Industry Trend Analysis - OPEC, Ageing Fields Driving Downturn In Output - JUNE 2017


BMI View : Azerbaijan will maintain a strong level of compliance with the OPEC, non-OPEC production c ut deal. Commitment to the deal, alongside accelerated decline rates at some mature producing assets, will drive crude and condensates output into a 2.8% decrease y-o-y.

Early data from the OPEC, non-OPEC production cut deal supports our view that Azerbaijan's oil output will disappoint official estimates in 2017. In its energy balance for the year, the Azeri Energy Ministry forecast crude production in a range of 800,000-807,000b/d. This would answer the country's pledge to curb its output by an average of 35,000b/d, based on an October reference of 840,000b/d. In total it would imply liquids production of around 845,000b/d, once condensates and NGLs are added into the mix. This is significantly higher than our forecast for the year, which stands at 822,000b/d.

For January and February the ministry reported crude production of 794,000b/d and 776,000b/d, respectively, which would put compliance at 134.3% in the first month and 182.9% in the second. However, secondary source estimates differ. According to a range of secondary sources, October output averaged significantly lower than was stated, at 814,000b/d. Conversely, January and February output was higher, at 808,000b/d and 786,000b/d, respectively. Based on these estimates, compliance was just 17.1% in January, but rose to 80.0% in February.

Cuts Taking Hold
Azerbaijan Crude Production, '000b/d, & Compliance With Coordinated Cut Deal, %
Source: BMI, OPEC

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