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Azerbaijan - energy, Azerbaijan

Zelle Acrouba

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Because of its vast oil and natural gas reserves, Azerbaijan historically has been an important energy state. Azerbaijan today is a primary supplier of oil and related equipment to the states of the former Soviet Union. Currently, Azerbaijan's energy industry is largely a state controlled industry which is divided into two distinct sectors: oil extractio and oil refining. Azneftemash, a ruble holding company, controls nearly all of Azerbaijan's oil equipment industry, which heav ily depends on the former Soviet Republics for its intermediary inputs, and serves as a primary distributor of oil in Azerbaijan. Recoverable oil reserves, mostly in offshore fields, are officially reported to be almost one billion metric tons and gas reserves 500 billion cubic meters. Close to 10 percent of Azerbaijan's Caspian Sea reserves has been explored for oil and the rest is expected to be equally rich. At present, the Azerbaijan oil industry is faced with declining productivity due to outdated equipment, an archaic infrastructure, inadequate investment and other inefficiencies inherited from the Soviet era. Recognizing the significance of the oil industry, the government of Azerbaijan has embarked on the import ant task of modernizing its energy sector. Contacts with foreign oil companies have been intensified and signif icant institutional changes initiated. Similar steps are being taken to streamline the energy sector, and a new administrative unit has been formed to supervise the sector's overall structure and performance. In order to further encourage foreign investment in Azerbaijan's energy sector, the parliament is working on legislation to facilitate the negotiation process currently under way with Western oil companies for pro duction and exploration rights. Oil Extraction- There are four major oil fields in Azerbaijan - the Guneshli, Chirag, Azeri and Kapaz. The Guneshii, Chirag and Azeri constitute, in effect, one large oil field, with the Guneshli accounting for 60 percent of the crude oil production in Azerbaijan. The amount of natural gas that can be captured from existing oil wells is estimated at 2.5 billion cubic meters annually. Oil Export Delivery - Present oil exports, primarily to the former Soviet Republics, are primarily conducted via rail to the Black Sea ports of Novorossisk in Russia and Odessa in Ukraine; a lesser amount is shipped by tanker across the Caspian Sea to northern Iran. Oil Refining - Azerbaijan's total refining capacity of about 20 million tons per year is distributed among two refineries located on the outskirts of Baku. Azneftyag, the older refinery, accounts for 60 percent of total refining capacity of Azerbaijan. Current domestic production of crude oil does not meet the maximum refin ing capacity of Azerbaijan and crude oil is regularly imported from Russia and Kazakhstan. Even so, Azerbaijan's total refining capacity remains under-utilized. Refined petroleum products are exported to the former Soviet republics and to other markets. Mix of Refinery Outputs (1991-1992) a Fuel oil (48 percent),
- Diesel oil (27 percent),
- Gasoline (9 percent),
- Kerosene (including jet kerosene) (8 percent),
- Other products (8 percent).