RATE LOSSES NOT TO BE TAKEN INTO ACCOUNT IN BUDGET OF OIL FUND

BAKU/07.01.05/TURAN: The Observing Council meeting of the State Oil Fund of Azerbaijan (SOFAR) chaired by Prime Minister Arthur Rasizade was held on 5 January. They discussed the draft of the 2005 budget, the currency composition of the investment portfolio, and the tax status of the SOFAR.

Speaking at the meeting, the Executive Director of the SOFAR, Mr. Samir Sharifov said that, according to the SOFAR budget confirmed by the Parliament as part of the total budget of Azerbaijan, except the costs of operations and asset management, the incomes would total AZM 1,078 billion, and the costs would total AZM 1,057 billion. This year the SOFAR plans to spend AZM 202 billion on solving the social problems of refugees and internally displaced people, AZM 105 billion on funding Azerbaijan's share in the Baku-Tbilisi-Ceyhan (BTC) main oil export pipeline, and AZM 750 billion on transfers to the state budget. The costs of management, including those of hiring foreign managers, are to total AZM 15.8 billion.

The meeting noted that the worldwide decrease in the USD rate could cause the SOFAR to spend too much on the rate re-evaluation because of the major part played by the US currency in it. These costs should be taken into account in the SOFAR balance in accordance with the international accountancy standards. But as the exact forecast of these costs is rather difficult, the Observing Council decided to take them into account as non-budgetary costs after re-evaluation. The changes in the annual estimate of costs concerning the SOFAR management are to be submitted to the President of Azerbaijan for approval.

The meeting also considered the currency structure of the investment portfolio and the possible release of the SOFAR from enterprise profit tax payment. They decided to consider the tax status of the SOFAR again during the preparation of the draft state budget of 2006.

Mr. Arthur Rasizade was elected as Chief of the SOFAR Observing Council again.

CPC SHAREHOLDERS PLAN TO EXPORT UP TO 12 MILLION TONS OF OIL THROUGH BAKU-TBILISI-CEYHAN PIPELINE DUE TO CAPRISES OF RUSSIAN GOVERNMENT

BAKU/04.01.05/TURAN: Delays with expansion of the main pipeline of the Caspian Pipeline Consortium is leading to transportation of Kazakh oil bypassing Russia. The principal shareholder in CPC - international joint venture Tengizchevroil is seeking alternative routes in preparation to increasing of oil production.

RusEnergy reports that ChevronTexaco (USA) prepared a discussion argument for the upcoming sitting of the CPC Board of Directors. ChevronTexaco shares 15% in the CPC and 50% in the Tengizchevroil (TCO) and intends to report that additional millions of tons of oil to be produced starting 2006, will be carried through the Caucasus.

Involved into development of Tengiz and Royal fields, TCO is implementing a large-scale project of production growth.

ChevronTexaco is the main opponent of Russian Government's suggestion on significant increase of the CPC tariff. The Russian Government was previously prone to give up this plan, but is now linking it to expansion of carrying capacity of the CPC pipeline. Oil exporter shareholders under support of Kazakhstan intend to increase oil exportation from 28 million tons annually to 67 million tons annually, because Tengizchevroil will otherwise have problems with transportation of growing volumes of hydrocarbons.

It should be noted that prior to launching of the CPC in 2001, Russia fixed transit fees at $25 per 1 ton. Together with other expenses (collection of oil into reservoirs, tanker loading, standstill in sea port - Novorossiysk port works the maximum of 320 days annually due to poor weather), transportation of 1 ton of Tengiz oil to the Russian port totals $30. Several high-ranked representatives of the Russian Government announced the necessity of increasing CPC transit fees up to $38 per ton last year. Transportation of Kazakh oil to Mediterranean oil processing plants will cost another $5-6 more. This makes TCO shareholders to consider alternative routes of exportation of oil.

The American company plans to export some 12 million tons of oil annually bypassing Russia through the Baku-Tbilisi-Ceyhan pipeline, which the official Moscow considers unprofitable for Russia. ChevronTexaco may be followed up by other exporters as well.

It should be noted that filling of the BTC pipeline with Azeri oil will begin in April of 2005. The first tankerload of Azeri oil will be lifted from Turkish port of Ceyhan in quarter III of 2005. Such companies as Total (France), Eni (Italy), Inpex (Japan) and ConocoPhillips (USA) are going to use the BTC for transportation of their oil produced from the Kashagan field in the Kazakh Caspian sector, to the world markets.

Last correction date of the file: 24/7/2008 - 15:22:28