REFORMS OF SOCAR
BACK TO THE FUTURE

Talks and different hearings on full or partial refurbishment of State oil company of Azerbaijan were rounded so long time.

In accordance with President of the country PA SOCAR "Oil and gas extraction at the sea" and PA SOCAR "Oil and gas extraction on the land" will be united in the whole structure and being on their base there will be established PA "Azneft". On the base of external economic links management (EELM) and "Azerneftejhizat" ("Azerneftsnabjeniye") it is being established the Marketing and economical transactions management. On the base of PA "Oil trunk pipelines" it is being found "Baku plant of Deepwater platforms". On the base of PA of SOCAR "Shelproyectstroy" it is established "Baku plant of deepwater platforms". On the base of PA "Azerneftyag" - SPP "Azernefteyag", on the base of PA"Azerneftynadjag" - SPP "Azerneftyandjag".

By words of president of SOCAR Natik Aliyev, the SOCAR reform is directed onto establishment of centralized management system, but does not stipulate staffs reduction. "The Decree is directed on SOCAR structure to be performed, strengthening of management and principles of marketing economy to be implemented. But definitely I declare that there no any reductions are expected; just only several leading employees will be passed to other positions, presumably, more lower ones than they were occupied before", - N.Aliyev stated

Hearings on massive dismissals commenced immediately following publication of the Decree issued by G.Aliyev in official press. The matter is that in the structure of

SOCAR there exists numerous management and departments, which duplicate its liabilities which certainly is caused to augmentation of oil and gas extraction cost price at SOCAR fields. Among them there are department of geology, exploring, development, objects to be constructed. In accordance with words of SOCAR's representatives, association of two PA companies into the joining management is "the first step onto oil and gas extraction profitability to be increased, simplifying by raw material production to be operated".

During 2002 "marine" PA SOCAR produced 7,384 mln tons of oil and 3,946 bln cub meters of gas, and "by land" PA accordingly 797,8 ths tons of oil.

Newcomers at the marketIn the Decree of President it is noted that by opening intended for privatization is announced the ones being income into staff of SOCAR, trust "Caspmornefteburstruoy", trust "Casmorneftsotsconstruction", and department of "Avtonagliyat".To SOCAR and Steering committee of opened to privatization of enterprises are authorized the responsibility for managing and property keeping of those enterprises up to the moment of their privatization. To Ministry of Economic Development it is authorized directly to implement the privatization.

Let us note that SOCAR trusts being opened for privatization intended for stabilize operation in terms of marketing economy is needed to receive many certificates for operation thereof as per international standards, for instance ISO or API.

Nowadays in that enterprises there are exports who could work at economical market having been known the trusts' experience, SOCAR will provide them by relevant customers.

However, for working with foreign companies which is deemed is more economically attracted, it is not enough to possess by many years experience work. Let us remind that by the only trust, which is capable to lead operations on international standards is SOCAR "Caspmorneftegasstroy", which received appropriate certificate from the Turkish Institute of standards. But azerbaijanian companies this year might appear the possibility to receive such certificates, as it is said, not leaving home. Starting from this year, Britain American Business-Center is intended to enlarge services for Azerbaijan companies and will promote them to obtain international certificates for works to be carried out on international standards.

"Appearance of certificate being issued will depend upon activity of the company. In the whole, just in some of registered in the centre companies there are international rights on running the said works. Now, here it is registered more than 250 azerbaijan companies and many of them had already received relevant works from the part of Br and contractors of that companies". - the Center noted.

Main vector of SOCAR

In the text of the Decree it is said that in accordance with SOCAR, by principal goal of the company is searching, exploring, preparation and oil and gas fields to be developed, including sites at land and sea. Except for that, SOCAR will be involved in oil, gas, condense and oil products to be transported. In duty of SOCAR there are entered stable provision of consumers requirements by energy carriers, other terms and services to be implemented and obtaining revenues. The Decree of head of country says that SOCAR president, the first vice president and vice presidents are nominated and released from their posts by President of Azerbaijan.

The structure of SOCAR is as follows :

Steering committee:

President

The first vice president

Vice president on geology and geophysic and oil fields survey

Vice president

Department of the company

Enterprises entering into the staff of SOCAR:

PA "Azneft"

PA "Geophysics and engineering geoligy"

Oil pipeline management

Marketing and economic transactions to be operated

Foreign investments to be operated

SPA"Szerneftyag"

SPA"Azerneftyanajag"

"Baku plant of deepwater platforms"

Export - import

New scheme of export and import transactions of the company is reflected in the basic provision which is subject to developed by SOCAR during month. Deprivation of status of Production amalgamation as to oil refinery enterprises of SOCAR envisages: that factories soon, will be operated as productive enterprises, having been preserved by that the status of legal entity, but performance of export bargains will be imposed upon Management of economical and marketing transactions (former external economic Department).

PA "Azerneftyag" and "Azerneftyanajag" rename in NPZ could deprive plants by constructional, transportation and small export-import divisions. NPZ will just produce oil products, and new management to export the production. In the whole, SOCAR and government of the country is satisfied with operation of Marketing and Economic transactions Management pursuant to which its expansion is being run. By the way, now the Management will deal with satisfaction of oil and oil products requirements and external and internal market. During 2002 Management of external economic links exported to the world markets 2,535 mln tones of oil and 905,1356 ths tons of oil products (produced at NPZ "Azerneftyanadjag"), PA "Azerneftyanag" exported 1,741 mln tons of oil products.

Today, both Azerbaijani NPZ are operating approximately by 40 % of own potential capacity. Each daily level of crude oil extraction makes up under SOCAR nearly 245 ths barrels. "Azerneftyag" is accounted on refinery of 230 ths barrels / day, but "Azerneftyanajag" - 200ths bar a day.