GAS SECTOR LIBERILAZATION SHOULD IMPROVE GAS SUPPLY

 

Caspian Energy (CE): Mr. Melikov, how do you think about the country's gas inventory today? What is the situation with the state programs in this industry?

Alihan Malikov, Chairman of Azerigaz CJSC: As of January 1, 2007 the gas inventory wields a broad gas distribution network covering 63 regions and Nakhchivan AR.

This gas inventory comprises over 4,400 km of HP trunk pipelines, about 36 km MP&LP pipelines, 7 gas compressor stations with total capacity of 200 MW, 240 gas distribution stations and two subsurface gasholders.

Using this technical potential and existing material and technical basis of the gas industry, we fully completed the State Program for Regions Gas Supply Improvement approved in 2004.

Today, on the eve of the 3rd anniversary of this State Program, we may say it is being carried out successfully and it will be completed in the remaining period of 2007-2008.

It will result in a complete coverage of the regions and country's economy with natural gas.

 

CE: How was the past year for Azerigaz? Does the company have any strategic objectives for the current and oncoming years?

Alihan Malikov: The year 2006 was marked as a year of hard work and good results for the entire team of Azerigaz.

Namely in 2006 we successfully carried out gasification of two districts, Lerik and Yardimli. Through the same year we pumped a record quantity of over 1 billion m3 of gas to subsurface gasholders.

However, the most important event of 2006 was the Decree issued by President of Azerbaijan Ilham Aliyev on celebration of the Gas Industry Worker's Day, which was a high appraisal for all people engaged in gas industry.

 

CE: How did the company change its strategy in the present market conditions? Is the government ready for liberalization of gas market, and how necessary is that?

Alihan Malikov: Indeed the entire strategy of work in both the entire economy and its gas sector, whether we want it or not, is directed to embracing the market economy as soon as possible.

It is noteworthy that as being different from other fields gas industry always worked in self-financing mode which facilitated our access to the market.

Therefore, the expense-revenue ratio, reception of profit and consequent expedient work are our basic indicators for economic activity estimation.

Concerning the gas market and its players' liberalization, I would say the economy liberalization, in particular gas industry, is the core aspect of post-soviet economic reformation. However, this process shall go steadily with an account for gas supply improvement through the gas sector liberalization.

In this extent, taking the developed countries experience into consideration, on may say for sure that after liberalization the government shall possess trunk pipelines and subsurface gasholders. This is necessitated by two primary factors: firstly, trunk pipelines and subsurface gasholders are completely inseparable segments that ensure the strategic work aimed to energy security of the country and reduction of Azerbaijan's dependance on other countries. Secondly, the gas distribution network can get liberalized and liberalization method selection shall account for specifics of gas industry and Azerbaijan's actual achievements alike.

 

CE: What are the company's plans on gasification in regions?

Alihan Malikov: Our plans pertaining gasification in regions and expansion of existing pipeline network are based upon the social-economic development program approved by Decree of President of Azerbaijan Ilham Aliyev.

In accordance with this program all operations on regions gasification and expansion of existing gas supply network shall be completed in 2008.

I would like to note that the most part of this work has already been done. As it is known, we have almost restored the gas supply to Nakhchivan AR; the gas supply to Lerik and Yardimli has already been strated; nearly 75 percent of gas distribution network has been restored in other regions and gas supply to earlier gasified regions resumed.

According to the program, in 2007 the gas supply will resume in Beylagan and Agjabedi districts and, thus, Azerigaz's objective will be achieved.

 

CE: What is the way you swap gas with Iran in order to supply Nakhchivan AR?

Alihan Malikov: The gas swapping with Iran pertaining supply to Nakhchivan is going according to the approved program. At the moment the second phase of gasification is coming to an end in the AR and all consumers have been provided with gas.

There is no problem with Iran in supply of required amounts of gas - all amounts of gas required in Nakhchivan we deliver and the consumer receives there. All the issues arising through the gas delivery cycle are timely resolved by specialists of the two countries.

 

CE: Why did the Tariff Council make a decision on reduction of gas price for industrial facilities? Could this result in subsidies to this sector of economy?

Alihan Malikov: This question should rather be asked to the Tariff Council, but I could say that reduction of retail price for individual consumer groups is necessitated by creation of economic conditions for their normal activity to boost growth of production and expedience.

Taking into account that these facilities use natural gas as the main fuel in their process cycle and it affects the cost price of their production, the costs were reduced through cheapened natural gas.

 

CE: Are you suggesting any measures in order to improve the gas consumption culture (careful consumption of fuel)?

Alihan Malikov: One of measures taken to improve this culture was provision of gas meters to the population. In this connection the gas meter installation program was approved as a State Program and fixed by relevant resolutions of the Government.

Furthermore, Azerigaz performed a certain work included a number of actions. In particular, each consumer received a unique code for effective gas payments. Moreover, to ensure timely and accurate payments we signed contracts with bank and mail offices to receive gas payments.

 

CE: Did you succeed in ensuring the accurate account of consumption per consumer?

Alihan Malikov: I would say you touched upon a very important issue that, if resolved, could provide normal relations between the consumer and gas distribution board.

I would emphasize that the task of accurate calculation of both transferred and consumed gas was set yet by national leader Heydar Aliyev in his famous Decree on "Measures on Improvement of Energy Carrier Supply to the Economy and Population" dated June 29, 2000.

At the first stage of this plan we fully provided gas meters to all facilities and gas distribution offices in all regions.

Further, based on our proposals and by the order of President of Azerbaijan Ilham Aliyev the Cabinet of Ministers passed a number of orders approving the Program for provision of housing resources of the Republic with household gas meters by the end of 2007.

According to the personal assignment of President of Azerbaijan, Azerigaz mobilized all its resources and by April 1, 2007 provided meters to 96% of consumers supplied with gas as of the date of the order.

The gas meter installation operations are underway and this issue will be solved by the end of the year.

 

Thank you for the interview