Natig Aliyev: "We don't rule out the possibility of making Azerbaijani gas deliveries to Iran"

1. In your opinion, to what extend is the Turkish economic crisis going to delay the implementation of the Shakh-Deniz "early" gas export project?

Response: The signing up of an Agreement on the purchase of Azerbaijani gas by the Turkish party was per se the most significant event for us. We've gone a long way to see this happen, as we understood that no implementation of the Shakh-Deniz project could have actually begun without such an Agreement in place. Had we not been sure that the Shakh-Deniz gas was going to find its consumer, we would not have started any work in terms of the field development. I mean entire scope of the field development related works (platform construction and underwater gas pipeline, etc.). The signing up of this Agreement was vitally important for us. As touching on the Turkish economic crisis, I think it's not going to have a negative impact upon the Shakh-Deniz project realization. Economic crises quite commonly emerge from time to time, which then lead to the country's economic recovery and stability, both in terms of its financial condition and industrial situation. This particular economic crisis will have nothing to do with the Shakh-Deniz project, since the delivery of the deposit gas supplies is going to start only in 2004. Moreover, the initial amounts of gas to be sold to Turkey will not nearly be as large for it to become exposed by the country's economic crisis. Let me add by saying that the entire scope of works to be implemented in the deep water part of the deposit - the platform construction, drilling of wells, rehabilitation and restoration of the gas pipeline passing through the territory of Azerbaijan and Georgia and up to the Turkish border - all of this is going to be done at expense of the Shakh-Deniz project member companies. And this has nothing to do with the economy of Turkey.

2. What are the possibilities in relationship to the export of the Shakh-Deniz gas to Europe? In regards with the negotiations that are held with Iran on the export of the Shakh-Deniz gas, what phase have they reached so far?

Response: We have already determined general exportation route. The Azerbaijani gas must reach the market of Europe, which is going to be gradually developed. It will be Georgia, whose ability to purchase Azerbaijani gas will depend on its financial capability, and it'll mainly be Turkey. We must annually deliver 6.6 billion cubic meters of gas to Turkey. This will be implemented gradually: 2 billion cubic meters of gas will be exported in 2004, then, we will slowly increase the volume of exportation until by the year 2008 it reaches 6.6 billion m3 of gas. The export of our gas into Georgia and Turkey is our general strategic objective. There are further possibilities. First of all, the Turkish parliament is currently in the process of preparing a special provision on the liberalization of the free gas market. Azerbaijan, besides exporting 6.6 billion m3 of gas per annum, in case it needs to increase its supplies, will be presented with an opportunity to access consumers directly in the territory of Turkey. We will be selling entire available surplus of gas directly to the Turkish consumers. Secondly, we have an Agreement that allows us to utilize entire Turkish infrastructure in order to transit deliver the over 6.6 billion m3 gas surplus to Europe. Our negotiations with Iran are going on. Mutual understanding has been reached pertaining to our willingness to purchase Iran's gas in order to solve the problems we have in our power industry (namely, in order to shift our thermo-power stations over to gas consumption mode, and fully provide population and industry with necessary gas supplies). Further on, as Shakh-Deniz undergoes its full-scale development, we don't rule out the possibility of implementing Azerbaijani gas deliveries to Iran, particularly to its northern areas. There is an understanding of such possibilities both in Azerbaijan and Iran. The question is how are these plans going to be carried out in the future. The answer will become clear as we develop the republic's gas deposits.

3. How did Shakh-Deniz field development plans change after that the deposit was outlined?

Response:The Shakh-Deniz development plans have changed, partly however. Today, we are trying to solve the problem of "early" gas production. You know that the third well was drilled outside of the gas field. Previously, we planned to build a light platform in a shoal within the deposit area. Currently, Shakh-Deniz member companies have slightly revised their plans. It's been decided to construct a heavier platform that will allow us to drill 16 wells, every one of which is going to produce about a billion cubic meters of gas per annum. The test wells number 1 and 2 have already been drilled, and are going to be fitted with an underwater collar equipment and linked to the platform. All of these have caused partial technical changes in the project.

4. What is your attitude towards the possibility of having Kazakhstan join Azerbaijani export gas pipeline?

Response: We have never considered the issue of Kazakhstan's joining the export gas pipeline of Azerbaijan. The gas pipeline is a project that concerns Azerbaijan's gas resources. Should Kazakhstan ever desire to utilize our gas pipeline in order to deliver their gas to the market, it must have proper agreement with the final consumer, have the transport agreement concluded, take into account appropriate transportation expenses, etc. Right now, any talks about the possibility of having Kazakhstan or any other country join Azerbaijan's gas pipeline seem unrealistic.

5. Has SOCAR been holding any negotiations with the government of Kazakhstan regarding the conditions for this Caspian country to join Baku-Jeikhan MEP?

Response: Yes, such negotiations are currently in progress. I think that Kazakhstan has already understood absolute profitability of MEP. Turkey, Azerbaijan and Georgia, supported by the U.S.A., are presently holding negotiations with the oil companies that work on the other side of the Caspian Sea in an attempt to make them consider the possibility of exporting their oil via Baku-Tbilisi-Jeikhan MEP. Such attempts turned out to be a success. A number of Astan presentations of MEP documents, made by representatives of Azerbaijan, Turkey, Georgia, and the U.S.A., and participated by the government of Kazakhstan and Kazakhstan-based companies, had been able to convince them of the fact that Baku-Jeikhan could become an alternative export route for Kazakhstan's oil. The Astan negotiations centered in the necessity of creating conditions in Kazakhstan that would be similar to those created in Azerbaijan, Georgia, Turkey, that is, all along the Baku-Jeikhan route of the pipeline. I think that everybody has understood that. That is why the government of Kazakhstan has notified us about its readiness to consider the Intergovernmental Agreement and oil transportation Agreements within the shortest possible period of time.

6. In your opinion, when the practical implementation of the Baku-Aktau project is going to become possible?

Response:Practical implementation of the Baku-Tbilisi-Jeikhan project has already started. The construction of MEP will start in mid 2002. Until that time we are going to accommodate all fiscal issues and conclude necessary agreements within the framework of the Baku-Tbilisi-Jeikhan project. As touching upon Aktau-Baku-Tbilisi-Jeikhan, so far there is no special investment need there. It only requires Kazakhstan's oil companies to convey certain amount of their oil to Baku. There is a way to deliver oil from Aktau over to Dubendi terminal, which then could be tapped into the Main Export Pipeline. Therefore, the realization of Baku-Tbilisi-Jeikhan project is more important than that of Aktau-Baku one.

7. Do you have all necessary conditions created for more investors to join the Baku-Jeikhan sponsor group?

Response: We are not going to improve any of these conditions. The packet of documents has already been signed. Everybody knows about the conditions for joining the Baku-Jekhan sponsor group. There are no new or additional privileges envisaged for the purpose of drawing investors to the Baku-Jeikhan sponsor group. The project is open for whosoever will to join.

8. What do you think about the concentration of European, Japanese, and Chinese companies in Iran?

Response:Every country has its own policy for drawing foreign investments. We wish to see entire Caspian region turned into a center of foreign investments, regardless of where that might be. The reason being is that capital commingling always brings about regional stability, security, better conditions for conducting exploration works, and greater rivalry. It also leads to cheaper labor cost, which is the drawing factor for other companies. I consider concentration of foreign companies in Iran to be a positive factor.

9. Is the resolution adopted by the French Parliament on the acknowledgement of "the Armenian genocide" going to impact SOCAR's plans to joint-develop the shoal part of the Gyuneshli deposit with TotalFina Elf the?

Response:No parliamentary resolution can have any impact upon SOCAR'S relations with any company. We have been cooperating with TotalFina Elf for a long time, and our cooperation is based upon mutual economic benefits, including that of the Azerbaijani government. We are not into the business of dramatizing any events that pertain to Azerbaijan, and we don't turn political interests into the cornerstone.

10. Does BP show interest to the development of the shoal part of Gyuneshli?

Response:The field is of an immense importance to us. We hold too high requirements for foreign investments' participation in the project for rehabilitation, further exploration, and development of Gyuneshli. On the one hand, these requirements are fair, while on the other hand they are quite high. Not every company today would dare to undertake the project.

11. Are there any plans regarding SOCAR's reorganization?

Response: This is a rather serious issue. Conventionally, SOCAR has emerged as an enormous oil and gas administration, and is characterized by a sizable and numerous personnel. It's possible to expect reorganization of some SOCAR's structures that develop inefficient and expiring fields, or those situated in the republic's remote regions. Usually, reorganization is closely connected with having to dismiss lots of personnel members, which is the last thing SOCAR wants to do. But we are trying to reorganize industrial structure and strengthen priority lines. This kind of reorganization is going on. It's implemented in a thoughtful and careful manner. The structural and industrial reorganization is going to be implemented according to a plan.

12. Does SOCAR have its representatives on the Supervisory Board of Azerbaijan's Oil Fund?

Response: Not yet, since the Supervisory Board itself hasn't been established yet. I think, however, that when it is established, SOCAR is certainly going to have somebody represent it there.