Fitch Ratings said it expects SOCAR's own oil production to decline gradually in 2014-2016 from the depletion of existing brownfields in Azerbaijan, SOCAR's only upstream region.
At the same time, the agency forecasts higher natural gas production from Azerbaijan's PSAs, in particular the Stage 2 of the Shah Deniz PSA.
In December 2013, the Shah Deniz Stage 2 partners approved the final investment decision with a USD28bn cost estimate, including the South Caucasus Pipeline expansion. Once completed, the project aims to increase production by 16 billion cubic meters of gas and 4 million tons of gas condensate starting from late 2018.
Fitch said it estimates that SOCAR will spend over AZN7bn (USD9bn) on capex in 2013-2016. The company has little capex flexibility as most funds are earmarked for its upstream business to arrest brownfield production decline, to meet its obligations under the PSAs and to complete projects that are already underway, including the construction of the STAR refinery.
“We forecast that under Fitch's oil price deck of USD96 per barrel of oil (bbl) in 2014, USD91/bbl in 2015 and USD85/bbl in 2016, SOCAR's FFO net leverage will reach 1.9x in 2016, up from 1.5x in 2012,” it said.
Bakudaily.az
