Azerbaijan’s oil & gas sector strengthens int’l position
Azerbaijan, Baku, Oct. 22 / Trend /
Trend commentator Emil Ismayilov
Standard & Poor's Ratings Services had assigned its 'BB' long-term corporate credit rating to the State Oil Company of Azerbaijan Republic (SOCAR) with a positive outlook and this closed the high international assessment cycle of SOCAR as a stable structure and confirmed its importance in the Azerbaijani economy. SOCAR already owns ratings of rating agencies Moody's and Fitch.
SOCAR entered the list of the world major oil companies with increasing its capacities in recent years. The company's strengthening allowed it to gain a foothold not only in the Azerbaijani market, but also to enter the international market. Particularly, now SOCAR actively operates in other markets. It is an active participant in the market of petroleum products and natural gas in Georgia and it has intensified its activities in the petrochemical market in Turkey. In addition to the petrochemical, SOCAR will launch the project on building a new refinery in Turkey in late October, 2011. This will allow SOCAR to strengthen the energy market in Turkey, particularly, to provide raw materials to the Petkim petrochemical complex, in which SOCAR has equity participation. Moreover, the company will ensure appearance of its products in the European market. This is evidenced by the company's revitalization and its major plans to expand gas station network in Ukraine and Romania.
SOCAR's trading arm - SOCAR Trading also entered the world market of oil and oil products trading in a short period of time, but not only with the Azerbaijani production. SOCAR Trading is also expanding its position in the sale of oil from third countries. It has offices in Africa, Europe and Asia, which indicates a considerable scope of its activities.
Given that today SOCAR actually turns into a rapidly evolving global company, the process of adoption in foreign markets will be even more extended following the receiving an investment rating.
SOCAR's aspiration for becoming an internationally recognized company is seen in its efforts to prepare a comprehensive strategic plan for the company until 2025. Work on the document was launched in August 2010 and took a long time, since SOCAR owns a large number of companies and about 80,000 employees. Particularly, major companies such as Azerigas (gas Distribution Company) and Azerkimya (enterprise of chemical products) were included in SOCAR's balance in over 1.5 years.
The company intends to develop a great plan meeting the appropriate level of international oil companies, which requires a rethinking of existing capacity, evaluation of new targets and goals for the future.
Along with the activities on the international market, SOCAR seeks to realize big plans inside the country. Particularly, SOCAR intends to further increase Azerbaijan's oil and gas potential. If today Azerbaijan's proven gas reserves exceed 2.5 trillion cubic meters, in the future reserves will be further increased due to the plans on development of promising structures in the Azerbaijani sector of Caspian Sea. Large enterprises' inclusion in SOCAR requires significant investment in the country's gas and chemical industries. There are ambitious plans to build in Azerbaijan the region's largest complex for oil refining, gas and petrochemical production, which is one of the largest projects in the SOCAR Development Plan. The complex construction may require investment of $13-$15 billion.
All these plans require a large amount of investment, which means the need to attract loans and preferably on favorable terms and rates.
SOCAR Vice President for Economic Affairs Suleyman Gasimov said earlier that the company in the future may attract additional investments of up to 5 billion manat for major projects. He said both local and foreign banks and financial institutions can be attracted, since it is a huge amount of additional investments.
SOCAR also plans to attract funds from international capital markets by issuing Eurobonds, and the debut issue is expected to be $ 500 million. The fact that three rating agencies assigned ratings to SOCAR will allow it to place Eurobonds on the most favorable conditions.
The company may attract credit resources from various international financial institutions without difficulty. Therefore, attraction of funds through the placement of Eurobonds is not an end in itself, and is being done to improve the international recognition of SOCAR.
SOCAR's entrance in the circle of the world's major borrowers confirms the high proportion of export earnings, international diversification and sustainable financial performance. SOCAR is fully owned by the Azerbaijani state and represents the interests of the state oil and gas industry, which is essential for the Azerbaijani economy.
The rating assignment is a sign for revitalization for investors. Major foundations and international financial institutions always go by the leading agencies' opinion, and now SOCAR has ratings of the three major rating agencies. Accordingly, obtaining ratings will allow SOCAR to attract large loans on favorable terms, which will positively impact the timeliness of the realization of the projects and goals of the Azerbaijani government set before SOCAR. This, in turn, will be a positive impact on the strengthening of Azerbaijan's position in the global oil and gas market, and promote the country's welfare and prosperity.