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Weekly actual topics in Azerbaijan (March 11 - 16)

Analysis Materials 19 March 2013 12:24 (UTC +04:00)

Chinese success in Libya's oil sector

According to data released by the Libyan National Oil Company as of 2012, one can say that Libya was able to return to pre-conflict oil production volumes and almost the same volume of supplies abroad last year.

According to the report, Libya exported 379.5 million barrels of oil in 2012.

However, as opposed to the previous restored production volumes and black gold export, the equity ratio of the three main importers of Libyan oil has been changed.

In 2010 Libyan oil covered about 30 per cent of Italy's needs, 16 per cent - France -11 per cent - China. In 2012 around 36.8 per cent fell to Italy's share, China - 12 per cent, France - 11 per cent. As one can see, China has firmly ranked second among holders of Libyan oil during a year, forcing France out.

If at first glance harmless numbers are taken easily and quickly, in reality the current percentage of African oil was not easy, taking into account the high quality of Libyan oil which cannot be replaced by raw materials from other countries. China was slowly and persistently moving towards its goal.

When the matter rested in the oil interests of various countries in Libya, China did not create suspicions in this respect and its presence in Libya was connected with the employment of a large army of able-bodied Chinese who were mainly engaged in infrastructure construction.

Chinese oil companies were not among the main beneficiaries of Libyan oil after the uprising. On the contrary, France will have a total advantage in Libyan oil and hold a 35 per cent share for its support for the opposition.

Nevertheless, the credibility towards European companies was undermined. As one knows, oil production in Libya has fallen to its lowest level since the beginning of the rebellion because of the departure of employees of foreign oil companies operating in the country. In particular, British BP, Italian Eni, French Total, Norwegian Statoil and Anglo-Dutch Shell companies stated their temporary reduction in the volume, or the cessation of work on oil and gas extraction in Libya.

The choice was made. In future Libya will be ready to replace Western oil companies for Chinese and Indian.

The leaders of the Libyan National Transitional Council have repeatedly pointed out that they respect and recognise all previously signed contracts with China.

China has assisted the new government in the form of humanitarian supplies and active participation in the post-war restoration of the North African country. The outcome of the mutual recognition was a major contract on oil supplies signed between Libya and China last March.

According to it, Beijing will buy up to 100,000 barrels of crude oil from Tripoli per day. This means Beijing has doubled its imports of Libyan hydrocarbons (48.2 million barrels). The final annual report of the Libyan National Oil Company showed this figure.

Azerbaijani State Oil Fund announces plans for 2013

The Azerbaijani State Oil Fund (SOFAZ) will bring its own gold reserves up to 30 tons by late 2013, SOFAZ head Shahmar Movsumov said in an interview with The Business Year: Azerbaijan 2013.

"According to SOFAZ current investment policy, up to five percent of our investment portfolio may fall to gold," he said. "We started making our investments in this kind of assets in February 2012 and acquired about 15 tons by the end of last year."

He said that as a kind of assets, gold has several unique characteristics that make it attractive to investors. Gold can act as an effective tool of hedging inflation and currency risks in the long term prospect. Moreover, gold ensures protection against high volatility in the financial markets during economic downturns.

SOFAZ buys physical gold on the London Metal Exchange and temporarily stores it in JP Morgan's London vault.

SOFAZ has already begun bringing gold to Azerbaijan. The first batch of gold was imported into the country on January 11, the second batch - on February 1 and the third batch - on March 1.

Referring to the plans for this year, Movsumov stressed that 2012 was marked by SOFAZ's entering the state securities market, real estate and gold. SOFAZ extended the exposure of currency portfolio, which includes the Australian dollar, the Russian ruble and Turkish lira in 2012. SOFAZ will continue working in this direction, as well as to further diversify the investment portfolio in 2013.

"We plan to increase our exposure for public and private shares," he said. "We will also strengthen our position in the real estate. Currently, we are examining new regions attractive for making investments in property."

According to SOFAZ's investment strategy, up to 5 % of SOFAZ investment portfolio may be invested in assets, up to 5 % - in real estate and up to 5 % - in gold for the first time since 2012.

SOFAZ was established in 1999 when its assets amounted to $271 million. As of Jan. 1, 2013, SOFAZ's assets hit $34.129 billion.

The main purposes of the fund are the accumulation of funds and placement of the fund's assets abroad to minimise the negative impact on the economy preventing a 'Dutch syndrome' to ensure savings for future generations and to maintain the current socio-economic standard in the country.

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