Weekly economic review (May 5-9)
SOCAR Trading provides Azerbaijan with additional revenues worth $ 1.1 bln
SOCAR Trading's activity (SOCAR's trading division) in 2008-2013 provided Azerbaijan with additional revenues worth $1.1 billion, according to the specialists of Wood Mackenzie international consulting company.
The company prepared a report on a six-year price dynamics of Azeri Light on the world market upon SOCAR Trading's order.
The report said that additional profit was obtained by increasing the cost of Azerbaijan's Azeri Light and due to SOCAR Trading's effective activity.
The cost of Azerbaijani Azeri Light oil increased by an average of $1.75 per barrel compared to North Sea Brent crude oil for the past six years, according to the report.
Some $0.6 per barrel fell to the external factors, $1.15 per barrel - to the factors associated with SOCAR Trading's effective activity in the structure of increasing the cost of Azeri Light compared to Brent, according to Wood Mackenzie.
"Accordingly, if one takes into account that the sales volume of exported oil hit 961 million barrels during the mentioned period, the total amount of Azerbaijan's additional income is directly connected with the company's activity, amounting to $1.1 billion," the experts of the company said.
At the same time, SOCAR Trading sold 72 million barrels of transit oil, transported via the Baku-Tbilisi-Ceyhan (BTC) pipeline during this period. As a result, BTC Co. consortium received $350 million of additional income.
Azerbaijani oil has significantly strengthened its market position in the Asian region due to SOCAR Trading's effective activity, according to Wood Mackenzie experts.
They said that the fact that foreign refiners preferred quality raw materials, was one of the external factors that positively influenced the growth of Azeri Light premium compared to Brent.
'While processing quality raw materials, large volumes of middle distillate fractions are obtained. As a result, the demand for it increased," said the report.
Furthermore, the Libyan crisis, which increased the global demand for crude oil was highlighted among the most important external factors.
Moreover, Wood Mackenzie experts emphasize the internal factors that increased Azeri Light prices. The security of supplies increased by SOCAR Trading and the transition to direct oil supplies without mediators, was named the most important factor.
The report of Wood Mackenzie said that in general, along with other factors, the activities of SOCAR Trading played a key role in the cost increase of Azeri Light over Brent. The document notes that internal factors (factors related to the efficient operation of SOCAR Trading) accounts for $1.15 (about two thirds) above the achieved growth at $1.75 per barrel, while the value increase of Azeri Light equates to 0.16 $.
Accordingly, most part of the premium growth is a result of effective marketing activities by SOCAR Trading, as well as effective development policy of deliveries to Asian markets, which in turn led to an increase in demand for Azeri Light, the report said.
The document prepared by the consulting company also demonstrated Brent's price dynamics in recent years, indicating the main factors that affect the price. Among the most notable changes - a sharp decline in 2008 due to the global financial crisis from $130 to $40 per barrel.
Despite the fact that, the financial crisis has weakened significantly in the next few years, the price of oil has not been able to reach the peak of 2008 and slightly exceeded $120 in 2012.
Then, the price of Brent varied in the range of $100-$110 per barrel.
In accordance with the Wood Mackenzie estimates, Azeri Light, the price of which is tied to the price quotations of Brent, also demonstrated volatility in this period. Despite this, considering the above mentioned internal and external factors, premium growth was achieved on average $1.75 per barrel relative to the price of the Brent brand.
SOCAR Trading, a subsidiary of SOCAR headquartered in Geneva was established under co-sponsorship of Anar Aliyev and Valeria Golovushkin.
Aliyev is a big-time businessman, well-known in the oil industry, and Valery Golovushkin is the founder of Lukoil Trading in Geneva.
SOCAR Trading Company started its activity in 2008.
The company sells most of SOCAR oil exported from Ceyhan (Mediterranean, Turkey), carries out trading crude oil and petroleum products from other countries, as well as assisting the parent company with international investments.
Activity of SOCAR Trading covers Europe, Asia and America. The company has offices in US, Turkey, UAE, Egypt, Singapore and other countries.