Fast Market Research recommends "Azerbaijan Oil & Gas Report Q2 2014" from Business Monitor International, now available

Boston, MA -- (SBWire) -- 02/13/2014 --Despite planned investment in order to stabilise output from Azerbaijan's ACG complex, the long term outlook for liquids is bearish notwithstanding near term gains from the US$6nn Chirag Oil Project (COP). The greatest source of upside risk to our oil outlook comes from our bullish view on Azeri gas, with a number of major untapped gas fields holding liquids potential as well. Despite a number of large fields having already been identified for exploration and appraisal, a shortage of rigs and the technical challenges of the Caspian's operating environment have slowed development. In the absence of firm timelines, we have yet to include these projects in our forecast but note the risks for gas are weighted heavily to upside as progress on strategically significant export infrastructure into Europe continues to advance.

The key developments in Azerbaijan's oil & gas sector are:

- While BP has reportedly stabilised output at the key Azeri-Chirag-Guneshli (ACG) field, we maintain a largely bearish outlook for oil production given challenges encountered at the field to date.
- Data from the EIA indicates that production continues to disappoint and based on EIA figures we estimate crude output of 883,000b/d for 2013. This figure is slightly below our previous forecast of 898,0000b/d for 2013. Although final figures are not yet available at the time of writing, we estimate Crude Oil, NGL and Other Liquids Production for 2013 of 886,000b/d, a 4.2% decline from 2012.From 2014 onwards, first oil from the Chirag Oil Project (COP), part of the ACG complex, will help to offset some but not all of the lower-targeted volumes from other production sites. The West Chirag or COP is a $6 billion further development plan for ACG. The design oil capacity of the new installation is 183,000b/ d however there were reports that further development of the complex could support further production increases. Yet we note based on setbacks at the ACG field to date there are risks that output could surprised to the downside.
- We retain our long-term view that on the back of production challenges at ACG and a failure to bring online major new liquids discovery, oil production is set to decline gradually from 2017. While we see upside from liquids volumes captured alongside major offshore gas discoveries, we are not currently pricing these in, given that development efforts remain in their infancy.
- A recent study from the EIA highlighted the country's untapped potential with 2P gas reserves placed at 1.43trn cubic meters and 2P liquids reserves estimated at 8.5bn bbl. However, the overwhelming majority of remaining resources is thought to be offshore, where territorial disagreements with Turkmenistan have prevented exploration in certain areas.

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