Azerbaijan’s SOCAR banks on gas output boom as production sags

SOCAR, the state-controlled energy firm of exSoviet Azerbaijan, is looking to increase production of natural gas in coming years, the company’s head Rovnag Abdullayev told Reuters, in an effort to reverse a decline in output.

Azerbaijan’s gas industry is crucial for Europe’s plans to secure additional energy sourcing and reduce its dependence on Russia, which covers about a third of the European Union’s gas needs and has frosty relations with the West.

The country is importing some gas volumes, including for storage, to mitigate economic hardship that prompted protests last year. It has historically bought gas from a number of countries, such as Russia, Iran and Turkmenistan.

“Domestic gas needs are fully covered by domestic production, yet we think it’s reasonable to buy it during summer months to benefit from our underground gas storage capacities, as gas prices are low at this time of the year,” Abdullayev said in written replies to Reuters questions.

“Thus, in order to maximize the profits of our country, we are buying Turkmen gas in the summer, storing it and selling in winter at higher prices.” In coming years, he said, the country expected to put on stream several gas fields that would provide much-needed output growth.

According to the statistics service, gas output in Azerbaijan is seen falling to 28.4 billion cubic metres (bcm) this year from 29.4 bcm in 2016.

“We aim to get 1.5 billion cubic metres of gas from Absheron gas field’s first stage in 2019 and an additional 5 bcm in 2022-2023 from the second stage,” he said.

SOCAR itself produces around a fifth of Azerbaijan’s gas. It also is part of several energy consortiums in the country.