Azerbaijan, which enjoys good potential for oil and gas development and export, is one of Caspian region's most important strategic export openings to the West.
In its Country Analysis Brief report, the U.S. Energy Information Administration (EIA) noted that Azerbaijan, one of the oldest oil producing countries in the world, is an important oil and natural gas supplier, particularly for European markets.
"Although traditionally it has been a prolific oil producer, Azerbaijan's importance as a natural gas supplier will grow in the future as field development and export infrastructure expands," the report reads. "Overall, Azerbaijan is a net energy exporter."
The report notes that Azerbaijan's proven crude oil reserves were estimated at 7 billion barrels in January 2013, according to the Oil and Gas Journal (OGJ). Oil production in the country amounted to 0.872 million bpd in 2012.
EIA said in its report that Azerbaijan was among the 20 largest exporters of oil in the world in 2012, underlining that the country has played a significant role in the development of today's oil industry.
Azerbaijan's oil production increased from 315,000 barrels per day (bpd) in 2002 to 1 million bpd in 2010. However, production declined since then, falling to 932,000 bpd in 2012, EIA said.
Monthly data through July 2013 show that this year's production thus far has continued its decrease, falling to an average of 910,000 bpd for the first seven months of the year, according to the EIA's report.
EIA forecasts Azerbaijan's production will decline to about 850,000 bpd in 2014.
The country's largest hydrocarbon basins are located offshore in the Caspian Sea, particularly the Azeri-Chirag-Guneshli (ACG) field, which accounted for more than 80 percent of Azerbaijan's total oil output in 2012. This block produces Azeri Light oil with a sulfur content of 0.15 percent (35 degrees API).
Shares in the contract for development of Azeri-Chirag-Guneshli block of fields is distributed as follows: BP (operator in Azeri-Chirag-Guneshli) - 35.78 percent, Chevron - 11.27 percent, Inpex - 10.96 percent, AzACG - 11.65 per cent, Statoil - 8.56 percent, Exxon - 8 percent, TPAO - 6.75 percent, Itochu - 4.3 percent and ONGC - 2.72 percent.
Although mainly a crude oil and condensate exporter, according to Eastern Bloc Energy, Azerbaijan exports small volumes of refined petroleum products to its neighbors, including diesel, gasoline, and jet fuel, with the majority of the refined product exports destined for Russia and Georgia.
With the startup of the Shah Deniz natural gas and condensate field in late 2006, Azerbaijan became a natural gas net exporter. Although historically an oil producer, Azerbaijan's importance as a gas producer and exporter is growing, EIA believes.
Reserves at the Shah Deniz field are estimated at 1.2 trillion cubic meters of gas. The contract on development of the Shah Deniz offshore field was signed on June 4, 1996. Stakeholders are: BP (operator) - 25.5 percent, Statoil - 25.5 percent, NICO - 10 percent, Total - 10 percent, Lukoil - 10 percent, TPAO - 9 percent and SOCAR - 10 percent.
Gas to be produced within the second stage of Shah Deniz field development will be the main source for the Southern Gas Corridor, which envisages the transportation of Caspian gas to the European markets. It is predicted that gas production can be brought up to 24 billion cubic meters (bcm) a year during the second stage of the field's development.
According to BP, gas production in Azerbaijan amounted to 15.6 billion cubic metres in 2012, which is 5.1 percent more than in 2011. Azerbaijan's share in global oil production amounted to 0.5 percent in 2012.
Recently, the Industry and Energy Ministry announced that currently the country's proven gas reserves are at the level of 2.6 trillion cubic meters, while the oil reserves amount to 2 billion tons.
The cited indicators ensure future development of the gas industry in Azerbaijan for a period exceeding 100 years.
According to the projections, the country's oil production will hit 51 million tons in 2015. Meanwhile, Azerbaijan's gas production will exceed 30 billion cubic meters in 2015.
Azerbaijan produced about 2 billion tons of oil in the period from 1847 to 2012 and about 650 billion cubic meters of gas from 1928 to 2012.