SOCAR Trading aims to increase competitiveness of SOCAR at world markets: interview with SOCAR MEOD head

SOCAR Trading aims to increase competitiveness of SOCAR at world markets: interview with SOCAR MEOD head

Baku, Azerbaijan, July 8 / Trend /

Trend interview with SOCAR Marketing and Economic Operations Department (MEOD) Director General Tofig Gahramanov

Question: SOCAR Trading, which is involved in trading Azerbaijani oil in world markets, was established one and half year ago. What success has the company achieved during its operation and what are its goals in the mid- and long-term prospect?

Answer: To give complete and exact answer let's make a short excurse to the last years. Even at the beginning of 2008 share of Azerbaijan and SOCAR in total production and sale of Azeri Light was inconsiderable and comprised approximately 4-5 million barrels in a month. SOCAR's Marketing and Economic Relations Department was involved in sale of these volumes on the basis of spot tender sales: at the beginning on FOB Supsa and FOB Batumi terms, and at FOB Ceyhan terms after the exploitation of the Baku-Tbilisi-Ceyhan pipeline. Traders were the participants in the tenders.

Successful implementation of the Azerbi-Chirag-Guneshli project, which was accompanied by multiple increase of oil prices over the past few years, was to change correlation of ACG oil distribution between the government and contractor in favor of the first taking into account the PSA. It occurred in April 2008. Realizing the importance of readiness for 'bulk oil' trading, SOCAR decided to establish a daughter company in Geneva with an objective to ensure flexibility and strengthening of commercial component in the work. Geneva is one of business centers of Europe, which incorporates offices of almost all major players in oil, financial and bank business.

SOCAR Trading, which was established in December 2007, launched active operations almost in 2-3 months. The company was successfully presented in September 2008. The major task of the company is to market Azeri Light, increase its competitiveness in world markets and to supply crude to final consumers.

Presently, SOCAR Trading supplies oil tankers to different corners of the world (approximately 25 countries). Since the beginning of operation the company sold over 160 million barrels of oil to systems of well-known companies such as Shell, Total, Sunoco, Irving, Exxon, Chevron, Agip, etc. Under the contract with the MEOD sold 358,000 tons of diesel fuel through the Georgina port of Kulevi, which belongs to SOCAR.

The company employs about 30 people. Some representatives from SOCAR MEOD hold positions in the here. By the way, relations between SOCAR MEOD and SOCAR Trading are set on the basis of full understanding and mutual proceed. We try to carry out consolidated sales, regularly dispatch specialists to each other for exchange of experience and urgent solution of all vital issues.

As to long-term prospects of SOCAR Trading, the company has different goals, including interaction with different partners through SWAP, realization of processing and tolling operations, time-chartering tinkers, purchase of perspective, highly profitable financial assets, rent of reservoir parks for preserving oil and oil products in different regions of the world, as well as fulfillment of logistics and commercial tasks.

Q: SOCAR Trading opened its office in Singapore. This representation of SOCAR is expected to sell oil in the Southeast Asia. Do you plan to establish an oil storage in South Korea so that to trade crude in this region further?

A: Even in the initial phase of development SOCAR Trading was committed to establish business with third parties in the nearest future. Opening of SOCAR Trading office in Singapore should be considered merely in this context. It's not secret that presently Indochina and Southeast Asia in whole occupies one of top places worldwide for energy consumption, possessing big capital and every opportunity to realize business projects.

So, we hope along with marketing and sale of Azerbaijani oil SOCAR Trading will first of all attach importance to the development and establishment of new ties and occupy a definite recess in this extremely significant region of the world.

Azerbaijani governmental delegation will visit the South Korea shortly the delegation includes SOCAR MEOD representative who is eligible to discuss possibility of long-term lease of storages in the so-called South Korea without storing oil. By the way, similar proposals on joint use of terminal oil storages without storing oil also same from other companies.

Q: This year SOCAR plans to increase considerably oil transportation via the Baku-Novorossiysk. In what way is it planned to increase delivery of own oil?

A: Last year the Baku-based oil refinery plants refined 7.3 million tons of oil. Under a contract with Transneft around 1.3 million tons of oil produced by SOCAR, operating companies and joint ventures was transported via the Baku-Novorossiysk pipeline.

This it is planned to refine 6 million tons of oil. It fully covers the domestic demand in oil products and enables to export of part of the products. SOCAR's oil not delivered for refinery will be directed at increasing the volumes pumped via the pipeline and transportation will reach 2.5 million tons by the end of the year.

Q: What markets are more attractive presently to trade Azerbaijani oil?

A: It depends what sort of oil we are dealing. If we deal with SOCAR's oil exported from Novorossiysk (Urals branded oil), in this case its consumption is restricted to Southeast and Central European countries. In case with Azeri Light the geography of supplies is infinite: North and South America, Africa, Europe and Asia. Almost 50 percent of Azerbaijani oil is delivered to Europe, particularly, the Mediterranean countries, and another 50 percent is supplied to far abroad.

Q: Iran offers to transport Azerbaijani oil through the Neka-Jask route for entry to the Persian Gulf. To what extent could this project be of interests for Azerbaijan?

A: SOCAR is one of founders of the Baku-Tbilisi-Ceyhan and in line with the terms of the project is committed to deliver the entire volume of Azeri Light via this route. Therefore, sale of roughly 180,000 tons of Azeri Light to Iran in August-October of 2008 should be regarded as exclusion because of force majeur (an incident in pipeline and military operation in Georgia).

On the other hand, the events of the last year clearly confirmed that Azerbaijani President Ilham Aliyev was right while urging the necessity of diversification and multiversion approach in developing energy resources transporting routes for export and import operations. From this point of view, Iranian deliveries turned out the only possible outlet from the crisis existing then.

As to the Neka-Jask pipeline, now it exists as a project. Term of implementation of the project and commercial terms of transportation are still to be defined. So, it is too early to speak about interests towards this route.

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