Energy security is of priority importance in the global economy. In this aspect, Azerbaijan, possessing huge reserves of energy resources, is recognized globally as a new source of diversification and provision of energy security principles. It is Azerbaijan, committed to the obligations it assumes, has been the initiator of the Southern Gas Corridor (SGC) projects aimed at contributing to energy security of the European countries. It was strongly exemplified in the two sessions of the SGC Advisory Council, the active phase of construction of the Trans Anatolian Natural Gas Pipeline and the groundbreaking ceremony for the Trans Adriatic Pipeline (TAP) hosted most recently. Promotion of the mentioned projects was possible due to the independent policy of Azerbaijan and active work of SOCAR in both domestic and foreign markets.
The independent policy of Azerbaijan and active work of SOCAR in both domestic and foreign markets were instrumental to promote the mentioned projects.
Gas route to Europe
The Southern Gas Corridor project has been a historical project of the 21st century. This is how President of Azerbaijan Ilham Aliyev called it at the IV Global Baku Forum - Towards a Multipolar World. The SGC is one of the largest infrastructure and energy megaprojects implemented in Europe nowadays. The SGC project has been initiated by Azerbaijan, which plays a major role also as an organiser and investor as well. The total project cost is estimated at about $45bln.
The Declaration highlighting the important and strategic role of Azerbaijan in the project’s implementation was signed at the second session of the Advisory Council hosted in Baku on February 29, 2016 with participation of 11 states and the European Commission. “We have established very close relations with the neighbouring countries, with many European Union member states. Today, we see a very fruitful, open and sincere cooperation. The key objective of establishing the Advisory Council format was associated with coordination since nowadays we all are the one team: Azerbaijan, Georgia, Turkey, Greece, Bulgaria, Albania, and Italy. I am very pleased to see the representatives of Croatia and Montenegro attending the today’s meeting. This demonstrates that the Southern Gas Corridor is going to be even wider”, President Ilham Aliyev said. He expressed appreciation to the Governments of all the countries involved and thanked the European Commission, the Government of the United States for their valuable contribution to the project.
The SGC is a project of energy security, diversification and free competition. Owing to this project, Azerbaijan for many decades is to export its natural resources and in this way diversify the European market. For Europe it means a new gas source which is really necessary.
“I believe that here within the Southern Gas Corridor project we see the perfectly balanced interests of producing countries, transit countries and consumers. I also believe that the successful implementation of our plans in the coming two or three years will show the project has an excellent potential for the future”, President Ilham Aliyev said.
The corridor includes a number of independent and still strongly intertwined projects, including laying of TANAP and TAP gas pipelines, expansion of the South-Caucasus Pipeline (SCP) and Sangachal terminal as well as operations associated with the second stage of development of the Azerbaijan Shah Deniz gas condensate field in the Caspian. It is also noteworthy that all projects are based on own resources of Azerbaijan with proven reserves of 2.6 trillion cubic meters of gas.
Nowadays, projects are implemented ahead of schedule. About 70% of operations will have been completed in 2016. Assembling of a new producing platform, including topside facilities and jackets, is carried out as part of the Shah Deniz Stage 2.
The SCP Expansion Project ongoing operations include construction of compressor stations, pipe laying in Azerbaijan and Georgia, and pipes to be used for the pipeline expansion have been fully produced.
In March 2015 the Turkish city of Kars hosted the TANAP groundbreaking ceremony, which captured attention of the global community. Nowadays, about 1,170 km of pipes to be used in construction have been produced. Of these, 942 km have been delivered to the construction sites. Welding and pipe-laying operations have been ended along the pipeline section of over 515 km. By mid 2018, TANAP will deliver the first gas to Turkey. The pipeline is scheduled to supply Turkey with 6 billion cu m per year of blue fuel for 25 years.
The implementation of TAP project will provide conditions to supply new gas volumes to the European markets. On May 17, 2016 the Greek city of Thessaloniki hosted the groundbreaking ceremony for TAP. This pipeline, which is to be linked to TANAP, will initially supply 10 billion cu m per year to Europe from 2020 onwards. The TAP pipeline was designed to enable an increase in the throughput capacity from 10 to 20 billion cu m per year with the lowest capital costs.
In future it is planned to build a Greece-Bulgaria (IGB) interconnector, which will allow expanding the range of supply of Azerbaijan gas to Europe.
Given the strategic and economic significance of the Southern Gas Corridor, the State Commission, consisting of the relevant ministries and agencies, has been established in line with the Decree of the President of Azerbaijan to provide the government support to the SGC projects. Moreover, a new company - Southern Gas Corridor CJSC - was established to secure efficient and sustainable funding of Azerbaijan’s shares in the Shah Deniz Full-Scale Development Project, SCP Expansion Project, TANAP and TAP. 51% of the CJSC belongs to the state, while 49% is owned by SOCAR.
Azerbaijan that has no access to the open sea is compelled to transport its products in the most comfortable, reliable and profitable way. The pipeline transportation is the most convenient one for Azerbaijan.
As a backbone of the SGC, TANAP will link Azerbaijan with the EU markets and thus enable to meet the long-term commitments on gas supply to the market regulated by the competition laws.
It stands to mention that the 25-year gas supply contracts have been signed with the nine European buyers. These are one of the most reliable, beneficial and not subjected to any momentary conjuncture changes contract forms currently prevailing in the global gas markets.
2025 strategy
Oil and gas production projects are the main line of activity of SOCAR till 2025. It reflects the key areas of future activities of the company. First of all it involves gas projects followed by oil projects implying further development of the Azeri-Chyrag-Gunashli fields, search for oil at shallow water Absheron archipelago and onshore areas. After the launch of Shah Deniz Stage 2, production on this field alone will total over 25 billion cu m by 2020.
Success at Umid field (200 billion cu m of gas and 40 million tonnes of condensate) and Absheron field (350 billion cu m of gas and 45 million tonnes of condensate), as well as gas reserves in deep-lying horizons of the Azeri-Chyrag-Gunashli fields, etc., enable to suggest that commercial gas production in Azerbaijan may have reached 40 billion cu m per year by 2025.
There are still many unexplored structures in Azerbaijan. Exploration will be continued at Shafag-Asiman (jointly with BP), Nakhchivan, Zafar, Mashal, Babek and other structures. In particular, to accelerate these operations SOCAR and Norwegian company Statoil signed an agreement in 2015 to study jointly the potential of exploration, development and resource base of the Karabakh, Ashrafi, Dan Ulduzu bloc. SOCAR, which signed 35 PSAs with transnational companies, is successfully representing Azerbaijan at the international arena. Nowadays SOCAR has been awarded ratings from the three rating agencies (Standard & Poor’s, Fitch Ratings, Moody’s), recognized by international investors.
The list of major lines of SOCAR’s activity also includes projects in the field of oil refining and petrochemicals, including: modernisation of the Heydar Aliyev Oil Refinery and Azerkimya PU, construction of the STAR Oil Refinery in Turkey, construction of the SOCAR Polymer plant for polymers production and construction of a new plant for carbamide production, SOCAR Carbamide. The reasons for modernisation of the Heydar Aliyev Oil Refinery are to launch a new bitumen plant by mid 2018, units for production of diesel fuel meeting Euro-5 standard in 2019 and units for production of gasoline meeting Euro-5 standard in 2020. The modernisation of Azerkimya PU aims to supply SOCAR Polymer-branded polymer grade propylene by the end of 2017 and ethylene grade polymer by mid 2018. At the same time, the negotiations are underway with potential investors to implement the project of a new oil-gas petrochemical complex (OGPC).
SOCAR is expanding its presence in many countries, starting mainly from its neighbors. Georgia was the first country that SOCAR invested in. SOCAR has become the largest tax payer of Georgia now. Investments made by the Azerbaijani side in Turkey have already exceeded those of Turkish side in Azerbaijan. Besides, there are broad-scale plans in Turkey. The TANAP pipeline will be built in Turkey until 2018. The STAR Oil Refinery is under construction. Petrochemical complex Petkim is being enlarged. The container port will be fully commissioned in the west of Turkey this year. SOCAR is expanding its presence in other countries as well. Noteworthy among them are Switzerland, Ukraine, Romania, the United Arab Emirates, Singapore, Germany, Greece, Iran, Russia and Romania. In general, vision and mission of SOCAR is to increase an oil-gas potential of the country, create close mutually beneficial relations and cooperation at international energy markets, integration and consolidation of common efforts in order to ensure better life for the people of Azerbaijan and better future of our country.
