Azerbaijan dramatically cuts oil price forecasts for 2010, when devising public budget

Azerbaijan, Baku, Sept. 17 / Trend , I.Khalilova/

On the backdrop of global processes, variability of the world oil prices, the Azerbaijani Finance Ministry has lowered the forecast prices, which have been formed on the basis of forecasts of the public budget and the consolidated budget for 2010, the government said. The Finance Ministry has submitted a budget package for next year and the next three years to the Cabinet of Ministers.

Although the Economic Development Ministry in the preliminary macroeconomic projections laid the oil price at $40 per barrel, but, apparently, it underwent a correction, depending on the situation on world markets.

Forecasts of the 2009 public budget have formed on an oil price of $70 per barrel, but since 2009, the oil price on world markets has declined, reaching less than $40-$50. However, in recent days, the price of Azeri light oil, produced from the Azeri-Chirag-Guneshli field is around $69-$70 per barrel.

In March, Finance Minister Samir Sharifov said that "our income reduces not so much the fall of oil prices on world markets, as the decline in AIOC's production".

The volume of oil production from the Azeri-Chirag-Guneshli should be one million barrels per day, but the actual size is less.

In 2009, Azerbaijan is projected to get 45 million tons of oil, whose about 36.5 million tons will fall to Azeri Light from the Azeri-Chirag-Guneshli field, and 8.5 million tons of oil - to SOCAR (State Oil Company of Azerbaijan) by own expense on offshore and onshore fields.

In 2010, oil production is projected at 55 million tons per year, whose 46.5 million tons will fall to light oil, and 8.5 million tons of oil will be produced by SOCAR.

Despite the increase in the oil forecasts, during developing budget figures for next year, the oil price has laid at the level of $45 to $70 in 2009. Thus, the government is trying to protect itself, because in the post-crisis period, countries usually need time to recover and increase growth.

Last year forecasts of macroeconomic indicators for 2009 were prepared on the basis of three scenarios [pessimistic, average and optimistic forecasts], changes in oil prices on world markets.

According to the pessimistic forecasts, the oil price in 2009 was laid at $80 per barrel, average - $100, and the maximum - $125. By 2012, this figure was expected to fall to $70. However, the deepening global crisis impacted on oil prices, which led to the need to return to a more conservative approach.

In 2005 when developing forecasts, the oil price was laid at $25 dollars, in 2006 - $50 (after adjusting forecasts, as initially it was $40), 2007 - $50, 2008 - $70 (although originally taken as a basis of $50).

IMF [for the 2009 budget of Azerbaijan] pointed to the stability of the country's budget, even with lower oil prices to $40 per barrel. Meanwhile, amid a recession of the U.S. economy, consuming today is not less than 50 percent of the main export grade of the Azerbaijani oil (Azeri Light FOB Ceyhan), does not bode well for the sustainability of the Azerbaijani budget, as well as oil consumption in the United States can be found at low levels during 2009/2010 period.

For seven months of 2009, actual revenues to the public budget amounted to 5.7087 billion manat (32.9 percent of GDP), down 5.5 percent compared to the same period of last year. Expenditures of the public budget increased 3.3 percent, amounting to 5.276 billion manat (30.4 percent of GDP). Budget surplus amounted to 432.7 million manat or 2.5 percent of GDP.

According to the 2009 public budget, approved by Azerbaijani President, Ilham Aliyev on Dec. 11, revenues are projected at 12.177 billion manat (27.9 percent of GDP), expenditure -12.355 billion manat (28.3 percent of GDP), and deficit - 178 million manat or 0.4 percent of GDP.

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