On April 9, 2020, 23 member countries of OPEC+ discussed the economic recession caused by Covid-19 pandemic and agreed to cut oil production by 9,7 million barrels per day from May 1, 2020, in order to balance supply and demand on the global market. The Republic of Azerbaijan, as a member of OPEC+, participated in the meeting and, along with other countries, committed voluntarily to production cuts in relevant proportions.
The Ministry of Energy, which represented Azerbaijan in the meeting, subsequently announced the terms of the agreement and the commitments undertaken by Azerbaijan. The Ministry proposed proportional sharing of the production cut quotas among the country’s oil producers. SOCAR, the State Oil Company of Azerbaijan, was ordered to carry out the implementation of the production cuts by the Cabinet of Ministers of the Republic of Azerbaijan.
The OPEC+ agreement considers temporary implementation of production cuts in three stages: first during May and June 2020, second between July and December 2020, third between January 2021 and April 2022. It was agreed to reduce production at a higher rate in the first stage, and to gradually restore production levels in the following periods. According to the international agreement, daily production in Azerbaijan should not exceed 554,000 barrels in May and June 2020, 587,000 barrels in July-December 2020 and 620,000 barrels between January 2021 and April 2022. These figures are applied only to crude oil, but not to gas condensate production.
Hence, the daily oil production is expected to be reduced by 96,000 barrels* in May-June 2020, by 63,000 barrels* in July-December 2020 and by 30,000 barrels* from January 2021 to April 2022, as compared to the initial national production plan for 2020.
SOCAR's Azneft Production Unit will initially reduce its daily production by 17,000 barrels* to 100,000 barrels*. In the following period, it will gradually increase its production adding 5,000* barrels to total output per day. Beginning from next year, it plans to add 6,000 barrels* more to daily production, which would bring Azneft’s total crude oil production to 111,000 barrels* per day.
Daily production on the Azeri-Chirag-Deepwater Gunashli fields is expected to be reduced by 76,000 barrels* in May and June. During the second stage of agreement, the operator of the fields - Azerbaijan International Operating Company (AIOC) - will be able to increase production by 27,000 barrels* per day, adding 26,000 barrels* per day in the next year. Thus, in 2021, the level of AIOC production is forecasted at 487,000 barrels* per day.
Other operating companies will initially reduce their production by 3,000 barrels* per day and then increase it by 1,000 barrels* in July-December, adding 1,000 barrels* per day in the next year.
As a result of measures arising from the OPEC+ agreement, between the beginning of May and the end of December 2020 Azerbaijan's oil production will decrease by 17.4 million barrels, amounting to 141.8 million barrels in total. In 2021, the country's total crude oil production is forecasted at 30.7 million tons or 226.3 million barrels. These figures do not include hydrocarbon production by the Shah Deniz consortium and the Umid Babek Operating Company, nor is the condensate production by SOCAR's Azneft PU and Bahar Energy Operating Company Limited included.
By the end of 2020, SOCAR's Azneft PU plans to suspend production at several oil and gas production facilities and conserve equipment in accordance with industrial requirements. The decision rationale for suspending particular fields is based on the assessment of field’s economic efficiency, technical sustainability, industrial safety and minimization of negative impact on the environment.
The suspension of operations is envisaged to take place mainly on the onshore fields with high production costs, whilst the exploitation of offshore fields with higher profitability is going to resume.
SOCAR employees, who become unoccupied as a result of the temporary production cut, will be involved in the conservation of wells and equipment maintenance. Therefore, following the suspension of some fields, no massive staff reduction is currently expected. The unoccupied employees will be registered in the Employee Reserve Database (ERD). They will be directed to SOCAR’s other units and departments in accordance with due legal procedures. SOCAR is suspending the external recruitment of personnel in the areas, which can be occupied by the employees in the ERD. Other measures have been planned as well, such as reskilling the unoccupied workers at SOCAR’s professional training centers.
* Note: Figures are rounded.
SOCAR conducts the digital transformation of its oil and gas production. SAP UFAM (a joint solution of SAP and OIS) will combine production processes in one system and will be integrated into the digital core of the enterprise - SAP ERP. The start of industrial operation of UFAM is scheduled for June 2020.
SOCARs vice-president for field development Yashar Latifov said: “SOCAR strives to use advanced technologies in business processes and production, while setting industry standards for oil production and supporting the government policy on digitalization of the economy. The implementation of UFAM platform will consolidate disparate data from various production systems. It will carry out integrated analysis to ensure that wells are operated in accordance with the approved potential, and also optimize geological and technical measures.”
A consolidated team from SOCAR, Caspian Innovation Center, SAP Digital Business Services and OIS are creating a single data source, which will allow for integrated planning, modelling, analysis and monitoring of all oil production processes.
In the first stage, it developed solutions for the main business processes, data and its integration with SOCAR measurement source systems, corporate data storage and SAP ERP digital core. The solution was implemented in the system of consistent algorithms and has been tested at two production departments of SOCAR. It demonstrated the functionality of the platform for selection of geological and technological measures, analysis of wells operations, integrated modeling and planning of the production process. The training for main users has already been finished. SOCAR’s responsible specialists have been appointed to various data groups to verify data and upload it to the system.
Launching the platform for industrial exploitation will enable SOCAR to achieve the following goals:
• a standardized approach to planning will ensure performance record of all production services affecting the output. That will significantly reduce intraday shortages;
• a permanent asset model will be realized in the integrated modeling subsystem to support decision making and calculating the pattern of static and dynamic constraints;
• all business facilities (well, pipeline, ground equipment, energy facilities, etc.) will be displayed on the map of monitoring panel in real mood with a presentation of their passport, target and current operation parameters
Dmitriy Pilipenko, CEO of SAP CIS said: “SAP UFAM is the first product developed in the CIS and included in the global SAP price list. This means that the solution meets high international standards and local customer needs as well. The system takes into account many indicators in its work, from the reservoir to the oil delivery unit, which allows us to transform production processes. We are pleased that for 10 years SOCAR has been choosing SAP solutions for the implementation of projects of strategic importance for the whole country.”
OIS is a leading Russian IT company with more than 20 years of history specializing in the creation and implementation of IT solutions for the oil and gas sector. Many OIS solutions are standards in the oil and gas sector in the Russian Federation. The company employs about 260 people and has offices in 13 cities in the Russian Federation. OIS has been an SAP partner since 2016, the SAP UFAM solution is the first Russian partner solution included in the global SAP price list.
Caspian Innovation Center (CIC) was founded in 2017 as a joint venture of SOCAR and IBM. The main goal of the enterprise is to implement various solutions based on SOCARs industrial experience and the knowledge of leading companies in the field of data analysis. CIC has prepared a strategic plan for digital transformation of SOCAR and carries out that plan.
CIC is a center of digital technology and expertise and it is active not only in Azerbaijan, but rather in the whole Caspian region. During short time of existence, it managed to widen the area of activity, encompassing Uzbekistan, Turkey, Georgia, and Romania. CIC experts have profound experience in the implementation of various SAP modules. They can work in various fields, including consolidation of financial reports, procurement, and production management, building platforms for drilling management etc.
The company aims at creating a one-stop shop for data processing and projects in the field of Internet of the Things, Blockchain and AI technologies.
SAP is a global leader in corporate application market. More than 413,000 customers in 180 countries around the world are using SAP solutions and services. In 1992, SAP SE opened its office in Moscow, now the number of SAP CIS employees is about 1300 people, the company is represented in all CIS countries. In 2012, the SAP Labs Research and Development Center was opened in Moscow, which now has divisions in St. Petersburg and Izhevsk.
SAP is the multinational software corporation that has its own data center in Russia and is constantly improving its capacity.
For more than 25 years, SAP has been helping domestic companies to transform and optimize their businesses based on innovative solutions. In July 2018, the SAP Digital Leadership Center was opened in Moscow. It is an innovative hub for events, demonstrations of new technological solutions and joint developments with customers and partners.
The company actively invests in training, increasing competencies and developing ecosystem expertise. More than 60 universities in Russia receive free access to SAP software for educational purposes. Since 2017, 12 SAP Next-Gen Labs - innovation centers for students and young IT professionals have been opened there.
Please find more detailed information at www.sap.com and www.sap.ru.
For all questions related to the activity of SAP in Russia, please contact Тatyana Zvereva (email@example.com), in CIS countries -Darya Gerasimova (firstname.lastname@example.org).
In the first quarter of 2020, SOCAR produced 1,9 million tons1 of oil, 1,8 billion cubic meters2 of gas on the fields exploited by its own. Nationwide natural gas production grew by 10% compared to the first quarter of the previous year and amounted to 10 billion cubic meters3 , oil production equaled to 9,3 million tons4 . Despite some growth in production on the fields, operated by SOCAR, the managed decline in the country’s overall oil production continued in the first quarter of 2020.
SOCAR carried out nearly 26 thousand meters5 of drilling work, including about 9 000 meters6 in March.
In the first quarter of 2020, SOCAR’s Heydar Aliyev Oil Refinery processed more than 1,5 million tons of crude oil7 . SOCAR Gas Refinery processed more than 1,1 billion cubic meters8 of gas in that period. SOCAR’s petrochemical unit Azerikimya refined about 167 thousand tons9 of intermediate products.
SOCAR exported about 5,4 million tons10 of crude oil in the first quarter of this year. 3,5 billion cubic meters11 of natural gas have been exported from the country in the past three months. This year the actual level of gas consumption amounted to 4,1 billion cubic meters12 , which exceeds the last year’s figure by 7%. The export of oil and petrochemical products amounted to nearly 534 thousand tons13 in January-March 2020.
During the reporting period, about 94 thousand tons14 of methanol, about 43 thousand tons15 of urea were exported. This year SOCAR Polymer produced more than 49 thousand tons16 of polymer products. More than 43 thousand tons or 89% of polymers17 were exported, while about 5%18 was realized on local market.
The main perceptible change in SOCAR's production figures in the first quarter of this year is that SOCAR directs more crude oil and natural gas to domestic refineries. Therefore, today the export is realized increasingly in the form of chemical products, which creates a higher value than the export of crude.
1 - 1.921.198 tons
2 - 1.814.130.000 cubic meters
3 - 9.991.314.000 cubic meters
4 - 9.305.012 tons
5 - 25.566 meters
6 - 8.933 meters
7 - 1.542.190 tons
8 - 1.124.710.000 cubic meters
9 - 166.607 tons
10 - 5.390.065 tons
11 - 3.536.763.000 cubic meters
12 - 4.136.777.000 cubic meters
13 - 533.613 tons
14 - 93.562 tons
15 - 42.996 tons
16 - 49.105 tons
17 - 43.466 tons
18 - 2.265 tons