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Major events in caspian countries' oil and gas industry for last week (Feb. 12-16)

Analysis Materials 19 February 2018 17:09 (UTC +04:00)

TANAP’s Lot 3 completed one month earlier

The Lot 3 of the Trans Anatolian Natural Gas Pipeline (TANAP) project has been completed one month earlier, Mustafa Kopuz, Project Manager of TANAP project's Lot 3, told Trend.

Lot 3 of TANAP project envisages construction of the pipeline from Sivas to Eskisehir in Turkey. The official completion date of this project was December 25, 2017.

The $565 million worth Lot 3 of TANAP project has been implemented by Turkey's Tekfen Construction.

Moreover, talking about Tekfen's further participation in TANAP project, Kopuz pointed out that the company is already taking part in construction of TANAP's compressor stations' first package which are located in different part of Turkey.

Those compressor stations are: MS-1: Metering Station 1 in Posof/Ardahan in Turkey-Georgia Border; CS-1: Compressor Station 1 in Damal/Ardahan; MS-1&CS-1 Family Accomodation in Posof and Hanak/Ardahan; CS5 & CS5L: Compressor Stations in Eskisehir; MS-2: Metering Station 2 in Eskisehir; MS-3: Metering Station in Canakkale and MS-4: Metering Station in Ipsala/Edirne.

TANAP project envisages transportation of gas from Azerbaijan's Shah Deniz field to the western borders of Turkey. The gas will be delivered to Turkey in 2018 and after completion of the Trans Adriatic Pipeline's construction the gas will be delivered to Europe in early 2020.

The length of TANAP is 1,850 kilometers with an initial capacity of 16 billion cubic meters of gas. Around six billion cubic meters of this gas is meant to be delivered to Turkey, with the remaining volume to be supplied to Europe.

Azerbaijan, Germany discuss economic co-op

Azerbaijan offers German companies to create a joint enterprise in the framework of SOCAR Polymer petrochemical project, Azerbaijani Ministry of Economy said.

The offer was put forward by Minister of Economy Shahin Mustafayev addressing the meeting with a German delegation headed by Chairman of German Committee on Eastern European Economic Relations Wolfgang Buechele.

At the first stage, production capacity of SOCAR Polymer will total 120,000 tons of polyethylene and 180,000 tons of polypropylene. The total capacity may reach 570,000 tons by 2021. An industrial cluster and additional enterprises are to be created around the plant with an aim to manufacture goods based on SOCAR Polymer production.

Speaking of bilateral cooperation, the minister underlined that German investment to Azerbaijan totaled $555.8 million until now. More than 200 companies with German capital are currently operating in Azerbaijan.

Both countries have wide possibilities for cooperation in pharmaceuticals, machinery, petrochemicals, transportation and transit traffic spheres, as well as in production of electrical equipment and agricultural machinery, according to the minister.

Mustafayev invited German companies to invest to the industrial areas in Azerbaijan, take advantage of transit capabilities of the country and invest to the free trade area in Alat settlement in Garadagh district of Baku.

Representative offices of German hospitals can also be opened in Azerbaijan.

According to the State Customs Committee of Azerbaijan goods turnover with Germany totaled $894.1 million in 2017, including Azerbaijan's export to Germany amounting to $450.46 millions.

Azerbaijan's energy projects not limited to Shah Deniz-2

Azerbaijan's energy projects are not limited to only Shah Deniz-2, Azerbaijan's President Ilham Aliyev said.

President Aliyev made the remarks in talks with a delegation led by Chairman of Germany's Committee on Eastern European Economic Relations Wolfgang Buchele.

The head of state voiced his satisfaction with the activity of Uniper Global Commodities in Azerbaijan, expressing hope that the company will continue successful cooperation in the future.

Stressing that the energy sector is successfully developing in Azerbaijan, President Aliyev said the country is implementing global projects in this sector. The Southern Gas Corridor is of great importance, he added.

The head of state said Azerbaijan is the initiator and leader of this project and soon ministers will meet in Baku as part of the Southern Gas Corridor Advisory Council.

"Azerbaijan's energy projects are not limited to Shah Deniz-2 ," President Aliyev said, adding that talks are in the active phase with a number of world's leading companies on new fields.

Thus, oil and natural gas production in Azerbaijan will remain stable and will further increase in the future, said the president.

Speaking of the importance of extending the contract on development of the Azeri-Chirag-Gunashli fields by 2050, the head of state said this shows that Azerbaijan together with the world's leading companies will be able to jointly develop these giant fields at least for 30 years from now on.

"All of this contributes to the welfare of population, the strengthening of the country's economy, and the energy security of our partners."

Noting the importance of the strong support for the Southern Gas Corridor project by the European Commission, President Ilham Aliyev wished success to Uniper Global Commodities in Azerbaijan.

German energy companies interested in co-op with Azerbaijan

Azerbaijani Energy Minister Parviz Shahbazov has met with a delegation led by Wolfgang Buechele, chairman of Germany's Committee on Eastern European Economic Relations, Azerbaijani Energy Ministry said in a message Feb. 13.

The delegation included representatives of such German companies as GP Gunter Papenburg AG, Herrenknecht AG, Uniper Global Commodities SE, Airbus Group International, CLAAS Global Sales GmbH.

At the meeting, the German companies engaged in production of drilling equipment and laying underground gas pipelines expressed interest in cooperation with Azerbaijan.

Shahbazov noted that the economic relations between the two countries are developing in the non-oil sector and stressed that a large share of Germany's trade with the countries of the South Caucasus accounts for Azerbaijan.

"More than 200 German companies operate in Azerbaijan," Shahbazov said.

Buechele, in turn, stressed the need to create favorable conditions for expanding cooperation in the economy, and in particular in the energy sector.

SOCAR reveals plans for work in Ukraine in 2018

SOCAR Energy Ukraine, a subsidiary of Azerbaijan's state oil company SOCAR in Ukraine, plans to open five new facilities in the country in 2018, the company told Trend and Azernews on Feb. 13.

"It is planned to launch at least five new facilities this year, as well as install modules for sale of liquefied petroleum gas (LPG) at the filling stations of SOCAR in Ukraine," the company said.

SOCAR operates 61 filling stations in nine regions of Ukraine, as well as two oil loading bunkers - "Baku-1" in Kiev and "Ganja" in Odessa.

"In addition to the retail market of SOCAR, the company is one of the five biggest importers of natural gas to Ukraine, and also participates in the development of the aviation fuel market," the company noted. "In 2017, SOCAR doubled the volume of LPG supplies and increased its presence in the diesel fuel market."

So far, SOCAR has invested more than $5 million in social and cultural projects in Ukraine.

A representative office of SOCAR was opened in Ukraine in 2008.

BP Azerbaijan VP discloses investments in Azerbaijan’s economy within BP

During 25 years of BP's activity in Azerbaijan, over $69 billion have been invested in Azerbaijan's economy as part of the projects in which BP is the operator, Bakhtiyar Aslanbayli, BP-Azerbaijan Vice President for Communications and External Affairs, Strategy and Region, said.

Aslanbayli made the remarks at the conference "Taxes: Transparency: Development" in Baku Feb. 13.

He added that during that period 3.3 billion barrels of oil were produced only within the Azeri-Chirag-Gunashli (ACG) field development project.

"Moreover, 89 billion cubic meters of gas and 176 million barrels of condensate were produced within the Shah Deniz gas condensate field development project," he added.

The contract for developing the ACG field was signed in 1994. A ceremony to sign a new contract on development of the ACG block of oil and gas fields was held in Baku Sept. 14, 2017.

The new ACG participating interests are as follows: BP - 30.37 percent; AzACG (SOCAR) - 25 percent; Chevron - 9.57 percent; INPEX - 9.31 percent; Statoil - 7.27 percent; ExxonMobil - 6.79 percent; TP - 5.73 percent; ITOCHU - 3.65 percent; ONGC Videsh Limited (OVL) - 2.31 percent.

“President Heydar Aliyev” tanker repaired in Azerbaijan

Azerbaijan Caspian Shipping CJSC finished repair of "President Heydar Aliyev" tanker, press-office of the company announced.

According to the announcement, underwater and above-water parts of the hull and deck of the tanker were cleaned and repainted, welding work carried out in cargo depots and ballast tanks, pipelines were repaired during the maintenance work.

"Backup engines were also repaired, new pumps and electrical equipment were installed," the announcement added.

The tanker successfully passed sea trial and was returned to the service.

Meeting of SGC Advisory Council create good opportunity to discuss plans set

Azerbaijani President Ilham Aliyev has received a delegation led by Sue Saarnio, acting special envoy and coordinator for international energy affairs of the US Department of State.

President Aliyev thanked Saarnio for attending the 4th Ministerial Meeting of the Southern Gas Corridor (SGC) Advisory Council to be held in Baku and emphasized the importance of the United States' high level representation in the event in terms of the implementation of the project.

President Aliyev highly appreciated the US support for the implementation of the Southern Gas Corridor project.

The head of state hailed the fact that the project will soon be realized, saying that the meeting of the SGC Advisory Council to be held tomorrow will create a good opportunity to discuss the works done and the plans set.

The President noted that the work on the project goes in line with the schedule, describing all this as a result of joint efforts of the governments, companies, and financial institutions involved in the project.

Saarnio, in turn, hailed her visit to Azerbaijan. She underlined the US President's, Secretary of State's, and the US government's support for the Southern Gas Corridor project, noting the importance of the fact that the project is going to be completed.

President Aliyev recalled with pleasure the US President's congratulatory message to the International "Caspian Oil and Gas 2017" exhibition, which was held in Baku last year, praising the new US administration's support for this project.

Azerbaijan to be reliable, long-term supplier of energy resources to world markets for decades

Azerbaijan will be a reliable and long-term supplier of energy resources to the world markets for decades, said Azerbaijani President Ilham Aliyev.

President Aliyev made the remarks as he was addressing the Fourth Ministerial Meeting of the Southern Gas Corridor Advisory Council in Baku Feb. 15.

President Aliyev stressed that Garabag is another field that they hope to get further involved in international cooperation.

"Furthermore, there are two fields with huge gas potential - "Dan Ulduzu" and "Ashrafi". Thus, the confirmed gas reserves of Azerbaijan is twice more than the gas reserves of the Shah Deniz field - 2.6 trillion cubic meters of gas and I am sure that it will be more. Because our experience shows that initially the anticipated reserves are substantially higher than previous one. For example, when the "Contract of the Century" was signed in 1994, the reserves of Azeri-Chirag-Guneshli were estimated at more than 500 million tons. Modestly speaking, this figure is now twice as high - about 1 billion tons. I think and hope that we will witness the same in gas fields. Therefore, in the coming decades Azerbaijan will become a reliable and long-term supplier of energy resources to the world markets. Today, Azerbaijan's oil makes up about a third, or even 40 percent of oil consumption in some European countries. Azerbaijan is ready to enter the European market with its gas reserves," he said.

President Aliyev: Projects in Azerbaijan gave strong foundation for realization of Southern Gas Corridor

The projects implemented in Azerbaijan have created a strong foundation for realization of the Southern Gas Corridor, said Azerbaijan's President Ilham Aliyev.

President Aliyev made the remarks as he was addressing the Fourth Ministerial Meeting of the Southern Gas Corridor Advisory Council in Baku Feb. 15.

The President stressed that the Southern Gas Corridor project is one of the key elements of Azerbaijan's energy strategy, which has been very successful so far and has helped Azerbaijan diversify its economy.

"We have invested in non-oil sector, human capital and infrastructure using energy resources, and thereby ensured long-term sustainable development of our economy. Certainly, the projects we have implemented in Azerbaijan in previous years have created a strong foundation for the implementation of the Southern Gas Corridor. Our energy strategy began shortly after restoration of our independence, and after three years, in 1994, Azerbaijan signed a contract with the world's leading oil companies consortium led by BP. Taking into account the volume of the project and investments, the contract was immediately named as the "Contract of the Century". After our last meeting in Baku in February last year, we signed a new agreement to extend the "Contract of the Century" on the same field. Presently, the project is extended until 2050. In the upcoming decades, we will benefit from stable and sustainable development at one of the world's largest oil fields, Azeri-Chiraq-Guneshli," he said.

Energy minister talks on Azerbaijan’s oil and gas strategy

Azerbaijan's oil and gas strategy is to continue to remain a reliable partner, Azerbaijani Energy Minister Parviz Shahbazov said.

Shahbazov made the remarks at a press conference in Baku Feb. 15 following the Fourth Ministerial Meeting of the Southern Gas Corridor Advisory Council.

He added that Azerbaijan for many years has proved itself as an oil country.

"However, after the implementation of such a giant project as the Southern Gas Corridor, Azerbaijan is becoming a big producer and exporter of gas to Europe and is becoming famous as a gas country," Shahbazov said. "Gas compared to oil is a more environmentally friendly product and the need for it, including in Europe, is growing. Taking into account this and Azerbaijan's rich natural resources, gas export is a priority for the country."

He added that Azerbaijan has proved itself as a reliable partner and its strategy is to continue to remain such a partner.

The Southern Gas Corridor is one of the priority projects for the EU and provides for the transportation of 10 billion cubic meters of Azerbaijani gas from the Caspian region through Georgia and Turkey to Europe.

At the initial stage, the gas to be produced as part of the Stage 2 of development of Azerbaijan's Shah Deniz field is considered as the main source for the Southern Gas Corridor projects. Other sources can also connect to this project at a later stage.

As part of the Shah Deniz Stage 2, the gas will be exported to Turkey and European markets by expanding the South Caucasus Pipeline and the construction of Trans Anatolian Natural Gas Pipeline (TANAP) and Trans Adriatic Pipeline (TAP).

Fitch affirms SOCAR ratings

Fitch Ratings has affirmed Azerbaijan's state oil company SOCAR long-term Issuer Default Rating (IDR) at 'BB+', short-term IDR at 'B' and senior unsecured rating at 'BB+', the agency said in a message Feb. 15.

All ratings have been removed from Rating Watch Negative (RWN), the outlook is stable.

"SOCAR was among the companies Fitch placed on Rating Watch in November 2017 when the exposure draft of its new Government-Related Entities (GRE) Rating Criteria was published," the message said. "At the time, Azerbaijan's 'BB+' rating was on Negative Outlook and we were reassessing the standalone credit profile (SCP) of SOCAR. In line with the final GRE rating criteria we have decided to continue to align SOCAR's rating with that of Azerbaijan."

"Following the completion of large pipeline projects and the STAR refinery in 2018, we expect the company's capital expenditures to decrease to around 2 billion manats in 2019-2020 from 4.3 billion manats in 2017," Fitch noted.

SOCAR is 100 percent state-owned, accounts for around 20 percent of Azerbaijan's oil production, is the largest employer in the country, and a significant contributor to the state budget, according to the message.

The state guarantees debt of the company to an amount of $703 million and has extended $528 million of loans to SOCAR via the Ministry of Finance with the intention of converting the exposure to equity, Fitch said.

Additionally, the strategic and operational ties are strong and the company is responsible for the realization of the government's strategy in the oil and gas sector, reads the message.

SOCAR's taxes accounted for 6.9 percent of government revenue in 2016, while income from profit oil SOCAR provides to SOFAZ accounted for 49 percent of government revenue, according to the rating agency.

Fitch says the rating was affirmed taking into account the assumptions that the Brent crude price will be $52.5 per barrel in 2018, $55 per barrel in 2019, $57.5 per barrel in 2020, and the average annual exchange rate of Azerbaijani national currency, manat, in the next three years will vary within 1.7 AZN/USD.

The aggregate capital expenditures of SOCAR will amount to 11 billion manats in 2017-2020, according to Fitch.

Azerbaijan-Georgia cooperation in oil and gas sector provides basis for sustainable development

Azerbaijani President Ilham Aliyev has met with First Deputy Prime Minister, Minister of Economy and Sustainable Development of Georgia Dimitri Kumsishvili.

The head of state said Azerbaijan and Georgia enjoy the long-term active cooperation. President Aliyev noted that this cooperation opens wide opportunities not only for Azerbaijan and Georgia, but also for many countries. The President stressed that the Southern Gas Corridor project is being successfully implemented, describing this as a sign of the two countries` opportunities and partnership.

The head of state emphasized that Azerbaijan and Georgia are implementing global projects in the field of transport. President Aliyev underlined that cooperation in the oil and gas sector brings the two countries closer to each other and provides a basis for the sustainable development.

Noting that the Southern Gas Corridor already covers seven countries, President Aliyev said that it is important to coordinate interests of producers and transit countries. "We have succeeded in it and this is the guarantee of our future achievements."

Kumsishvili, in turn, conveyed Prime Minister Giorgi Kvirikashvili`s greetings to President Ilham Aliyev. Underlining the importance of Georgia's involvement in this project, Kumsishvili said the implementation of the Southern Gas Corridor created thousands of new jobs in the country.

Kumsishvili noted that Azerbaijan and Georgia are jointly implementing successful global projects. The first vice prime minister said that these projects are of great importance to both Azerbaijan and Georgia as well as to Turkey and Europe.

The head of state thanked for Prime Minister Giorgi Kvirikashvili`s greetings and asked the first vice prime minister to extend his greetings to the Georgian prime minister.

BP reveals launch date for gas delivery to Turkey via TANAP

The gas delivery from Azerbaijan's Shah Deniz gas condensate field to Turkey via the Trans-Anatolian Natural Gas Pipeline (TANAP) will start June 30 this year, BP Regional President for Azerbaijan, Georgia and Turkey Gary Jones said during a press conference in Baku Feb. 16.

He noted that this year it is planned to additionally produce two billion cubic meters of gas from the Shah Deniz field.

For this year, BP has a contract for the additional export of two billion cubic meters of the produced gas, he said, adding that the export volumes will increase from year to year.

TANAP project envisages transportation of gas from Azerbaijan's Shah Deniz field to the western borders of Turkey. The gas will be delivered to Turkey in 2018 and after completion of the Trans Adriatic Pipeline's construction the gas will be delivered to Europe in early 2020.

The length of TANAP is 1,850 kilometers with an initial capacity of 16 billion cubic meters of gas. Around six billion cubic meters of this gas is meant to be delivered to Turkey, with the remaining volume to be supplied to Europe.

SOCAR to provide engineering design services in Albania

Azerbaijan's state oil company SOCAR will provide engineering design services in Albania, according to the letter of intent signed between SOCAR Balkans and Albania's Albgaz company in Baku, SOCAR said in a message Feb. 16.

A gas pipeline will be built between the Albanian cities of Fier and Vlora in order to ensure gas supply to Albania as part of the Southern Gas Corridor project, according to the message.

The Pre-FEED (preliminary front end engineering design) of this pipeline will be carried out by SOCAR Balkans, the message said.

The Southern Gas Corridor, worth $41.5 billion, is considered as one of the priority energy projects for the EU, which strives for diversification of gas supplies. The project envisages the transportation of gas from the Caspian region to the European countries through Georgia and Turkey.

At the initial stage, the gas to be produced as part of the Stage 2 of development of Azerbaijan's Shah Deniz field is considered as the main source for the Southern Gas Corridor projects. Other sources can also connect to this project at a later stage.

As part of the Stage 2 of the Shah Deniz development, the gas will be exported to Turkey and European markets by expanding the South Caucasus Pipeline and the construction of Trans-Anatolian Natural Gas Pipeline and Trans Adriatic Pipeline.

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