Azerbaijan - From Camels to Pipelines

Azerbaijan has always formed an important bridge between east and west. Today, pipelines, oil and gas have replaced camels, spices and silk as important elements in this bridging role.

Azerbaijan has fought its way out of the political and economic crises of the 1990s and has experienced positive economic growth since 1996. Still, Azerbaijan has just begun on its road to sustainable growth and development. The country's GDP is recovering slowly and a strategy to combat poverty is now in place. More than 800 000 refugees and IDPs are still waiting to return to their home lands.

Statoil's most important contribution to the development of Azerbaijan must necessarily derive from our commercial involvement in the country. However, we also have a broad social commitment beyond our core business. The following section will take a closer look at how we aim to contribute to sustainable development in this nation on the shores of the Caspian.

Economy

Azerbaijan is now on the threshold of the third historical oil boom. Investment in the projects under development could reach a total of USD 20 billion in the years to come. Statoil will be one of the largest foreign investors. Investments and spending not only yields a financial reward for the companies involved, but also promote employment, growth and industrial spin-offs in the host countries.

The projects in which we are involved open great development opportunities. Calculations done for ACG, BTC, Shah Deniz and SPC indicate that they could provide a revenue base for Azerbaijan, Georgia and Turkey of between USD 27-65 billion depending on oil price level. In addition comes the effects of employment, operating expenses, etc. on domestic demand and development.

In addition to the revenues and opportunities created through our investments, Statoil is involved in a number of areas with the aim of promoting development opportunities for Azerbaijani industry.

* We are co-owner of the Enterprise Centre (www.ecbaku.com), which opened in May 2002. This facility has been established by foreign oil companies to increase business opportunities for local industry. Offering training, support and advice to small and medium-sized enterprises (SMEs), it reached its 2002 goal of expanding the commercial involvement of local companies in the projects by 25 per cent. Even more ambitious targets have been set for 2003.

* Statoil headed-up the work on Azerbaijan's first Gas Master Plan (1996-1999) done in close cooperation with Socar and Azeriqaz. The project analysed Azerbaijan's opportunities and challenges in the gas sector, both domestically and internationally. The final report gave important guidance to the Shah Deniz development, and many of the report's recommendations have been transformed into concrete action.

* Statoil was instrumental in establishing the Business Development Alliance (BDA). Inspired by the Norwegian experience, the BDA works for increased local participation in the petroleum industry. It began in 1999 as a collaboration forum for companies and non-governmental organisations. Statoil was one of three oil companies which agreed in 2002 to part-fund the creation of a permanent secretariat with a general manager.

* Together with BP and other oil companies, we are set to participate in a collaboration with the World Bank's International Finance Corporation (IFC) and Germany's GTZ development agency. This three-year programme will offer tailored technical and financial advice to local sub-contractors in the oil and gas sector. The aim is to improve the opportunities of Azerbaijani companies to take part in the international projects.

The environment

The impact we make on the natural environment derives primarily from our participation in petroleum projects. Together with BP, we have worked actively for a number of years to establish the high HSE standards which now apply in the projects. Comprehensive environmental and social impact assessments have been carried out by the projects, and boundaries have been moved in terms of transparency: It is an historic step that impact assessments, production sharing agreements and other key documents now can be downloaded from the internet (ref. www.caspiandevelopmentandexport.com).

We have also initiated or supported a number of additional measures to promote HSE in Azerbaijan.

* Our business in Azerbaijan was the first international upstream office in Statoil to be certified to the ISO 14001 standard for environmental management.

* We helped to establish the first environmental laboratory in Azerbaijan with an important role in local analysis and monitoring in Azerbaijan.

* We have collaborated for a number of years with Baku's Western University over programmes on ecology and the environment. Together with Norway's Ministry of Foreign Affairs, we fund courses and provide guest lecturers.

* We cooperate with the Organisation for Security and Cooperation in Europe (OSCE) on a programme for environmental monitoring of rivers in the Caucasus. Transboundary river pollution can only be resolved through transnational collaboration. Between 2003-2006, scientists and academicians working on the environment in Azerbaijan and Georgia will have their salaries funded by Statoil.

* In 2002-03, we co-funded the work to establish national safety regulations in compliance with international standards.

Society

On our own and through the PSAs in which we participate, Statoil is contributing a total of USD 2,4 MUSD to various social and environmental projects in Azerbaijan in 2003. Particular emphasis is given to continuing our collaboration with Statoil's partners - the UN High Commissioner for Refugees (UNHCR), the Red Cross and the Norwegian Refugee Council. With our corporate partners we contribute to Azerbaijan's own efforts in solving key developmental challenges.

Social Investment Projects

* We have collaborated with the Norwegian Refugee Council (NRC), Norway's foreign ministry and the Azerbaijani Ministry of Education since 1998 on human rights education in Azerbaijani schools. Several new textbooks have been developed in Azeri in an effort to promote this subject as an integrated part of the curriculum. At the end of 2002, 14 regional training centres had been established and the long-term aim is to reach 18 000 teachers in more than 4 000 schools nationwide. Nine hundred teachers will be trained by the NRC in 2003.

* Azerbaijan's refugees are perhaps the most socially disadvantaged group in the country. Access to basic social services such as health and education is hampered by difficult economic conditions. Statoil is contributing USD 100 000 in 2002-03 through the UNHCR to rehabilitating primary schools in Baku's refugee communities. This work is being done by two local NGOs, Hayat and Umid. Almost 20 schools were built or upgraded in Baku and Sumgait during 2002, and the programme for 2003 covers a similar number.

* The International Federation of Red Cross and Red Crescent Societies is one of the most experienced providers of development assistance in Azerbaijan. We concluded an agreement with the Red Cross in 2002 on helping internal refugees in the village of Alkhanli in liberated Fizuli. Reconstruction work has been led by the Red Cross for a number of years with the aim of repatriating IDP families. We are contributing USD 100 000 in 2002-03 to an agricultural project for refugee families who have returned home. With our help, 100 hectares of farmland have now been prepared for wheat growing providing both employment and income.

* In connection with the 10th anniversary of Statoil's presence in Azerbaijan in 2002, we donated USD 50 000 to the Refugee Council's housebuilding project for internally displaced people in the village of Beylagan near the area occupied by Armenia. This gift made it possible to build about 20 new family homes.