In the epoch of globalization big states and transnational companies regard the issues of energy security, building the energy potential and diversification of energy supply as the issues of paramount importance in their development strategies. Azerbaijan has gained great achievements in this regard since it was building its energy security under the leadership of Nationwide Leader Heydar Aliyev, and this policy is now successfully followed by the incumbent President of the Republic of Azerbaijan Ilham Aliyev. The multi-vector oil and gas pipelines have been constructed. All this has turned the country a guarantor of energy security of several regional and European countries. The State Oil Company of Azerbaijan (SOCAR) is in the spot of implementation of oil and gas projects, promptly expanding the geography of supply of oil, gas and oil products, and also petrochemical products now. The investment activity of SOCAR covers today Turkey, Georgia, Ukraine and some countries of Europe and Asia.
The Trans-Anatolian pipeline project TANAP (80% belong to SOCAR) has become one of the most important achievements for the last period since it will allow to bring Azeri gas closer to the transport arteries of Europe. The initiative was put forward by the President of Azerbaijan Ilham Aliyev and received a strong support from the partners in Turkey and Georgia. Azerbaijan has undertaken main commitments on project’s implementation and started preparatory work for laying the pipeline that will serve, at least, 100 years. In view of the large gas reserves of Azerbaijan and potential resources in the region, this corridor is going to play an important role in the decades to come. The construction of the gas pipeline is scheduled to be commenced in 2014 and be accomplished in 2018. Export through the pipeline will make 16bcm of gas. Here 6bcm are intended for Turkey and 10bcm for Europe.
Resources are the basis of energy security. Fields of Azerbaijan, including those under development, have proven reserves of 2 trillion 550 billion cubic metres of gas. At the same time forecasted reserves of Azerbaijan are estimated at 6 trillion cubic metres of gas. Proved oil reserves of Azerbaijan comprise 2 billion tons, while forecasted reserves make 2 billion tons more. In total, anticipated reserves of Azerbaijan make 10 billion tons of oil equivalent.
SOCAR together with foreign companies has achieved successful results in the field of exploration, drilling and production of oil and gas. Total reserves of Azeri-Chyrag-Gunashli fields are estimated at 1 billion 200 million tons of oil and 350 billion cubic metres of gas.
One of the largest offshore gas fields, Shah Deniz, is now being developed in Azerbaijan. Its recoverable reserves comprise 1.2 trillion cubic metres of gas and 240 million tons of condensate at least. Gas produced within the frame of the Shah Deniz project is exported to Georgia and Turkey. Once Shah Deniz Stage II starts, gas production from this field in 2020 alone will make over 25 billion cubic metres of gas. Decisions on Shah Deniz Stage II are already on the final stage.
With the discovery of Umid field, using only own resources, reserves of Azerbaijan grew by 200bcm of gas and 40 million tons of condensate. The production at the field was launched within a short period of time. Drilling of the third well is now underway.
The discovery of Absheron field can be considered as another important achievement in the history of modern Azerbaijan. Therefore, reserves of Azerbaijan grew by 350bcm of gas and 45 million tons of condensate. Intense work is now carried out on this field.
There are a number of unexplored fields in Azerbaijan. Exploration on Shafag - Asiman (together with BP), Nakhchivan (together with RWE), Zafar, Mashal, and Babek will be continued. In particular, to facilitate these work in April 2013 SOCAR signed a memorandum of understanding on perspective structures Zafar and Mashal with Norwegian Statoil. Under the memorandum, basic commercial principles and terms of the contract on development of these areas shall be agreed within one year from the date of signing.
To increase oil and gas production in the republic, the special attention is paid to modernization of the existing infrastructure since for some reasons the existing drilling rigs do not allow holing wells on ultra-deep areas of the Caspian Sea. To fulfill the forthcoming tasks it was decided to construct 4 new floating drilling rigs of new generation capable to drill wells with the depth up to 8,000-10,000 meters in the sea depth of up to 1,000 metres. Construction of the first new floating drilling rig will begin later this year. A drilling club is now being formed in the country. Then there will be orders for construction of the second, third and fourth floating drilling rigs. These projects require large investments and are very important in terms of development of the national economy. Active drilling on Umid and Absheron fields and the beginning of prospecting works on perspective structures Babek, Nakhchivan, Zafar and Mashal are associated with implementation of this project.
SOCAR is a steadily developing world-class company. It is in the list of world’s 50 largest oil and gas companies. Fitch Ratings has recently affirmed State Oil Company of the Azerbaijan Republic's (SOCAR) Long-term foreign currency Issuer Default Rating (IDR) at 'BBB-' and Short-term foreign currency IDR at 'F3' and senior unsecured rating at 'BBB-'. The Outlook on the Long-term IDR is Stable.
SOCAR stays committed to introducing structural changes aimed at improving functionality of the company in the domestic energy market. According to the last changes, Azerigaz Production Association is not responsible for transportation of gas any more. Its current focus is to supply consumers in the country, reconstruct the gas supply system according to the international standards and gasify settlements.
Azerbaijan-Russia, Azerbaijan-Iran gas pipelines are now successfully operated. In particular, large-scale maintenance and repair works have been performed on Mozdok-Gazimagomed main gas pipeline to raise exports of natural gas to the Russian Federation and the operation of the Siyazan compressor station has been restarted. At the same time, the maintenance and repair works were accomplished on the Hajigabul-Astara main gas pipeline to improve gas supply of the Nakhchivan Autonomous Republic, and a new gas-compressor station was constructed in Astara.
Besides construction of the TANAP gas pipeline and development of oil and gas fields on the Caspian Sea, SOCAR has set up other perspective directions for development. They include such projects as a new Oil and Gas Processing and Petrochemical Complex (OGPC), construction of a shipyard in Baku, construction of an oil refinery in Turkey, development of Petkim Holding and other investment projects.
In total, SOCAR’s capital investments in the current year as well as in 2012 will exceed 1 billion AZN without including investments into the Turkish projects. SOCAR has issued Eurobonds worth $1 billion, so there is no serious need to attract funds for financing the investment plans in 2013.
SOCAR is improving its positions on the Caspian Sea by expanding the capacities of the oil and gas fleet. The construction of a shipyard which has no analogs in the Caspian Sea basin successfully proceeds in Baku. In September 2013 the first vessel will be launched from the new shipbuilding plant of the company. The shipyard will also build large-size vessels, including tankers with DWT 60,000 tons. The shipyard will meet local needs of Azerbaijan and implement foreign orders.
Works on preparation of specifications for the new Oil and Gas Processing and Petrochemical Complex (OGPC) in the Garadagh area are also implemented according to the schedule. Construction of a gas-processing plant will start in 2013 as a part of the OGPC project. The plant will receive crude gas from the Azerbaijani fields. The plant with the processing capacity of 10bcm will come on stream in 2017. Additional feasibility evaluation on the OGPC project is also underway. The complex is expected to be launched in 2020. In the history of Azerbaijan it is the most giant industrial project which is to ensure the perspective development of the country. SOCAR attaches special significance to this project in terms of improvement of the quality of products of the oil and gas processing and petrochemical industries, and also ensuring the ecological balance in the city of Baku.
In line with the executive order of the President of Azerbaijan Ilham Aliyev, works on development of Sumgayit city are now underway. One of the major tasks is to develop the chemical industry there. New units for manufacture of polypropylene and polyethylene are now constructed. SOCAR has extensive plans on tanker export of liquid propylene the company started in 2012. Special capacities for such export unique in Georgia have been created on the SOCAR-operated Black Sea terminal in Kulevi (Georgia) operational since May 16, 2008.
The construction of a carbamide plant will be commenced very soon in Sumgayit. This plant will become an important contribution from the oil industry workers to ensuring the food security of the country. In view of the great demand for nitric fertilizers in the region construction of a similar plant is planned in Georgia.
SOCAR continues successful business activity in Switzerland, Turkey, Romania, the United Arab Emirates, Ukraine and Georgia. Opening of foreign representations of SOCAR has become a proof of the intensive growth and forward development of the company. For example, the SOCAR-operated subsidiary in Georgia, SOCAR Energy Georgia, controls about 2/3 of the oil products market. In Georgia SOCAR already possesses 5 petrol stations, and its total network of filling stations has reached 105 petrol stations. By the end of 2013 SOCAR will have in Georgia not less than 120 petrol stations. Following the results of the last several years, SOCAR is the largest taxpayer and foreign investor in Georgia.
Through the acquisition of Esso Switzerland the State Oil Company of Azerbaijan obtained the retail network in Switzerland including 170 petrol stations, the division engaged in fuel marketing for the industry and wholesale clients, Wangen-Olten gas-filling plant, filling stations and joint ventures engaged in filling aircrafts at the airports of Geneva and Zurich, a Swiss supply and distribution company controlling joint ventures operating terminals and pipelines. Last year the first filling station under the brand of SOCAR came on stream in Zurich.
In Ukraine 34 gas stations has been operating under the SOCAR brand. By the end of 2013 the network of petrol stations will reach 100 stations. The possibility of investments into other branches of the oil and gas industry is now under consideration.
SOCAR is implementing important projects in development of oil refining and petrochemistry in Turkey. As the main shareholder of the largest petrochemical concern Petkim, today SOCAR covers about 30% of the oil processing market in Turkey. Construction of a new oil refinery has been launched in Turkey to supply raw materials to the Petkim complex. The expansion of the port is now carried out there. In the near future it is going to be the largest port of Turkey. Preparatory work for construction of a new power plant is now implemented to improve power supply of the Petkim complex.
In general, the vision and mission of SOCAR aims at raising the oil and gas potential of the country, establishing close mutually advantageous relations and cooperation in the international energy markets, integrating and consolidating common efforts for creating a better life for the Azerbaijani people and the best future for the country.
