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Azerbaijan's economy can withstand low oil prices

Economy Materials 20 October 2014 17:22 (UTC +04:00)
The oil price decrease on the world markets has caused great agiotage. There have been many attempts to explain the reason for this decline.
Azerbaijan's economy can withstand low oil prices

Baku, Azerbaijan, Oct. 20

By Seymur Aliyev - Trend:

The oil price decrease on the world markets has caused great agiotage. There have been many attempts to explain the reason for this decline. Among the versions are those beginning with the scenerio of a glut in the market and an increase in shale gas production, to the agreement between the U.S and the Arabic producers to put pressure on the Russian economy.

Today much has been said about the need to adjust the budgets of the producing countries to reduce expenditure. However, despite the current state of affairs, there is no need for revising the state budget of Azerbaijan.

Although the oil price in the country's budget for this year is set at the level of $ 100 per barrel, and despite a decrease in its cost on the world markets, the average price on Azerbaijani oil as of the first nine months is about $ 109.

An important factor is also the profitability of the country's ongoing energy projects. No problems are expected in this area. This is explained by the fact that they were initiated and implemented taking into account low oil prices compared to the current prices. Consequently, their profitability is quite high today.

Moreover, almost all projects have undergone the process of capital investments, which are made in these projects as operating expenses. Such projects include the development of the Azeri-Chirag-Guneshli block of fields, Baku-Tbilisi-Ceyhan oil pipeline and the first stage of development of the Shah Deniz field.

The decline in oil prices will also entail decrease in the cost of services and materials needed for the implementation of the project for supplying Azerbaijani gas to Europe. Here we mean the Shah Deniz-2 and the whole Southern Gas Corridor project. So, this will lead to price adjustment in accordance with the changes in prices for energy resources.

However the changes in oil price first of all creates the need to reduce the economic dependence of producing countries from the oil sector. Currently this process is the main vector of Azerbaijan's economic development. The country pays special attention to the agricultural sector, transport, tourism, high technologies, production of construction materials and other fields. In general, 2014 has been declared the Year of Industry in Azerbaijan.

Diversification of economy, reducing dependence on energy and the development of the non-oil sector, maximum ensuring of food and energy security will allow to significantly improve the country's economic sustainability and withstand recessions and fluctuations on foreign markets.

Seymur Aliyev is Head of Trend Agency's Russian News Service

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