Azerbaijan expects 40-percent increase in oil revenues to 2011-state budget

Business Materials 20 May 2011 18:13 (UTC +04:00)

Azerbaijan, Baku, May 20 / Trend I.Khalilova /

The bill 'On amendments to the Law on Azerbaijan's state budget for 2011' introduced to the Azerbaijani Parliament for discussion provides an additional increase in oil revenues to the state budget by 40.8 percent, the government told Trend.

As part of correction of the budget forecasts with revenues of 15.554 billion manat, 73.87 percent (11.49 billion manat) are expected through oil and gas revenues. Under the approved budget, this revenue was expected to reach 8.16 billion manat.

The basis of state budget revenues in 2011 will be ensured through transfers from the State Oil Fund in the amount of 9.18 billion manat. The transfers increased by 41.7 percent (2.7 billion manat) compared to the figures in the draft state budget approved for 2011 and made up 59 percent of the proposed state budget revenues.

Previously, the Taxes Ministry transferred the bulk of accumulations the state treasury. The share of tax revenue in the total budget revenues was reduced from 39 percent in 2010 to 33.2 percent in 2011.

However, the forecasts for the Taxes Ministry are expected to increase by 740 million manat to 5.160 billion manat in 2011. Some 450 million manat of the additional revenue is expected to come from the Azerbaijan International Operating Consortium (AIOC), and 180 million manat - the State Oil Company of the Azerbaijan Republic (SOCAR).

As part of corrections in the budget forecasts for 2011, it is planned to increase the target of income tax transfers for the AIOC, the operator of the Azerbaijani Azeri-Chirag-Guneshli fields producing Azeri Light, from 600 million manat to 1.050 billion manat. The figure for SOCAR has been increased from 1.080 billion manat to 1.260 billion manat.

The favorable situation in the world oil market enabled to keep the cost of the Azerbaijani oil by more than 80 percent above the price set in the 2011-state budget ($60) for a long time. Therefore, even at lower volumes of oil and gas production, Azerbaijan received from their sales more than expected. Thus, additional revenues of the State Oil Fund of the Azerbaijan Republic totaled 976.4 million manat in the first quarter of 2011 compared to the earlier projected 193.5 million manat. AIOC transferred 641 million manat to the state budget over the past two quarters.

Meanwhile, the country's oil sector fell by 4.1 percent and natural gas production fell by 3.6 percent in January-April 2011. Following a 15-percent expansion in 2009, a growth in the oil production began to decline since 2010 (an increase of 0.9 percent), as existing oil fields (except the Azeri-Chirag-Guneshli fields) are reaching their maximum capacity. However, the country's gas production rose by 11.2 percent in 2010.

The government implements measures to develop non-oil sector in parallel. According to forecasts, the share of oil sector in Azerbaijan's GDP will drop to 38 percent by 2014 compared to 47 percent in 2009, which will be achieved as a result of the successful diversification of the economy.

The share of non-oil sector in GDP will increase from 45 percent to 53 percent.
The non-oil GDP growth rate is projected at 7.2 percent in 2011, while growth is expected to reach 8 percent in the next three years.

"To ensure this growth upon the Azerbaijani President's instructions with a view to develop the private sector, it is planned to improve the legislative and state regulatory system, to further improve the business climate in the country, expand activities on the state support, particularly to small and medium enterprises, improve financial, infrastructural, advisory and information management, attract foreign and local investment, modern technology and study experience to manage and support production of high quality and competitive products," Economic Development Minister Shahin Mustafayev said earlier.

It is expected to undertake activities under the state program on socio-economic development of the Azerbaijani regions to develop non-oil sector. Construction of the enterprises in the manufacturing and service fields is also important.

The official exchange rate is 0.7902 manat to $1 on May 20.