S&P Global Ratings says SOCAR may need more investment as output declines

In its baseline scenario, S&P Global Ratings forecasts a gradual decline in hydrocarbon production at Azerbaijan’s state oil company SOCAR.

This outlook may require additional investment in the company’s Upstream segment, Caliber.Az reports, citing S&P Global Ratings.

Based on the agency’s estimates, SOCAR’s own assets produced 7.5 million tonnes of oil and 7.7 billion cubic meters of natural gas in 2024.

The company also holds minority stakes in major international projects, the most significant being Azeri–Chirag–Gunashli (ACG) and Shah Deniz.

The agency notes that while SOCAR’s resource base remains substantial, output is expected to continue decreasing in line with the company’s current production profile. This is primarily because ACG has already passed its peak production, while Shah Deniz has recently shown signs of declining output.

Given that Upstream is SOCAR’s main source of EBITDA and the core of its operational activity, S&P anticipates increased investment in new field development or expansion of existing projects.

To reflect this expected expenditure, the agency includes in its baseline forecast roughly 3 billion manats in annual capital spending, exceeding investment levels of the past two years.

S&P emphasises that the nearly completed Shah Deniz-2 project and the Shah Deniz Compression project signed earlier this year demonstrate SOCAR’s continued efforts to boost production and strengthen its operational capacity through further Upstream investments.

By Jeyhun Aghazada