WE ARE IN AZERBAIJAN FOR THE LONG TERM

Mr. Gundersen, Statoil has been working in Azerbaijan and Caspian for more than 10 years, how would you assess the rate of realization of Statoil's Caspian projects?

President of Statoil Azerbaijan Mr. Georg Karl Gundersen: Statoil's current focus is primarily on the timely and successful development of the four world class projects ongoing in Azerbaijan: the Azeri-Chirag-Guneshli full field development; the start-up of the Shah Deniz gas condensate field development; and also the construction of the Eurasian transport corridor "named after Heydar Aliyev" - Baku-Tbilisi-Ceyhan and Baku-Tbilisi-Erzurum pipelines. All of these projects are now moving forward quickly and becoming a reality. We also hold a 15% share in the Araz-Alov-Sharg prospect, where I hope work will also commence in the nearest future.

Araz-Alov-Sharg, in the opinion of the Iranian side, is a disputable field, a result of that Caspian status has not been settled yet. How much is the company's work troubled in view of this?

The issue of Caspian delimitation is a challenge between the five Caspian countries and I hope it will soon be solved. That would enable drilling of new prospects in the Caspian Sea, in Azerbaijan as well as the other countries. We know that intergovernmental consultations are ongoing. As an industrial player we are just waiting for this problem to be solved so that we can start our work as soon as possible.

Statoil is engaged in marketing of Azerbaijan gas in European markets, which works are being done in this direction, are there any results?

In the gas world, there are regular contacts between potential sellers and potential buyers of gas. However, there is a big difference between informal contacts and talks, and formal negotiations. The Shah Deniz partnership is now working hard to identify and assess the market opportunities that exist for further developments of the field. Exactly when formal negotiations can be started with potential buyers is hard to say. We aim to progress Shah Deniz as quickly as possible both on the technical and commercial sides.

Early March during his visit to Kazakhstan the Azerbaijan president Ilham Aliyev sounded the possibility of underwater gas line laying for export of Kazakhstan gas via the future Baku-Tbilisi-Erzurum pipeline. Is the Shah Deniz consortium doing any works in this direction today?

It is difficult for me to comment on a specific statement that I haven't heard or know the details of. Nor am I aware of any concrete studies of such a Transcaspian gas pipeline to Azerbaijan. In general, however, many complex projects have in fact been realized even if some from the outset said they would be impossible. Technological capabilities are developing extremely fast these days. There were huge limitations on laying of subsea pipelines back in, say, 1984 - today, they are normal practice, and 1,000 km subsea pipelines are already laid at the depth of over 2000 meters! From a technical point of view, I don't see any problem in laying subsea pipelines in the Caspian. The commerciality of such a project would surely have to be studied in detail.

Today the opponents of this project have arguments of the region's active geodynamics, its ecological vulnerability, how solvable is this problem?

Before realizing any project, all the aspects - technical, commercial, environmental, etc. - must be carefully assessed. Only from such assessments can a decision be made as whether to continue the project. This would of course also be the case with the concrete project that you are referring to.

Today Norway takes practically the leading place for gas deliveries to EC markets and is the major competitor of the Russian monopolist Gazprom. Does it mean that Azerbaijan gas will enter the competitive struggle for sale markets when it appears in the market?

No, there will be no direct competition between Norwegian and Azerbaijani gas in Europe. From a purely economic point of view, a main driver in the gas business is the distance between the gas source and the marketplace. Norwegian gas has its primary markets in the Northern part of Europe and the UK. If moving towards Europe, Azerbaijani gas would most likely find its market further to the south and east in Europe.

Does it mean that Statoil is not familiar with south European markets, where it has not worked yet?

No, we are familiar also with these markets. We are currently delivering gas to countries like Spain, Italy, Austria and the Czech republic, to mention a few. In the future, we could foresee that Azerbaijani gas finds its way to the Southeastern part of the European Union.

Statoil is one of the strongest transnational European companies, however, the company is not an operator of any project in the Caspian, compared to the younger companies, which have already announced their operator strategy in Caspian projects, will there be any changes in the works in this direction?

As I've said, we are now in the most intense period of investment and project development in Azerbaijan. Timely and successful delivery of these projects must be our number one priority at the moment. Statoil is an active participant in all of these projects and we will do our best to progress them successfully. With regard to the operatorship issue, I don't entirely agree with you: Statoil is an operator for the marketing of Azerbaijan gas in to Azerbaijan, Georgia and Turkey. We are also charged with the commercial operator function of the SCP gas pipeline to Turkey where BP is the technical operator. These are strategically very important roles for Statoil and they fit very fell with our European gas experience.

We are satisfied with our 12-year presence in Azerbaijan, and we are pleased to see the progress that is being made in all the projects where we are involved. Statoil has long-term ambitions for our presence in Azerbaijan. Now increasingly moving into a phase of operations will put the scale and magnitude of the developments into perspective. The top management of Statoil has always shown a keen interest in Azerbaijan. Only this year, we have had two of our executive board members visiting Azerbaijan to be updated on the status of the activities. They were impressed with what they saw and we have since experienced that their interest has increased even further.

Norway is the source of new advanced ecologically pure production technologies, which may be successfully applied in the Caspian...

World-class technology is already the basis for the facilities now being built in Azerbaijan. There are two areas where Norwegian technology has been particularly influential: Subsea production technology and drilling. Most of the drilling equipment now being put to use in Azerbaijan, is Norwegian. This equipment is in the technological forefront of the world at the moment (North Sea, West Africa, Gulf of Mexico, etc). We are increasingly seeing that traditional large-scale platforms are being phased out and replaced by smaller subsea solutions. This is flexible, efficient and lower cost technology. In the Arctic climate of the very north of Norway, the Snohvit field is being developed 170 km from the Norwegian coast. In this LNG development, the entire production process is done by subsea facilities located on the seabed but fully controlled from the shore. No facilities are visible on the surface. This is important to align the interests of Norway's two most important industries: oil and gas, and fisheries. From our point of view, subsea technologies have tremendous potential also in the Caspian Sea. In my view, they are very suitable from an economical as well as an environmental point of view.

Is manufacture and export of liquefied Caspian gas possible today?

Probably, it is possible, but we are not planning such projects. The Caspian is located in fairly favourable geographical position, which enables us to target markets by traditional ways of pipelines. That is still the most effective way of transporting gas to the market.

Thank you for the interview.