 OIL &
GAS:
The Caspian Powerhouse
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As "the land of fires", Azerbaijan
has become a regional cradle for the petrochemical
industry. While it was one of the first countries
to send oil tankers out to the Caspian, the outstanding
history of the past has not disappeared. Nor will
it in the future; it is expected that Azerbaijan's
oil and gas will continue booming for another
100 years at least.
The history of modern development of huge power
stocks of the Caspian Sea started in September,
20, 1994 when the first oil contract between the
government of the country and a consortium of
multinationals was signed as a PSA (Production
Sharing Agreement). Its operator was BP, who led
the consortium to extracted oil for distribution
to the world market through two small oil pipelines
with terminal points - Novorossiysk (the Russian
port on Black sea) and Supsa (the Georgian port
on Black sea).
Ten years later, 22 similar agreements have been
signed with the largest world oil companies for
the development of oil deposits on the sea and
on land. Investors from the USA, the Great Britain,
France, Russia, Turkey, Saudi Arabia, Japan, Norway,
Italy, Holland, China have all made Baku, the
capital of Azerbaijan, their new home. Among them
the biggest names are present: BP, Exxon/Mobil,
LUKoil, Shell, Statoil, TOTAL, Agip, Eni, Turkish
Petroleum, Chevron, JNOC, Phillips-Conoco and
many others.
The total sum of oil-and-gas investments will
reach 50 billion dollars - which is only a first
taste of what is to come, since the total stocks
of power resources of Caspian sea are estimated
in 7-10 billion tons of which Azerbaijan should
yield about a third of the total findings. Continuous
development of oil-and-gas sector, by estimation
of experts, will lead Azerbaijan to extract 57
million tons of oil in 2010 (exporting 42 million
tons) while it is estimated that in 2020, some
105 million tons of oil will be produced, of which
81 million will go be sold internationally.
The state oil company of Azerbaijan (SOCAR) in
2003 has independently extracted 8,925 million
tons of oil, which is practically equaled to last
year's parameters.
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Besides stocks of oil
at the end of 90th there was an openly large gas
deposit Shahdeniz (King of the sea). Its stocks
are evaluated at 800 billion cubic meter of gas,
and partners of the project together with Statoil
(Norway) in February, 2003 have approved the first
stage of industrial development of the deposit,
concerning extraction of 178 billion cubic meter
of gas.
For the exports of such great volumes, energy
carriers have been brought in to construct export
pipelines - oil to the Baku-Tbilisi-Jeyhan, and
gas to the Baku-Tbilisi-Erzurum. The first oil
pipeline throughput 50 million tons will be ready
in the beginning of 2005, while the second gas
main throughput of 15-20 billion cubic metre of
gas is expected to be completed in 2006.
According to the president of SOCAR Natiq Aliyev,
the Azerbaijan gas delivered up to Turkey will
be the cheapest for Turkish consumers in comparison
with other offers, in particular compared to the
Russian " Blue stream".
By 2010, SOCAR plans to increase considerably
its own gas extraction by up to 9 billion cubic
metre per year, up from the present volume in
5,168 billion cubic meters of gas extracted in
2003.
Needs of Azerbaijan for gas translate to 12 billion
cubic meters, while any deficiency is covered
by the purchase of gas in Russia and Kazakhstan.
Azerbaijan therefore hopes to achieve growth of
extraction of gas in 2006 with the beginning of
extraction of gas from the Azerbaijan Shahdeniz
deposit.
In order to manage oil and gas revenues for future
generations, the special State oil fund of Azerbaijan
(SOFAR) was created in 1999 to control activity
on development of deposits, including payment
for transit of hydrocarbons on territory of Azerbaijan
and bonuses of foreign companies for participation
in the Azerbaijan oil-and-gas projects.
This year the oil fund budget rose to $815 million,
while reserves of National bank of Azerbaijan
resulted in $757 million. The importance of this
fund has led the national government to bring
in foreign management to ensure transparency of
this strategic national fund.
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