AIOC may overfulfill its target on tax remittances to Azerbaijan's state budget in 2010

Azerbaijan, Baku, Oct. 21 / Trend I.Khalilova /

The Azerbaijan International Operating Company (AIOC) has transferred 564 million manat to the state budget in profit tax since early 2010. It makes up 86.8 percent of the annual forecast, the government reported.

AIOC is the operator of the Azeri-Chirag-Guneshli full field development project in the Azerbaijani section of the Caspian, where Azeri Light oil is produced.

"Rise in oil prices affected the increase in revenues from the oil contractor companies, because the remittances were calculated on the basis of oil price set at $60 per barrel, while the average price was $75," a source in the government said.

Decline in world oil prices (almost twice) in 2009, as well as three-fold reduction in equity ratio of foreign contractor companies in the oil production - from 70 percent to 20 percent affected the revenues of the 2009-state budget.

In 2009, remittances to the state budget in profit tax amounted to 513.2 million manat compared to the forecast of 1.23 billion manat (oil price was set at $45 per barrel). Remittances decreased by 76.1 percent or 1,636.2 million manat compared to 2008. In 2007, revenue from contractor companies exceeded 2.5 billion manat. In 2010, the transfers were laid at 650 billion manat, but the annual target will be over-fulfilled because additional 180 million manat is expected in revenues.

Despite this, the forecast for the AIOC in 2011was designed in the amount of 600 million manat.

The government reported cut in forecast for profit tax remittances for the AIOC in 2011 is linked with the implementation of the Chirag oil project worth $6 billion up to 2013.

"This will increase expenses of oil companies participating in the project, and respectively, decrease their profits," the government said.

Chirag oil project involves $6 billion investments. Planned daily production of Azeri Light oil from the new platform, which will be built to increase oil production at ACG, will amount to 183,000 barrels. The expected daily production of associated gas from the new platform will exceed 6.5 million cubic meters. Estimated daily volume of injected gas into the reservoir on the platform will be about 2.3 million cubic meters.

Advance drilling under the project will cover the second half of 2010 - the first half of 2012. Drilling will be carried out with the Dede Gorgud rig. Starting production from the platform is scheduled for the end of 2013. In total, 300 million barrels of oil are expected to be produced under the project (until the end of the contract on ACG in 2024).

ACG participating interests are: BP (operator - 37.43%), Chevron (11.27%), SOCAR (10%), INPEX (10.96%), Statoil (8.56%), ExxonMobil (8%), TPAO (6.75%), ITOCHU (4.30%), Hess (2.72%).

In 2010, oil production is projected at 52 million tons, of which 8.5 million tons will be produced by SOCAR.

In 2011, the volume of oil production is projected at 51.5 million tons per year. Of this amount, 43 million tons will fall to Azeri Light from the Azeri-Chirag-Gunashli and 8.5 million tons will be extracted by SOCAR in the onshore and offshore fields at its own expense.

In 2010, the gas production is projected at 27 billion cubic meters, of which 17.6 billion cubic meters are intended for sale.

Gas production in 2011 is projected to increase to 29 billion cubic meters, 18 billion cubic meters of which will be sold.

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