Weekly economic review

Analysis Materials 23 April 2008 12:02 (UTC +04:00)

Last week the Executive Director of the State Oil Fund of Azerbaijan (SOFAZ), Shahmar Movsumov, held a press-conference dedicated to results of first quarter of 2008 on 17 April. "The first quarter was successful for the Fund and it is testified by additional $860mln being received against $1bln during the last year," Movsumov said.

As a result of the first quarter of 2008, the income of SOFAZ totaled AZN 1.116.400.000 and expenditures - AZN438.4mln. The majority of fund's payments (96.7%) accounts for the sale of oil. The income from the realization of oil contracts totaled AZN 1.094bln, AZN 1.079bln - from the sale of oil, AZN 0.8mln - per acre payments, AZN 14mln from dividends from BTC project and AZN 0.04mln from the assets at the disposal of foreign investor. The yield from the management of fund's resources totaled AZN 22.4mln and off-budget income from the re-evaluated currency assets -AZN 20.2mln.

Due to the increase of oil prices in the world markets, the State Oil Fund of Azerbaijan (SOFAZ) expects that the income will increase up to AZN 10bln against AZN 3.6bln forecasted earlier, in 2008. Due to the increase of oil export, these incomes will come from its sale. As a result the assets of the Oil Fund may reach AZN 9-10bln, against AZN 2.775bln ($3.336bln) as of 1 April. The 2008 budget of the Fund determined incomes at AZN 3.609bln and expenses - AZN 1.680bln.  

Currently the dividends from Baku-Tbilisi-Ceyhan pipeline are also taken into consideration. "We have already received incomes from the operation of the pipeline in 2007, but accounts are being held for the incomes being expected as a result of 2008, which can also be included in the revenue part of Fund's budget," Mosvumov said.

Most part of SOFAZ's incomes (over 90%) is expected to be received from the sale of profit oil. The incomes received from oil contracts are forecasted at AZN 3.473bln, including 13.423mln from dividends on Baku-Tbilisi-Ceyhan pipeline: AZN 121.928mln from passing assets to management: AZN 900.000 - other profits.

Within corrections to the 2008 Public budget, currently the forecasts of the SOFAZ are also being re-considered. Due to the growth of Fund's revenues, head of the Fund did not exclude the expansion of Fund's expenditures. It may affect the gross amount of transfers totaling AZN 1.1bln from the Oil Fund to the Public budget. Of them, 580mln will be directed towards realization of the projects and it will remain unchanged.

As the income of State Oil Fund of Azerbaijan (SOFAZ) is expected to increase by the end of 2008, the Fund plans to increase its portfolio at the disposal of foreign managers by early 2009. "There is good work underway with managers now and their income indicators are at an average rate," Movsumov said. At present we are not going to cancel the current contracts, but will attract two more managers by increasing our income at the same time, he said. According to Movsumov, the decision in this regard will be adopted by the end 2008 and early 2009.