SOCAR - TOWARDS NEW ACHIEVEMENTS
Oil is the greatest wealth of Azerbaijan and it is going to remainso for many years. Today, when Azerbaijan is an independent country, the national wealth promotes its development. This is the locomotive of our economy that has provided unmatched rates of economic development for the last years. If one were to refer back to the statistics of several previous years, it would reveal the growth of the Azerbaijan's state budget from $1 billion to today's $8 billion for only 3-4 years.
Commercial oil production in Azerbaijan was launched in 1848 and already in 1901 the half of world oil recovery accounted for Azerbaijan. To date Azerbaijan has produced over 1.5 billion tons of oil. In 2007 the total oil output in Azerbaijan is projected to make 43 million tons, whereas by 2010 it will be brought to 65 million tons. The State Oil Company of Azerbaijan is the key driving force that promotes increasing oil production in Azerbaijan through development of its own fields and active participation in the development of contract areas. In addition, SOCAR keeps expanding its presence in the region and Europe. The company is implementing its first foreign pilot projects in Georgia, Turkey and Romania where it has already had its representations. Now the State Oil Company of Azerbaijan is carrying out some projects to ramp up gas production in the country.
Record level
At the moment there are 34 oil & gas companies in Azerbaijan that represent 15 countries. This number includes 28 joint ventures and 4 alliances established by either SOCAR or its subsidiaries that cover almost all branches of the oil-and-gas industry.
The Baku-Tbilisi-Ceyhan main export pipeline (BTC), and the South Caucasian Pipeline (SCP), which is targeting to introduce Azerbaijan's valuable hydrocarbons to global markets, have been on stream since mid-2006. As soon as these projects are accomplished, Azerbaijan will turn into one of the key countries ensuring Europe's energy security. BTC is a new stage in global oil pipelines' diversification process. Yet being a corner stone in creation of the Europe-Asia Transport Corridor, it also enables to supply daily 1 million barrels of oil to global markets. Over 28 million tons of oil has already been transported through the pipeline since when it was commissioned. The design capacity of the Baku-Tbilisi-Erzurum Gas Pipeline (BTE) is evaluated as much as 20 billion m3 per annum.
Remarkably that the measures implemented jointly with foreign companies during 13 years that followed signing the Contract of the Century resulted in the oil production brought to 22.2 million tons in 2005 and 32.2 million tons in 2006. Thus, the record level at 23.5 million tons achieved in 1941 was regained in 65 years.
This year oil production growth rates keep on increasing. At the moment Azerbaijan produces more than 120,000 tons of oil per day not only because of intensive development of Azeri and Chirag fields but also due to implementation of additional geotechnical activities at old worksites, construction of new facilities and structures, reconstruction, repair and improvement of the existing infrastructures and communications. Hence, this year Azerbaijan is expected to produce over 43 million tons of oil.
In 2006 gas production also stood at the record level of 5.9 billion m3, where 3.8 billion m3 account for SOCAR. The key role in achieving such success belongs to the operations implemented within the State Gas Programme. As is known, since 2000 Azerbaijan had been purchasing per 4.5 billion m3 of natural gas a year from the Russian Federation but was forced to cease import in late 2006. In this connection SOCAR was commissioned to meet in-country gas needs.
SOCAR has developed a new programme of complex measures enabling to ensure energy security of the country and a part of Europe's energy needs in future.
Under the programme, in 2008 SOCAR will transfer 8 billion m3 of gas. By now the State Oil Company's daily gas output has already exceeded 15 million m3. Apart from its status of an oil exporter, the implemented works enabled Azerbaijan to join the number of gas exporters as well.
Export potential
Gas production at one of the world largest gas condensate fields, Shah Deniz, started last year. Gas is delivered to the network of distribution gas pipelines of Azerbaijan and Georgia. In July first gas arrived at BOTAS-run gas transportation system through the South Caucasian Pipeline (SCP) crossing the territories of Azerbaijan and Georgia. At present Shah Deniz gas (Stage 1) is sold to Azerbaijan, Georgian Oil & Gas Corporation (Georgia), BOTAS and BTC Co.
Furthermore, SOCAR plans to ramp up the refining capacity of Azerbaijan Gas Processing Plant JSC (AzGPP) in connection with the enhanced gas production schedule in Azerbaijan. This year Azerbaijan Gas Processing Plant JSC was withdrawn from the privatization programme and returned to the balance of SOCAR. At present AzGPP daily produces 9 million m3 of gas.
Enhanced volumes and the expanded geography of crude oil export occurred in recent years also prove successful development of the Azerbaijan's oil industry. At present Azeri Light brand oil is exported to almost all regions worldwide including Europe, Asia, North and South America, and Far East.
The Azerbaijan's oil refining facility also has wide opportunities. SOCAR is able to fulfill its commitments on refining, production and export of petrochemicals as well as bringing these processes in compliance with the European standards. Upgrading of ELOU-AVT-6, gradual coking and catalytic cracking plants is currently underway. Furthermore, the construction of a modern technological plant that will produce high-octane components from liquefied gas, is expected.
The new target is to process oil transported through the BTC. SOCAR intends to construct a new contemporary oil-refining plant in Turkey's port of Ceyhan with the capacity of 10 million tons a year. Its oil products will be supplied to the markets of Turkey and other Europe's countries. In future SOCAR plans to build an oil-refining plant in Kulevi. Last year SOCAR purchased the Kulevi terminal being constructed in the Georgia's water area of the Black Sea. Its throughput capacity is projected to make 10 million tons of oil per annum.
On the whole, SOCAR is about to launch direct exchange sales of Azerbaijan's oil. The matter concerns establishment of a SOCAR-run trading company, which will sell oil, freight vessels and ensure oil delivery to consumers.
At the international arena
The State Oil Company of Azerbaijan is now efficiently working at the international arena and implementing large-scale projects of high importance for Azerbaijan's economy. They are carried out through subsidiaries established in different countries where they represent SOCAR's interests. Last year SOCAR set up its representations in Romania, Turkey and Georgia, which are currently dealing with oil & gas marketing.
The official opening of the SOCAR-run office in Romania with participation of representatives of the Romania's government, heads of petroleum companies, members of the Azerbaijan Diaspora took place on July 12. In general, Romania assigns high priority to the relations with Azerbaijan, in particular, in the field of ensuring energy security of the European Union. "I am ready to create all conditions for the activity of the State Oil Company of Azerbaijan in Romania", said Romania's President Traian Basescu when receiving (July 12th) SOCAR President Rovnag Abdullayev.
The Company is going to create such subsidiaries in some European countries in future.
Furthermore, SOCAR and KazMunayGas are viewing the possibility to construct a pipeline from Baku to the Black Sea to deliver Kazakh oil to world markets and, at the same time, considering on the BTC capacity expansion project.
At the same time, SOCAR is setting up a joint venture on a par with KazMunayGas to deal with creation of the Trans-Caspian System. The basis of the Trans-Caspian Project's implementation was laid down during President of Azerbaijan Ilham Aliyev's official visit to Kazakhstan in August 2007. SOCAR and KazMunayGas NC JSC signed the bilateral documents on the project's implementation. These are the Agreement on Strategic Cooperation in the oil-and-gas branch and the Memorandum on joint implementation of the Trans-Caspian Project.
The signed agreement sets the intentions of the parties to continue mutually beneficial cooperation in the oil-and-gas branch and contains the appropriate provisions on transportation and transit of Kazakh oil, oil refining and petrochemistry as well as joint operation of the SOCAR's oil-and-gas infrastructure.
Under the Memorandum, the parties plan to jointly implement the Trans-Caspian Project that will include oil-discharge terminals at the Kazakh coast of the Caspian Sea, tankers and vessels, oil-loading terminals at the Azerbaijani coast of the Caspian Sea and junction facilities to the Baku-Tbilisi-Ceyhan system.
To carry out plans on energy supplies, on August 16th, 2007 the State Oil Company of Azerbaijan and the United States Trade and Development Agency signed the Grant Agreement on drawing up a feasibility study of the Trans Caspian Pipeline Project.
Azerbaijan's Foreign Minister Elmar Mammadyarov and Assistant Secretary for Economic, Energy and Business Affairs, Co-Chairman of American-Azerbaijani Intergovernmental Commission for Economic Affairs Daniel Sullivan signed the document as witnesses.
Having characterized the Grant Agreement as the continuation of energy cooperation between USA and Azerbaijan, R. Abdullayev stressed the aim was to transport energy carriers from Central Asia to Azerbaijan.
Perspective growth
However, the State Oil Company does not rest on laurels and plans to work independently at perspective structures in the Azerbaijan sector of the Caspian Sea as well as join the oil-and-gas offshore projects of neighbouring countries. The outstanding plans include completion of prospecting and starting commercial development of Ashrafi and Garabagh fields, and restarting exploration activities at such perspective fields as Nakhchivan, Babek and Umid.
"We target to make SOCAR a modernized, completive, strong company that meets all international standards", Rovnag Abdullayev, President, SOCAR says. To achieve this aim SOCAR underwent some structural changes to ensure operative management and promote development of the company's appropriate units.
The State Oil Company is carrying out works to improve ecology and protect environment at oil fields, and train professional personnel.
The Company helps to solve social & economic problems in the regions and contributes much to the construction of healthcare facilities.