vital to underpinning production improvement in 2013 and beyond and are critical to the effectiveness of the joint work that we are undertaking with SOCAR and other partners.

“BP can offer much to the Caspian from its global technology for optimization of the overall oil and gas recovery in the Caspian. With the right production stabilization and recovery optimization plans in place, the right technologies, we believe ACG can go on for decades to benefit Azerbaijan, our partners and the region as a world-class resource,” Birrell said.

In remarks at the session, Secretary General of the Energy Charter Urban Rusnak praised Azerbaijan’s contribution to the energy security of Europe.

Turkmenistan’s Deputy Minister of Petroleum and Natural Resources Annageldy Mammetyazov said that energy exports to Europe are one of the priorities of his country’s international strategy.

According to him, the key point in this matter is the Trans-Caspian Gas Pipeline — which is to be laid from the Turkmen coast of the Caspian Sea to Azerbaijan, where it will be linked to the Southern Gas Corridor.

Mammetyazov said Turkmenistan has much to offer to the changing global energy market, adding that the country is rich in energy resources, but needs investment and is keen on establishing business relations with all interested parties.

General Director for Europe, America and Caspian Sea Neighboring Countries at the Iranian Oil Ministry, Hossein Esmaeili Shahmirzadi, said that Iran is ready for broad cooperation and providing its infrastructure in the region to transport crude oil and natural gas to foreign markets.

The next sessions of the conference covered issues including the instability of the international energy markets and the possible impact on gas prices; diversification of Caspian oil and gas; the dynamics of the gas markets in Europe, the CIS and Asia and its impact on the Caspian region; the stable development of the oil and gas industry of Azerbaijan; Turkey’s role in the “East-West energy corridor” and the TANAP project, Trans Adriatic Pipeline (TAP) position in the supply of Caspian gas to the main markets of south-eastern and western Europe, and the advantages of the new business plan “Nabucco West”.

The speakers noted the priority energy policy in the present-day world and the importance of the projects implemented in Azerbaijan for European energy security.

A favorable assessment of the prospects of Azerbaijani gas export to Europe was made on the second day of the conference.

Matthew Shaw, Wood Mackenzie’s Senior Analyst for Caspian Upstream Research, said that Azerbaijan, which has enough gas reserves, could become a major supplier of gas to Europe.

“To get the status of the main supplier of gas to Europe, Azerbaijan, which is interested in diversifying export sources, should take into account issues of competitiveness, both in terms of the volumes delivered and prices,” Shaw said.

He added that by 2030 gas production in Azerbaijan will be brought up to 50-60 billion cubic meters a year.

“The third phase of Shah Deniz project is the most important for the growth of production, but it is more complicated because of the greater depth of the sea and higher strata pressure. Also, existing PSA contracts on Shah Deniz expire in 2026, and that is why discussion of a new contract will be required,” Shaw said.

In his view, Azerbaijan is capable of asserting itself as the largest natural gas producer in the next 20 years.

BP Azerbaijan Exploration Vice President Greg Riley said that gas fields may be discovered in Azerbaijan in the future.

“Discovering such impressive fields as Shah Deniz and Absheron is very important. But I am sure that new gas fields will be discovered in Azerbaijan in the future,” he said.

Riley said that in general, the Caspian basin is promising and it is only necessary to carry out exploration competently.

Head of SOCAR Investments Department Vagif Aliyev, in turn, said that $45 billion has been invested in the oil and gas sector of Azerbaijan since 1994

According to him, work is underway on the Shah-Deniz 2 project, investments in which will exceed $25 billion.

SOCAR Vice President Khoshbakht Yusifzade said that over the entire period of hydrocarbons production in Azerbaijan 665 billion cubic meters of gas have been extracted.

According to him, the country produced a total of 1.8 billion tons of oil during this period.

“Analysis of oil and gas production in the world shows that the period of light oil is over. Oil reserves are not depleted, but the oil just lies deep, which requires development of technology,” he