A total of $1bn is required for the rehabilitation of the gas complex in Azerbaijan, as the government sources urge. The countrys gas sector, which has not been renewed since the collapse of the Soviet regime. Today the gas reservoirs, main gas pipelines, gas distribution network, including Garadagh gas refiner plant are in need of reconstruction. It is also necessary to resolve a problem with collection of low-pressure associated gas, which makes negative impact on the transportation system, results on the corrosion and finally impacts on the quality. As a result provision of full collection it will be possible to obtain a doubled volume of gas for countrys internal demand. This gas could be transferred to the gas refinery plant, and partially fulfill the gas pipeline in Sangachall

Taking into consideration the current state in the world markets the issue becomes an urgent task. The resolution of the problem with the collection of gas would eliminate the necessity of Russian gas import, which is sold at $110 per 1000 cu m at present with strong suppositions of rise in future. Iran is nor considered a reliable partner as well.

Due to losses of gas at present only 30% of gas is refined at the gas refinery plants. Numerous efforts to privatize the plant every time ended in failure. The government now thinks it would be more expedient first to reconstruct the plant, including the gas distribution network, and then transfer it t private ownership at more favorable terms.

With a strong will to assist Azerbaijan in the reconstruction of the gas sector, the World Bank presented to the Ministry of Industry and Energy a program which envisages repair of main gas pipelines and improvement of the existing technical networks, expansion of gas reservoirs. Different projects included in it comprised $1bn. However, the bank itself can finance, or participate in the syndication of financing of projects and can allot only $50-100m out of funds of the International Bank for Reconstruction and Development, which is not favorable for Azerbaijan at all. In this respect the utilization of internal resources is also expected efficient, where the operator of Shah Deniz are expected to be the most interested investors.

There are two gas reservoirs used today in Azerbaijan Garadagh and Kalmaz gasholders. This total capacity is up to 1.1bn cubic meters of gas. Following extension, capacity of Garadagh gasholder is raised to 2.2bn cubic meters and that of Kalmaz to 1.2bn 1.03bn cubic meters of gas. The conversations on financing the extension project are conducted at the moment. World Bank is interested in financing this project. Preliminary cost of the project is $120mln. Azerbaijan may issue some part of funds to execute the project.

The World Bank is ready to finance a project on collection of law-pressure gas on the shallow water Guneshli field and transport to the sea shore through constriction of gas compressor station in the vacant part of the Guneshli-4 platform Last year the ank approved a $481,250 grant in this respect.

Around 1.6m cu m of low-pressure gas is wasted on shallow water Guneshli and around 800,000 cu m on the Chirag field.

The construction of gas compressor station on free part of the Guneshli-4 platform will allow to extract 4.9bn cu m of gas per year from the Guneshli field by 2010. At present the figure is equal to 2.2bn cu m of gas. The gas transportation pipeline should be built for delivery of gas to Oil Rocks and onwards to the coast.

Thus, we have perspective plans for future. As to present, work on improvement of gas delivery to outskirts of Baku is underway. 28m manats are expected to be spent on gas supply of regions. 20m manats of the total sum will be granted by the Azerbaijani public budget and 8m manats at the expenses of Azerigass private funds. The project will cover the villages and settlements of Baku. Under the project to end in 2007 it is planned to build gas compression stations for increase of pressures of delivered gas, main pipelines, as well as necessary control equipment. At present gas supply of these villages is too poor.

This year it is planned to implement a program on gas supply of Azerbaijani regions. At present they number four Lerik, Yardimly, Agjabadi and Beylagan. Work here will start in mid 2006 and end late 2007. Azerigas also carries out the development of feasibility study on gas supply to villages in 49 districts of the country. First of all, the gas delivery will be implemented at the expense of village where it was sod earlier.

The reanimation of the countrys gas sector will be held along with the project in the sphere of carbon financing. Over the subsequent 3-5 years Azerbaijan will more opportunities for obtaining carbon incomes in million dollars through strengthening the energy sector, in the sphere of returns, woods and agriculture. The office of the World Bank asserts it can be achieved through the implementation of project on increase on emission of gas making a heat effect. Member-countries of the Organization for Economic Cooperation and Development (OECD) can buy 0.5-0.8 billion ton of gas, which was utilized, by means of investing in these projects. As a result of implementation of commitments on Kiot agreement till 2012 these projects are intended to decrease gas emission with the market estimation of from 20-25 billion to 3 billion tons. Today 97% of returns in Azerbaijan are implemented in the energy sector.

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