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Energy in Azerbaijan

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  • Re: Energy in Azerbaijan

    Oil Fund of Azerbaijan will become empty treasury (Our analysis)



    AZERI DAILY ANALYSIS GROUP

    Many of our officials and deputies unanimously asserted that the decline in oil price was not terrible for Azerbaijan. They said, we had large supply of funds, which would last not only for this year but for the next as well. We have warned that in these words if there is truth, then only partial. That is, all their allegations concern only the budget and current issues, including social. But there is a more long-term plan of the country, there is the Oil Fund, which not only sponsors half of the state budget, but also a lot of other projects, including social ones.

    Yes, we have repeatedly warned that the collapse of oil prices will cause a severe blow to the Oil Fund and it cannot be so recklessly squandered. And no matter how hard the authorities hide from the public these prospects, they did not succeed. The government has not yet approved the budget of the State Oil Fund (SOFAZ) for this year. Although, as Turan Agency reminds, this annual procedure usually falls on the last month of the previous year. But if the oil fund, roughly speaking, plays the role of the second half of our budget, it turns out that one half of the budget have been approved, and the other not. That cannot go for long, the fund will soon have to carry the current payments, but there is no budget.

    Indeed, the State Oil Fund is too important for the economy of Azerbaijan. It should provide 53.5% of the revenue of the state budget for 2015, or about 11 billion manats. From SOFAZ the Azerbaijani government plans to fund its share of the Southern Gas Corridor and other major oil and gas projects. A lot of them, and the total cost is more than one billion manats. It is financing the construction of floating drilling rig of SOCAR, SOCAR refinery in Turkey, the chemical complex in Garadagh and other projects.

    Naturally, all of these projects should be activated, and the Fund budget will be approved. But today the government is not ready for approval of this important document. This is understandable, because not only Azerbaijan, but also all the oil-producing countries today are experiencing difficulties with the budget. Oil price in the budgets of different countries is set at current prices it at the time of adoption of the relevant budgets. The leaders of these countries have openly declared that they are ready to calculate the new budget, which may be revised according to different scenarios. After all, oil prices continue to fall, forecasts contradict each other. And in Azerbaijan it is all happening against the backdrop of the continuing decline in export of oil.


    And it is not difficult to understand that in such a situation, the government must clarify all the details before you approve the budget of SOFAZ. After all, if the current low prices last for a long time SOFAZ revenues can be zeroed out. Expenses, although not approved yet, are already known. And one of the important problems of the government today, we think, is precisely to find ways to reduce them as much as possible.

    In the case of the Oil Fund, it is not easy to carry out such calculations. If, say, the State Oil Company of Azerbaijan (SOCAR) has calculated its losses and found that if the oil price in 2015 is at $ 60 per barrel the company's losses could reach approx. 400 million AZN. In such case it will complicate things for SOFAZ. At that price of oil and the budgeted price of $ 90 per barrel SOFAZ may loose all oil revenues, which formed the basis of its income.

    And how can that be? Oil Fund is indeed faced with a stalemate. We recall that at the end of the year the executive director of SOFAZ Shahmar Movsumov said that to ensure the sustainability of their own development in the following years mechanisms to reduce costs had to be developed. In this regard, the fund is developing various scenarios of income and the dynamics of the fund's assets. But this statement only provides certain reduction of the budget expenditures of SOFAZ. The basic expenses, including the multi-billion transfer to the state budget, is not within the competence of the fund, the decision thereon shall be taken at the highest level.

    Note that, according to the State Oil Fund in 2013, revenues of the fund amounted to 13.6 billion manats and expenditures 12.3 billion manats, in 2014 its revenue was projected at $ 11.6 billion manats and expenditures - 10.6 billion manats. That is, every year, the Fund's income exceeded its expenses. This year, there is still much spending with almost no income. How to make billions out of nothing, or vice versa, how to bring billions to a minimum – that is the problem to be addressed to the Government.
    Politics is not about the pursuit of morality nor what's right or wrong
    Its about self interest at personal and national level often at odds with the above.
    Great politicians pursue the National interest and small politicians personal interests

    Comment


    • Re: Energy in Azerbaijan

      Azerbaijan puts brave face on slumping oil price
      By Margarita Antidze and Nailia Bagirova

      * State budget assumes oil price of $90 per barrel
      * Government to increase non-oil taxes
      * SOCAR's dividends from oil may halve

      BAKU, Jan 16 (Reuters) - The drop in oil prices threatens to blow a large hole in the budget of energy producer Azerbaijan, but officials say the government can cope by raising taxes elsewhere.

      The former Soviet republic may lose almost half of its projected revenues and revise its 4.4 percent growth forecast this year if the oil price averages around $40 per barrel, analysts estimate.

      Brent crude oil rose to almost $50 a barrel on Friday, although analysts did not expect a stronger rebound yet.

      Azerbaijan's 2015 budget anticipates revenues of 19.4 billion manats ($25 billion) based on an estimated oil price of $90 per barrel, down from $100 last year.

      "If we calculate the average price of oil to be $40 (per barrel), this will mean a loss of 9 billion manats per year from oil revenue," Qubad Ibadoglu, an independent analyst, said.

      Oil prices have dropped by nearly 60 percent since June as global production outstrips weak economic growth.

      The government says the budget "will include extra taxes, which will come through expanding the base for taxes and fees owing to the development of the non-oil sector," Finance Minister Samir Sharifov said on Thursday.

      "The state budget will also receive taxes and other proceeds remaining from past years and envisaged for 2015. The treasury will also gain from amendments made to the Tax Code."

      Pro-government newspapers have run headlines such as: "Azerbaijan is not afraid of $60 per barrel."

      "If we take a look at the past 20 years, we can see that the oil prices have constantly changed," Natiq Aliyev, Azerbaijan's energy minister said.

      Officials acknowledge the Azeri state oil company SOCAR will face financial losses, but say these are not alarming.

      An average oil price of $60 per barrel would reduce SOCAR's revenues by $510 million, a senior official said.

      "It's a big sum for SOCAR, of course, but it can be covered by regulating spending," Suleiman Gasymov, SOCAR vice-president, told Reuters.

      He added that SOCAR's annual dividends of $300-$400 million from participation in the Azeri-Chirag-Guneshli project, operated by the British oil major BP, might be reduced by 50 percent this year, if the price remained at the current level.

      "We are not afraid of it ... The production cost of oil for SOCAR is $15 per barrel," Gasymov said.

      The oil production cost for BP, which operates some big energy projects in Azerbaijan, is $12 per barrel, Qubad Ibadoglu, an independent expert, said.

      ($1=0.78 manats) (Writing by Margarita Antidze; Editing by Jason Bush/Ruth Pitchford)

      Comment


      • Re: Energy in Azerbaijan

        Originally posted by Mher View Post

        "We are not afraid of it ... The production cost of oil for SOCAR is $15 per barrel," Gasymov said.

        The oil production cost for BP, which operates some big energy projects in Azerbaijan, is $12 per barrel, Qubad Ibadoglu, an independent expert, said.
        These figures are lower than the published figure for Saudi Arabia ( on land not deep) which has one of the lowest extraction costs.

        Dodgy figures.

        .
        Last edited by londontsi; 01-19-2015, 04:31 AM.
        Politics is not about the pursuit of morality nor what's right or wrong
        Its about self interest at personal and national level often at odds with the above.
        Great politicians pursue the National interest and small politicians personal interests

        Comment


        • Re: Energy in Azerbaijan

          Originally posted by londontsi View Post
          These figures are lower than the published figure for Saudi Arabia ( on land not deep) which has one of the lowest extraction costs.

          Dodgy figures.

          .
          These figures are BS.
          Extraction cost for the off-shore, BP, that makes most of their income is 30-35 $.
          Plus, the Brits, best contract redactors one can imagine, have put all the maintenance and material cost on Baku....

          Comment


          • Re: Energy in Azerbaijan

            Azerbaijan Spends 8% of Reserves as Ruble Rout Lashes Currencies
            By Zulfugar Agayev Jan 13, 2015 7:16 AM PT

            Azerbaijan’s central bank spent about 8 percent of its international reserves to defend its currency last month as the crisis in Russia and slumping oil prices forced devaluations in other former Soviet states.

            The central bank used $1.13 billion from its currency holdings to support the manat in December after buying $1.27 billion in the first 11 months to keep it from strengthening, the regulator in Baku said in an e-mailed statement. The manat appreciated 0.1 percent against the dollar last month.

            “As a result of the quick regulatory measures, stability was ensured fully in the currency market,” the central bank said, adding that it’s already returned to purchasing foreign currency after last month’s sales.

            Contagion from the Russian ruble’s decline of more than 40 percent last year has rippled through the former Soviet Union, putting pressure on currencies from Belarus to Armenia. Azerbaijan’s central bank has vowed to keep the manat stable even as economic growth slowed to 3 percent last year from 5.8 percent in 2013 because of a slump in oil prices and production. Azerbaijan, the third-biggest crude producer among ex-Soviet republics, relies on hydrocarbons for more than 90 percent of exports and 45 percent of gross domestic product, according to the International Monetary Fund.

            The central bank said the manat’s stability is key to steadying the broader economy and promised to use “all means” at its disposal to keep the currency stable through 2015. Azeri President Ilham Aliyev said last month that his country will continue to support the manat’s value for “social” reasons.

            The manat gained 0.1 percent today to 0.7844 against the dollar, according to data compiled by Bloomberg.

            “Of all the regional currencies, I would expect the Azeri central bank to value FX stability,” Timothy Ash, the London-based chief economist for emerging markets at Standard Bank Group Ltd., said by e-mail. “Remember they held the manat even through the Lehman crisis.”



            __________________________________________________ ______________________

            Azerbaijan spent 8% of all foreign reserves in December alone. If these prices can keep up for a few more months, that wasteland of a country will really start falling apart

            Comment


            • Re: Energy in Azerbaijan

              Azerbaijan spent 8% of all foreign reserves in December alone. If these prices can keep up for a few more months, that wasteland of a country will really start falling apart
              Very good point
              General Antranik (1865-1927): “I am not a nationalist. I recognize only one nation, the nation of the oppressed.”

              Comment


              • Re: Energy in Azerbaijan

                Deficit-ridden budget of the Oil Fund of Azerbaijan approved for 2015

                Baku, Fineko/abc.az.
                The budget of the State Oil Fund (SOFAZ) for 2015 has been approved by the decree of Ilham Aliyev, President of Azerbaijan.

                According to the decree, SOFAZ revenues in 2015 are expected to be at the level of AZN 10,246,611,900, while the expenses are set at the level of AZN 11,813,909,200. In other words, the Fund’s budget will be in deficit for AZN 1,567,297,300.

                The Fund’s revenue will be formed mostly by oil and gas PSA income (AZN 9,741,175,600), and by SOFAZ assets management (AZN 494,357,500). Per-acre payments of SOFAZ participants (AZN 1,568,400) and payment for transportation of oil and gas through the territory of the country (AZN 9,410,400) will also contribute to the Fund’s revenue.

                The expenses will be associated mostly with the transfers to the state budget (AZN 10.388 bn) and financing of the national share in the Southern Gas Corridor Project (AZN 997,016,200). AZN 111.487 million will be allocated for completion of Baku-Tbilisi-Kars railway construction and AZN 90 million – for the Samur-Absheron complex. Refugees and forced migrants will get AZN 150 million, while young Azerbaijanis getting their education abroad will receive AZN 44.088 million.

                Comment


                • Re: Energy in Azerbaijan

                  Ադրբեջանում զանգվածաբար աշխատանքից հեռացնում են նավթագործներին ,
                  27.01.2015


                  BP-Azerbaijan ընկերությունում զանգվածային կրճատումներ են իրականացվում։

                  haqqin.az-ի փոխանցմամբ՝ աշխատանքից ազատվածներից մեկը հայտնել է, որ կրճատումների տակ են հայտնվել BP-Azerbaijan-ի հարյուրավոր աշխատակիցներ։

                  Միեւնույն ժամանակ, BP Azerbaijan ընկերության մամուլի ծառայության պետ Թամամ Բայաթլըն չի հաստատել եւ ոչ էլ հերքել է տվյալ տեղեկությունը՝ նշելով, որ ընկերությունն այդ առիթով պաշտոնական հայտարարությամբ հանդես կգա։

                  Նկատենք, որ Ադրբեջանում պարբերաբար բողոքի ակցիաներ են անցկացվում մասնավոր եւ պետական ձեռնարկությունների աշխատակիցների կրճատումների եւ աշխատավարձերի չվճարման կապակցությամբ։

                  Լուրեր Հայաստանից - NEWS.am

                  - See more at: http://news.am/arm/news/249754.html#....DQGnYUvT.dpuf

                  Comment


                  • Re: Energy in Azerbaijan

                    Haha these aze propagandists are losing their xxxx because of the new Greek government.

                    Greece blackmailing Europe, Azerbaijan

                    BAKU - 04.02.2015 12:11:12


                    The new Greek government, which promised the moon to its constituents, began to search for money to fulfill its obligations and in this regard turned its view on Azerbaijan. Such actions of the Greek government cannot be called anything other than blackmail.

                    Minister of Productive Reconstruction, Environment and Energy of Greece Panagiotis Lafazanis said that the government supports the construction of Trans Adriatic Pipeline (TAP), however, it considers the benefits, that Greece can get from the transit of natural gas through its territory, to be insufficient. He said that this issue needs to be discussed additionally.

                    In fact, today the Greek government blackmails the gas consumers, namely the EU, rather than suppliers.

                    Athens takes advantage of contradictions of Russia and the West, while flirting with the first one and imposing conditions on the second one. Time will tell how far the Greek government will go wit these games, but one thing is clear: nothing good will come of it.

                    Revision of any international contracts cannot be called anything other than incompetence of the new government and an attempt to make money the shady way.

                    We shouldn’t forget that energy security is the goal of Europe, not Azerbaijan's, which is self-sufficient in energy. Azerbaijan and its partners had a choice. One of the four routes was chosen – the one that starts at the border of Turkey and Greece, and the latter assumed commitments that it’s obliged to fulfill.

                    There's another fact that needs to be considered. Today's there's a direct confrontation between "South Stream" (its changed route is called "Turkish Stream") and the "Southern Gas Corridor". Azerbaijani gas must be supplied to Europe via this Southern Gas Corridor. And Greece is actually using this confrontation. The purpose is to delay the process of implementing the Azerbaijani project in favor of the Russian one. It's obvious, who's the initiator of all this...

                    A similar situation was also observed when the government in Georgia was reshuffled. And then the hint was given to Azerbaijan for possible revising the energy and transport contracts (including the Baku-Tbilisi-Kars project).

                    However, it is worth recalling that not only suppliers, but also consumers are interested in energy supplies. They are also interested in a single transport communication. Fortunately, Tbilisi figured it out.

                    Moreover, Greece is part of the EU. The EU is primarily interested in the Azerbaijani gas supply. So, Brussels will have to solve the problem with Athens.
                    The West has recently been accusing Azerbaijan of all mortal sins. However, Baku has never given reason to doubt its honesty. Azerbaijan has complied with all obligations, especially, those concerning the international contracts. It seems that the time has come for West not to accuse Azerbaijan, but to take example from it.

                    Comment


                    • Re: Energy in Azerbaijan

                      Azerbaijan has still not released their 4th quarter 2014 SOFAZ data. This data was released on Jan 4-5 on previous years

                      I'm assuming the numbers aren't looking too favorable, and they're hoping to release it when/if oil prices rebound

                      Comment

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