GAS
ONE "BUT" IN AZERBAIJANI-TURKISH GAS AGREEMENTS. PARTICIPANTS OF "BLUE STREAM" DO NOT COUNT ANY MORE ON QUICK PAYBACK
As is known in the middle of March was signed the intergovernmental Agreement "About supply of Azerbaijani gas to the Republic of Turkey in 2004-2018" and similar Agreement between SOCAR (gas supplier) and BOTAS State company (gas buyer) in Turkey under the patronage of the President of Azerbaijan Heydar Aliyev. The turkish side has undertaken to buy from Azerbaijan gas distillate in quantities of 79,7 billion cub. m. within 15 years. The primary agreement was signed by the Vice Prime-Minister of Azerbaijan Abid Sharifov and Minister of Power and Natural Resources of Turkey Jumkhur Ersumer. The second by presidents of companies Natig Aliyev and Gekhan Yardim. The Contract envisions that gas of the sea field "SHah-Deniz" will commence entering Turkey in the amount of 2 billion cubic meters in 2004, 3 billion cubic meters - 2005, 5 billion cubic meters - 2006, and 6,6 billion cubic meters annually within the period of 2007-18.
All is good and first it seems that Azerbaijan remains a winner in this bargain (see CASPIAN ENERGY ¹8) except for one "but". The present economic crisis in Turkey, though it is not being paid special attention in Baku, might in due course play a malicious joke and reduce to a minimum the anticipated dividends from the like bargains.
After February 22 when the Turkish government was forced to enter a floating policy for a Turkish lira in order to rescue the economy from collapse, the national currency almost instantly has depreciated by 26 percent (1 USD now costs almost one million lira). And most importantly - the national income per capita this present year will be reduced from 3,242 USD to 2,503 USD as a result of the crisis according to the Turkish economists. Assets for the import gas repayment may definitely not be enough.
The external debt of the country has exceeded 100 billion USD, and domestic - 20 billion. In the beginning of the year Turkey stood on the verge of sovereign default, and only a new massive financial inflow from the crims of the International Monetary Fund have rescued it from bankruptcy. Annual inflation pace is estimated as over 50 percent.
Now a former high-ranking employee of the World Bank Kemal Dervish, who has been urgently introduced into the structure of the Cabinet of Ministers has pledged to pull Turkish economy out of fiscal bog. The government links all hopes for improvement of economy with his "National program", which still is to be practically tested. Yet international practice witnesses that formulas of economic rescue tendered by the experts of the World Bank and the IMF entail rather opposite results.
Already today Turkey reduces on deliveries instead of increasing export of power resources. General Director of the turkish state pipeline assembling company of "Botash" (BOTAS) Gekhan Yarym in mid-March affirmed according to the Turkish Daily News that his firm already has run into a debt of 45 million USD for the current deliveries of Russian gas. "Economic Crisis in Turkey was mirrored in our company as well, and we wage payments to Russia for the gas supplied "by portions" as soon as we find an opportunity for this", - he said. According to Yardym, Turkey is going to diminish amounts of gas procurement from Russia.
Competitors already worry
As it is known, the designed Capacity of the "Blue stream" will put 12 billion cubic meters per annum with an outlook of magnification up to 24 billion. If to add deliveries from Russia through an old track via Bulgaria, by 2008 the stream will be capable to achieve a maximum of 37 billion cubic meters per annum . Turkey will have to pay for it 4 to 5 billion USD per annum.
Besides, at the end of July Turkey should receive gas distillate from Iran as well. The construction of pipeline is already complete and annual deliveries, according to the intergovernmental agreement, will make 8-10 billion cubic meters. Add one more billion USD per annum.
In the mid-March presidents of Turkey and Azerbaijan have signed the 15-year agreement on deliveries of 6,6 billion cubic meters of gas per annum. The President of Azerbaijan Heydar Aliyev has declared at the ceremony of signing that Azerbaijan counts in the near future to augment supply volumes three times.
If we recollect the previously signed arrangements such as with Turkmenistan, which expressed its desire to supply to Turkey 10 to 20 billion cubic meters of gas per annum via Iran, and contracts on delivery of condensed gas from Algeria, Egypt and other countries, then an impression is made of a complete security, if not overtrading for long years ahead.
The Turkish market of gas, which in a long-term outlook is extremely attractive, there is going on a real strife.
Russia with Italy and Iran, Turkmenistan and Azerbaijan, Egypt and Algeria - everyone aspires to reach Turkey before the competitors.
Ankara receives an opportunity of a commercial maneuver
If one existing Russian track will be added "Blue Stream", and one Iranian track under construction will soon be added also gas pipeline from Baku, gas prices in this region may sharply drop, which is what consumers bail for. Suppliers look in the future, and Ankara with the complete assurance considers that during a sharp competition the gas prices will fall, and it will be given a fine opportunity of commercial maneuver.
In any case, Russian competitors of Azerbaijan are already concerned with the self-repayment ability of the "Blue Pipe".
Planning financial indexes of the "blue stream", "GazProm" tried by any means to lower commercial risks from the whims of the Turkish market. Half of income and loss in the project is born by the Italians. Eni has agreed to buy volumes of gas exported by them via new pipeline for the price of 35-40 USD per thousand cubes from "GazProm", until it arranges independent production activity in Russia. Basically this guarantees the partners benefit from realization of gas in Turkey, consider Russian analysts, as the given price in any case is less than what the Turks will pay if they would like to look decently.
However, the reimbursement of the pipeline construction will be prolonged apparently, for a longer term than both creditors, and borrowers counted. First, Turkey will not bring volumes of procurements too soon via "Blue stream" up to the peak 24 billion cubic meters. There are grounds to guess that even the line of 8 billion per annum will be stepped over only within a couple of years. Secondly, the price of realization may not appear at the calculated level (we shall remind, that "GazProm" and Eni started with outlooks of gas sale in Turkey up to 58 USD per thousand cubic meters).
As per gas line of Azerbaijan, it would be desirable to hope, that its participants will foresee all risks and the price formula of the Azerbaijan gas will be flexible enough, as the lots supplied to the Turkish market for the first time will be rather little. Plus the building expenses, according to the information of BP Amoco, should not exceed 600 millions USD, which for the like projects is rather a cautious sum.
Azerbaijani side transfers project of transit agreement for consideration to Georgia
Draft agreement on transit of the Azerbaijan gas on territory of this country is prepared and transferred by the Azerbaijani side to Georgia for consideration. Journalists were notified about it by Vice Prime-Minister of Azerbaijan Abid Sharifov.
As he said, signing 4 agreements with Georgia is planned - intergovernmental, transit, about gas sale support, and also contract on procurement - sale, as this country has expressed a desire to receive the Azerbaijani gas. However, the question of procurements of the Azerbaijani gas by Georgia is not in the agenda and is a subject of the future negotiations.
For gas export to Turkey not only existing now gas line (Gazah - Gazi-Magomed - boundary with Georgia) will be used, which also will be used for delivering gas within the Republic (for small volumes), but also is constructed a new one with the original capacity of 7,2 billion cubic meters of gas per annum.
"AzNIPIgaz" has prepared alternatives of reconstruction of Galmaz and Garadag gasholders
Azerbaijan research, development and project institute of gas ("AzNIPIgaz") AOZT "Azerigaz" has developed several alternatives of Galmaz and Garadag gasholders' reconstruction.
As we know, French company Sofregas has developed these gasholders' reconstruction projects. According to the projects, bringing the volume of Galmaz gasholder up to 1,5 billion cubic meters of gas will cost $81 million USD, whereas the reconstruction of the Garadag gasholder is supposed to be carried out in 2 stages: at the first stage its volume will be brought up to 1,5 billion cubic meters, that will cost $80 million USD, and at the second stage - up to 3 billion cubic meters, which requires $111 million USD. However, these two projects are not realized in any way - due to the lack of financing.
Nevertheless, the alternatives of "AzNIPIgaz" allow to lower the cost of Galmaz gasholder reconstruction in half together with simultaneous conservation of the stipulated 1,5 billion cubic metres. In case of the Garadag gasholder it is originally proposed to reject the second stage of reconstruction, cost of the first stage will constitute $40-50 million whereas the volume of gasholder is 1,5 billion cubic meters.
According to the opinion of the specialists of the institute these alternatives may increase attractiveness of the gasholders reconstruction projects to the potential investors.
* At the present time the Galmaz gasholder has the capacity of 350 million, and Garadag - 200 million cubic meters of gas. Within the last year the underground gasholders were filled only with 505 million cubic meters of gas.
First block of turbine power plant at Karachanak field to be entered into operation in the 3d Quarter of 2001.
On March 21 Ministry of Energy and Mineral Resources being an authorized body of the Government of Republic of Kazakhstan in the agreements on production share, held meeting of joint management committee of the Karachanak project (JMC), informs weekly magazine "Oilreview".
At the meeting special attention was paid to development of a refining complex, provision of works' environmental safety, activation of works on attraction of the Kazakh enterprises in building and servicing objects of Karachanak field, to development of social projects, etc. The authorized JMC program of works envisions placing in operation the first block of turbine power plant on Karachanak field in the third quarter of the current year. The corporate capacity of the power plant will reach 120 MW. The power plant will provide stable electrical power not only for objects of the field, but also consumers of Burlin region, on which territory Karachaganak is located. The Kazakh part of the structure of JMC includes the Vice-Minister of Energy and Mineral Resources Uzakbuy Karabalin, first Vice-President of "KazTransOil" Erlan Upushev, Vice-President of "KazTransGas" Bulat Nazarov, akim of the West-Kazakh field Krymbek Kusherbayev, and also representatives of alliance of foreign companies designing Karachanak gas condensate field - Agip, BG, Texaco and "LUKOIL".
"GazProm" does not see competition on the part of western companies in providing Europe by gas distillate - R.Vyahirev
The Joint Stock Company "GazProm" (GAZP) does not perceive competition on the part of the western companies in providing Europe by gas distillate. Answering to the questions of journalists concerning the civil-engineering design of gas pipeline connecting Denmark, Sweden and Germany with an original throughput of 3 billion cubic meters of gas distillate per annum and with the subsequent expansion to 10 billion cubic meters, R.Vyahirev announced that he does not see the competitors among western extracting companies for "GazProm" in provision of Europe.
The only competitor of Russia and, in particular, of "GazProm", can be Iran with its reserves, which are estimated for today at a second place level after Russia. At the same time R.Vyahirev declared that within 15 years when the gas resources will be depleted, the role of Russia would even more increase in the European market.
Answering the journalists' questions, R.Vyahirev declared that the position of the minority shareholders represented by Boris Fedorov and assuming the integration of oil shares of "GazProm" "is not favourable for us".
Through placing the shares at the external market such as ADR we attract into Russia rather large investments, has pointed out R.Vjahirev at the press conference.
The government of Russian Federation tries to establish common rules of game on the domestic gas distillate supply market.
The government of Russian Federation has brought to consideration of the State Duma of the Russian Federation the draft of the federal law "About appending to the article 17 of federal laws "About licensing of separate kinds of activities". This project contains appendices to the list of activities, for realization of which licenses are required. These are, in particular, gas distillate sales (delivery), condensed gas and container refilling. License on transporting gas distillate via pipelines of gas-distributing systems and gas distribution to the consumers will be required as well.
The Deputy Minister of Economical Progressing and Trade of Russian Federation Andrey Sharonov considers that bringing these appendices is dictated by a necessity to improve legal regulation of the relations of the participants of a domestic gas market according to the stipulations of the federal law "About a gas-supply in Russian Federation". The main idea is that there must be an opportunity for origination of trade companies and expansion of gas deliveries by the independent producers. As a result common rules for realization of this kind of activities for all gas suppliers will be established, which should promote development of a diligent competition in the gas market and increase of reliability of mode of gas-supply.
The gas distillate price in Russia within 7-8 years should reach 55 USD for 1 thousand cubic meters - Chairman of FEC
The price of 1 thousand cubic meters of gas distillate in Russia within 7-8 years should make 55 USD, the chairman of a Federal Power Commission Georgiy Kutovoy has declared at a press conference in Smolensk. According to the data of PRIME-TASS, now gas in Russia is supplied at the price of 16 USD for one thousand cubic m.
As he said, the price for oil should hardly be lower than that of a gas, and the coal should be the cheapest raw material for the Energy of Russia.
The Chairman of FEC noted that the gas prices in Russia should be corrected once a year, maybe per half a year, depending on inflation, and once every 5 years there should be a radical reconsideration of the gas distillate prices.