Rovnag Abdullayev: SOCAR increased international trade volume by more than 2 times last year
“SOCAR does not depend on any foreign partners in developing oil and gas resources in the country. In fact, the government has already allocated funds for the development of the Umid natural gas field. But as a state-owned company, we prefer to focus on saving some of the funds, and channel them to a number of other areas, including the education, and healthcare ones. We welcome the desire of potential partners to be involved in our projects on the basis of mutual benefit in this regard,” said SOCAR President Rovnag Abdullayev in his exclusive interview with AZERTAC.
SOCAR President Rovnag Abdullayev responded to AZERTAC correspondent’s questions on the company’s last year achievements and this year targets, as well as the success and importance of the Souther Gas Corridor project.
-What was the key achievements of SOCAR last year and what are your expectations in 2018?
-In 2017, we succeeded in realizing most of our strategic goals. In this regard, the signing of a new contract on development of Azeri-Chirag-Guneshli (ACG) block of oil and gas fields is of great importance to Azerbaijan.
Under the new agreement, the foreign partner companies will pay overall a bonus of USD 3.6 billion to the State Oil Fund of the Republic of Azerbaijan (SOFAZ), and SOCAR will increase its equity share in the ACG from 11.65 percent to 25 percent. Regardless of the investment of international partner companies, the share of Azerbaijan’s profit oil will be 75 per cent.
Thus, the indicator of the country’s total profit will make 89.1 per cent, which will pave the way for the launch of new strategic projects in the years to come.
Last year, SOCAR commissioned 177 wells together with partner companies. Some 80 wells were added to the company’s well fund.
By the end of 2016, we managed to drill a well in the Umid field and last year two more high-pressure and high-temperature wells in the Bulla Deniz field. These wells were drilled at a depth of more than 6.000 metres. The continuous diversification of our business portfolio and increasing our share in the international oil market is one of our most remarkable achievements.
SOCAR Trading, the company’s marketing arm, apart from the crude oil of Azerbaijan, sells crude oil and oil products from third parties, which last year allowed the volume of trade of crude oil and oil products to reach 108 million tons. It should be noted that 86 million tons of crude oil volume was made up of crude oil and oil products from third parties. Thus, SOCAR Trading increased the total trade volume of crude oil and oil products by more than 2 times, and the volume of sales of third-party products up to 3 times. This is a great achievement that the company made ahead of its 10th anniversary. This achievement was primarily due to the expansion of SOCAR Trading’s offices in China and Houston and increasing the market share on the Heavy Diesel Fuel category.
With great pride I would also like to note that this year the construction of SOCAR’s six strategic projects, TANAP, and Star oil refinery plant in Turkey, Shah Deniz 2, South Caucasus Pipeline expansion, SOCAR Polymer and SOCAR Carbamide plants in Georgia and Azerbaijan will be completed and launched as part of the projects. And this, in its turn, will contribute to the diversification of the economy, provide the inflow of foreign currency, ensure the creation of thousands of new jobs, and give impetus to the economic development of Azerbaijan and the region.
– Natural gas demand in Azerbaijan continues to grow. Will Azerbaijan, as the initiator of the Southern Gas Corridor, be able to meet the country’s increasing demand for natural gas and fully fulfill its commitment to ensuring Europe’s energy security?
-The approved gas reserves of Azerbaijan are 2.6 trillion cubic meters. One of the world’s largest gas-condensate fields, the Shah Deniz field, equivalent to the area of New York’s Manhattan, supplies gas to domestic and overseas markets.
Part of the gas produced is intended for domestic market on the basis of a warranty. Apart from this, we plan to produce 16 billion cubic meters of extra gas per year in the second stage of the field operation. Starting this year, these volumes will be channeled to the Southern Gas Corridor project.
Apart from the Shah Deniz field, we have other areas, including the Absheron, Umid, Garabagh filelds, and Babak prospective structure.
These areas will ensure both the energy sources and raw materials for the developing manufacturing industry in Azerbaijan, to meet the growing demand of the domestic market with extra volumes of gas. The company’s key development areas for the coming years will be processing and chemistry. Particularly, we plan to increase the production of polymers and carbamide for the production of plastic goods and fertilizers.
We are currently involved in the development of new oil and gas fields, and they are expected to be commissioned in 2020-2021.
As a result, we will be able to further boost natural gas production in the years ahead, which will help to meet the increasing domestic demand for natural gas thanks to the development of the processing industry, as well as make continuous contributions to Europe’s energy supplies.
The Absheron field will be jointly developed by SOCAR and French Total company. SOCAR is ready to negotiate on prospects for cooperation on the development of Umid and other structures.
Azerbaijan’s oil and gas industry has rich historical traditions and we have sufficient technical and financial capabilities to develop our energy resources.
In fact, the government has already allocated funds for the development of the Umid natural gas field. Therefore, SOCAR does not depend on any foreign partners for the development of oil and gas resources in the country. But as a state-owned company, we prefer to focus on saving some of the funds, and channel them to a number of other areas, including the education and healthcare ones. We welcome the desire of potential partners to be involved in our projects on the basis of mutual benefit in this regard.
-The European Investement Bank approved a 1.5 billion euro loan for the Trans-Adriatic Pipeline (TAP). This is important for timely implementation of the project. How much have you invested in each component of the Southern Gas Corridor so far, and what are your plans to deliver the first commercial gas to Turkey through the TANAP pipeline?
– There were various opportunities to realize Azerbaijan’s rich natural gas reserves. But we preferred to build an export pipeline to Europe. Azerbaijan was the initiator of the Southern Gas Corridor project, no matter how complicated was the mega project, based on the legislation of different countries, and implemented in a variety of continents. Now only one step is left to transport natural gas from the Caspian Sea to Europe.
We are also looking forward to building a sustainable partnership with our European partners.
European Investment Bank’s direct financial contribution to TAP reaffirms importance of the Southern Gas Corridor for European energy security. The total amount of joint investment so far has been $ 29.7 billion. Azerbaijan has invested $ 8.7 billion in financing its equity shares in four projects included in the value chain of the Southern Gas Corridor so far. The works are underway in line with the schedule and the project will be completed at the intended time. We are going to start the exploitation of parts of the Southern Gas Corridor in Azerbaijan, Georgia and Turkey. The delivery of first natural gas to Turkey for commercial purposes is scheduled for mid-2018.
-Thank you for the interesting interview.