TWENTY-FIVE PER CENT OF STATE OIL FUND'S INCOMES TO BE SAVED FOR FUTURE GENERATIONS

BAKU/29.12.04/TURAN: The Executive Director of the State Oil Fund of Azerbaijan (SOFAR), Mr. Samir Sharifov, spoke at the presentation of the long-term management strategy concerning incomes from the oil and gas industry. He said the state was rather conservative in appraising the future incomes from oil. The parameters of these incomes are calculated, referring to three forecasts of changes in the world prices of oil, i.e. $16, $20 and $24 per barrel. "The first option is to generate a state income of $25 billion and the second option is to make it $45 billion in 2005-2025," he said (NOTE: the third option will generate an income of $60 billion).

Mr. Sharifov said the strategy took into account the increase in the output of hydrocarbons, the sharp increase in the incomes related to oil and gas from 2009 onwards, and the expected exhausting of the hydrocarbon resources in a rather short period of 20 years. The strategy is mainly aimed at creating a favorable macroeconomic environment for economic develoment, and making the economy less dependent on the oil factor.

The strategy envisages appraisal of the future hydrocarbon-related incomes of Azerbaijan, first of all concerning the exploitation of the Azeri-Chirag-Guneshli, Shahdeniz and other hydrocarbon deposits on production-sharing agreements. The part of Azerbaijan in those contracts, the enterprise profit tax imposed on the foreign oil companies, and the money paid by the State Oil Company (SOCAR) and its joint ventures to the state budget are evaluated as the sources of the incomes.

Taking into account that the SOFAR should also serve the future generations of the Azerbaijan people, 25% of the income will be saved during the biggest rise of the hydrocarbon-related incomes of Azerbaijan in 2009-2018. The rest of the income can be spent in the following key directions envisaged by the strategy:

- Development of the non-oil sector of the national economy, the regions and the small and medium-range enterprise;

- Development of the infrastructure;

- Poverty reduction and settlement of other social problems;

- Improvement of the intellectual and technological foundation of the economy;

- Development of the human resources;

- Improvement of the national defense.

Speaking about that, Mr. Sharifov said the directions could be corrected and amended in the future.

The long-term management strategy concerning the hydrocarbon-related incomes in 2005-2025 was confirmed by the President of Azerbaijan on 27 September 2004.-

FOREIGN OIL COMPANIES RECEIVE ALMOST 50% OF REVENUE FROM EXPORT OF OIL

BAKU/22.12.04/TURAN: Azerbaijan exported oil and oil products totaling $2,107 billion in January-September 2004. That was 81.4% of the total export of Azerbaijan. The part of oil in the export decreased by 7% against January-September 2003, though the index of the export of oil and oil products increased by 26%.

The January-September export of crude oil totaled $1,612.7 million or 76.5% of the oil export. It was $233.4 million more than the January-September 2003 index. The Azerbaijan International Operating Company (AIOC) produced a part of the exported crude oil, which totaled $1,219.4 million against the index of January-September 2003, which totaled $991 million. A part totaling $997.8 million (against $820.9 million) was supplied to foreign oil companies, while a part totaling $221.6 million (against $170.1 million) was supplied to Azerbaijan. The State Oil Company of Azerbaijan and other local companies exported crude oil totaling $393.3 million (against $388.3 million).

Meanwhile, Azerbaijan imported natural gas totaling $179.2 million (against $161.9 million).

So the net revenue of Azerbaijan coming from the foreign economic business of the oil and gas industry totaled $930 million in January-September. It is $340.7 million more than the January-September 2003 index. -

IS AZERBAIJAN INDEED CONCERNED ABOUT GROWTH OF SHAH DENIZ PROJECT COST?

BAKU/20.12.04/TURAN: Azerbaijan is concerned about growth of the Stage- 1 project cost within the development of gas condensate field Shah Deniz in the Azeri Caspian sector. This statement was made by Azeri President Ilham Aliyev last week.

"The growth of the project costs concerns both us and the investing party", said the Head of State. At the same time, he said that it happened "quite often".

Aliyev noted that both parties were not interested in growth of expenses. "However, this is a very large and important project for the future of Azerbaijan, and it must necessarily be implemented", said the President.

It should be reminded that BP-Azerbaijan announced last week that the expenses on implementation of the Stage-1 project of the Shah Deniz field development may increase by 25%.

It should be reminded that the Stage-1 envisions production of 178 billion cubic meters of gas and 34 million tons of condensate, as well as construction of export gas pipeline Baku-Tbilisi- Erzurum for gas exportation to Turkey. When Shah Deniz shareholders authorized the Stage-1 project in February of 2003, its cost was approved at $3.2 billion, of which $2.3 billion fell at the project of early development of hydrocarbons, and the remaining amount - for the construction of export gas pipeline.

It should be stressed that as First Vice President of the State Oil Company of Azerbaijan in October of 2002, Ilham Aliyev also expressed his concern about growth of Stage-1 project cost by $600 million. However, SOCAR's foreign partners did not share the future President's considerations and had the increasing budget of the Stage-1 project approved by the Government of Azerbaijan. One year later, SOCAR's foreign partners successfully increased project cost of construction of the BakuTbilisi-Ceyhan oil pipeline. At first, they added over $300 million for the conduction of negotiations and preparation of documents for the receipt of credits from banking and financial organizations and by the end of 2004 nearly enlisted SOCAR's consent for provision of additional $400 million for the completion of the BTC project.

It should be reminded that no projects were completed "turn key" within approved budgets ever since SOCAR signed its first PSA project on the 20th of September, 1994. The Azeri Government's loyalty to increases of project costs is not easy to understand, because the special operations result in reduction of Azerbaijan's profits.

One may therefore consider why petroleum companies pompously express their respect to the leadership of Azerbaijan for its attractive oil strategy at all large-scale economic forums? Similar statements were previously made on Kazakhstan. However, after the official Astana demanded transnational companies to observe the elementary business ethics principles in respect to the young state, an anti-company was launched. However, resolute activities of the Government of Kazakhstan prevented transnational companies from dictating their conditions in the territory of Kazakhstan. As the result, petroleum giant British Petroleum no longer works in Kazakhstan, and British Gas, prohibited by the official Astana from "trading" with other foreign companies, is abandoning its Kazakh assets in several months. Besides, the Government of Kazakhstan is gradually strengthening its control over projects, operated by foreign companies (justified taxation sanctions, publication of quarterly financial reports, profit contribution to social projects, etc).--

PHASE-1 OF EXPLOITATION OF SHAH DENIZ GAS DEPOSIT CAN INCREASE BY 25% IN PRICE

BAKU/15.12.04/TURAN: "Phase 1 of the exploitation of the Shah Deniz gas deposit, which totals $3.2 billion, can get dearer by 25%," the press service of BP-Azerbaijan reported.

"We are discussing the final estimate of costs on Phase 1 with the shareholders and the Azerbaijan side. More entire information will be released during the news conference of the company's management, which is scheduled for 21 December. But we initially expect the costs to increase by 25%," they stated.

However, the official statement of the European Bank for Reconstruction and Development read on 14 December after the credit treaty on Shah Deniz was signed with the State Oil Company of Azerbaijan that the Phase 1 project totaled $4.3 billion.

It was supposed earlier that the costs of the exploitation of the deposit and the extraction of the gas would total $2.3 billion, while the construction of the South Caucasian Baku-Tbilisi-Erzurum (BTE) gas pipeline being 690 km long would total $0.9 billion. So the total of the Phase-1 costs would come to $3.2 billion. There would be 442 km of the pipeline in Azerbaijan and 248 km in Georgia.

* The Shah Deniz contract was signed in Baku on 4 June 1996 and ratified by the Parliament of Azerbaijan on 17 October. The following companies take part in it: BP (the operator - 25.5%), Statoil (25.5%), SOCAR (10%), LUKAgip (10%), NICO (10%), TotalFinaElf (10%), and TPAO (9%).

** The reserve of Shah Deniz is believed to include 625 billion cubic meters of natural gas and 101 million tons of condensed gas. Phase 1 sanctioned on 27 February 2003 envisages the extraction of 178 billion cubic meters of gas and 34 million tons of condensed gas and the construction of the BTE gas pipeline to export gas to Turkey. --

SOCAR TO COMPLETE PROCEDURE OF ATTRACTING FUNDS FOR FINANCING ITS SHARE IN EXPLORATION OF GAS CONDENSATE FIELD SHAH DENIZ TODAY

BAKU/14.12.04/TURAN: The State Oil Company of the Republic of Azerbaijan (SOCAR) has completed the whole scope of measures on drawing funds for financing its share (10%) in exploration of gas condensate field Shah Deniz.

The Credit Agreement between the leadership of SOCAR and the European Bank for Reconstruction and Development (EBRD) was signed within Azeri President Ilham Aliyev's visit to Great Britain, today.

Further to the agreement, EBRD will award a $170 million credit to SOCAR. SOCAR itself attracted $50 million for financing its share in the Shah Deniz project. It should be reminded that SOCAR's revenues from profit oil produced by the international consortium AIOC from the Chirag field, were used for this purpose.

The technical agreement on award of $170 million credit by EBRD to SOCAR was signed in Baku on the 4th of November of this year. SOCAR president Natig Aliyev said to journalists then that $110 million will be utilized for the field development, and another $60 million - within the project of construction of the export gas pipeline Baku-Tbilisi-Erzurum (SCP).

It should be stressed that total cost of early oil production project within the development of Shah Deniz field is $2.3 billion, SCP - $900 million.

The first gas from the Shah Deniz field is expected in the end of 2006. Initial recoverable resources of the field are estimated at 625 billion cubic meters of gas and over 100 million tons of condensate. The Shah Deniz project shareholders are BP (25% - operator), Statoil - (25.5%), SOCAR (10%), LUKAgip (10%), Iranian NIOC (10%), Total (10%) and Turkish company TPAO (9%).--0--

STATE OIL FUND SELECTS COMPANY TO AUDIT TRANSPARENCY INITIATIVE IN EXTRACTION OF MINERAL RESOURCES

BAKU/10.12.04/TURAN: The State Oil Fund of Azerbaijan (SOFAR) invites tenders to select an audit company to check the reports of the government, local and foreign companies on the implementation of the Mineral Resource Extraction Transparency Initiative.

The tenders are acceptable at the SOFAR until 18:00, 16 December. The company chosen will have to audit the reports of 2003 and the first six months of 2004.

For more information contact 498 77 53 (extension 132).

* The Mineral Resource Extraction Transparency Initiative envisages reports of oil companies about their payments to the government and reports of the government about the incomes received from oil companies. The audit company will analyze the reports, summarize them and publish the results. The reports will be published twice a year. The semiannual report will be published before 15 August, and the annual report will be published before 15 March. --

INTESA SELLS ITS SHARE IN PROJECT OF BTC PIPELINE CONSTRUCTION

BAKU/03.12.04/TURAN: Banka Intesa (Italy) has sold a part (30%) of its share in financing of construction of the Baku-Tbilisi-Ceyhan oil pipeline. Negotiations on sale of the remaining share in financing of the project are underway, Financial Times reported yesterday.

"We confirm the sale of a part of our investments into BTC project. Besides, we are negotiating full sale of our share in the project, with several interested parties", a representative of Banka Intesa stated.

* Banka Intesa financed $60 million in the project

Last correction date of the file: 24/7/2008 - 15:22:35