BP and partners ask government to prolong oil contract in Azerbaijan

Oil&Gas Materials 2 June 2009 14:56 (UTC +04:00)

Azerbaijan, Baku, June 2 / Trend , I. Khalilova/

Foreign partners on PSA contract on development of Azeri-Chiraq-Gunashli fields ask the Azerbaijani government to prolong the contract signed in 1994, Azerbaijan State Oil Fund Director Shahmar Movsumov said.

"This issue is not discussed seriously at the moment as the contract will expire in 2024," Movsumov said. "All must be reviewed in detail for this purpose." PSA partners say they want the contract to be prolonged as they intend to make new investments in the project. They want to make sure that the term of the contract will be long enough to recompense investments."

Movsumov said Azeri-Chiraq-Gunashli project brings more profits unlike the period when the realization of the project began.

"The revenues are so high that they invest and recompense in the same year and there is no need to wait for 20 years. They lose from earned revenues," Movsumov said.  

In meantime, a transition to a "zero balance" took place in March 2008 due to onset of time of full recompense of investments of foreign partners in the Azeri-Chirag-Guneshli fields. Currently, a special committee continues to work on the technical transfer of the assets of the Azerbaijan International Operating Company (AIOC) to the government, Movsumov said. He said this is a huge process, because billions of dollars that are returned to the Azeri government are the main point, so it is necessary to clarify all details.

"Nearly 40 million tons of oil will be produced [from Azeri-Chiraq-Gunashli] in 2009 which makes up a huge sum with world oil prices at $50 per barrel. Extra investments by foreign partners will total $10 billion. About $1-$2 billion will be invested each year. They can recompense very quickly," the SOFAZ head said.

He said if investments recompense every year, they can be considered Azerbaijani government's assets. Respectively, status of "zero balance" will not change.

Working group of representatives of SOFAZ, SOCAR and AIOC has been set up to get prepared for this process. The afore-said companies are discussing transfer of assets to government and scheme of activities after that.

The oil prices in world markets affected acceleration of the recompense of the investments. Despite that the date of the zero balance came last year, AIOC and its shareholders continue to pay income taxes. A new payment mechanism at the level of technical staff was agreed, based on the amortization transfers, Azerbaijani Deputy Taxes Minister Sahir Mammadov said.  

"It was decided that by 2018, they [the shareholders of AIOC] will be paying taxes for a partial payment of the cost of amortization," Mammadkhanov said. "This mechanism already works and companies pay taxes on the difference of income and expenses."

In 2008 the Public budget received 2240.4 million manat profit tax from AIOC. In the first quarter of 2008, AIOC paid 555 million manat to the budget, in the second quarter - 486.9 million manat, in the third - 1107.1 million manat.

Nearly 1.23 billion manat is expected be transferred to the pubic budget In 2009

On June 2, the official exchange rate is 0. 8035 manat to $1.

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