Caspian: Turkish refinery funding arranged

On 8 May, state oil and gas company Socar said it had concluded a financing agreement with a group of banks to fund the construction of the Star oil refinery at the Turkish port of Aliaga in Izmir province. The contract was signed with five export-import banks from the US, Japan, Spain, Italy and South Korea as well as 15 commercial banks.

The banks will provide $3 billion of funding in the form of 18-year loans. A further $500 million will be offered by Turkey’s Garanti Bankasi as a 15-year loan facility. The latter is also to process all future monetary transactions related to the oil refinery within 15 years after its commissioning. The total cost of the Star project is estimated at $5.7 billion. This means that Socar will still have to provide over $2.2 billion. Construction of the oil refinery is expected to be completed in 2018. The Star oil refinery has been wholly owned by the Azeri state since 19 May when Turkey’s Turcas Petrol sold its 18.5% stake in Socar Turkey Yatirimfor $59.4 million to Rafinery Holding, a local subsidiary of Socar Turkey Energy. The latter now owns 60% of Socar Turkey Yatirim, which owns the refinery project. The other 40% is owned by the State Oil Fund of Azerbaijan. Last May an international consortium comprising Tecnicas Reunidas (Spain), Saipem(Italy), GS Engineering & Construction (South Korea) and Itochu Corporation (Japan) signed with Socar a $3.46 billion engineering, procurement and construction contract.

The Star refinery is projected to have an annual capacity of 10 million tons, 1.66 million tons of which would be naphtha that could go to the Petkimpetrochemical complex. Socar’s share in Petkim currently amounts to 61.32%. Besides naphtha, the new refinery is also expected to produce annually 5.95 million tons of diesel with an ultra-low concentration of sulphur, 500,000 tons of jet fuel, 630,000 tons of petroleum coke and 240,000 tons of liquefied petroleum gas. On 14 May Socar President Rovnag Abdullaev told The Business Year that the total volume of his company’s investments into various business ventures on Turkish soil has amounted to over $20 billion. The Azeri state firm is also active in neighbouring Georgia: as one of the largest taxpayers in the country, it has reportedly invested more than $400 million since 2006.

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© 2014 Menas Associates

Caspian: Socar issues formal invitations for Tanap

 

Socar has formally invited a handful of IOCs to take part in the Trans-Anatolian Pipeline (Tanap), apparently shutting out others (both public and private) that had expressed an interest in joining the project. As previously expected, BP, Statoil and Total were all invited to take some of Socar's 80% stake in the project. (Turkey's state-owned energy companies hold the remaining 20%.) Socar has offered 29% of its stake, ensuring that it retains a majority.

The formal invitation on 8 October suggests that other potential entrants – notably Hungary's OMV and Ukraine – have been kept out of the project, at least for now. In late September Turkey's economy minister Zafer Çaglayan said that OMV “has demanded [an opportunity] to join the Tanap project.” Çaglayan suggested that the company was willing to provide an eye-opening €5.4 billion to Tanap. Although Turkish energy minister Taner Yildiz subsequently welcomed OMV's participation, Baku is the one to make the final decision and it shows no sign of wanting to dilute its stake any further.

Ukraine's President Viktor Yanukovych had affirmed his interest in Tanap as recently as last month, in a meeting with Turkish prime minister Recep Tayyip Erdogan on 14 September. Despite Yanukovych's request, he appears to have been rebuffed. At the time of writing, none of the three companies had responded to Socar's offer but BP, at any rate, is widely considered to be interested.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2012 Menas Associates

Azerbaijan's gas reserves boosted by Total find

The French oil and gas major Total has discovered a major gas field off the coast of Azerbaijan, the company announced on 9th September. The field is believed to be one of the country's largest, providing a major boost to Azerbaijan's reserves.

The new field lies within the Ashberon block, which Total has been operating through a subsidiary since it made an agreement with Azerbaijan's state energy firm SOCAR in 2009. Total holds 40 per cent, as does SOCAR, while GDF Suez holds the remaining 20 per cent. The block is located around 100km east of the capital Baku, and around 25km north of the enormous Shah Deniz gas field.

The exact size of the discovery remains open to speculation at present. Total announced that the field as a whole had potential for “several trillion cubic feet of gas and associated condensates”, but on 12th September, SOCAR claimed that the discovery holds around 350 billion cubic metres of gas and 45 million tons of gas condensate.

Whatever the exact size of the field, it provides a major fillip to Azerbaijan's energy reserves, perhaps bringing them to 2.55 trillion cubic metres. Contrary to the hopes expressed by some analysts and officials, however, the new discovery is not necessarily a saving grace for the EU's Nabucco project to bring Caspian gas to Europe. Azerbaijan already possesses sufficient gas for Nabucco to get underway, mainly in the second phase of the Shah Deniz field and recent discoveries in the Umid field.

The problems with developing Nabucco have not therefore been about gas reserves – they have been about building pipelines to export the gas, as well as the technical work to actually extract the gas. This is particularly true in the deep and challenging waters of the Caspian Sea. First Vice-President of SOCAR Khoshbakht Yusifzadeh acknowledged this, saying that extraction from the new field was unlikely to begin before 2021 or 2022. Meanwhile negotiations over the pipeline project which will bring gas to Europe continue.

Azerbaijani officials are nonetheless exuberant over the find, with President Ilham Aliyev calling it a “truly remarkable event” and stating that it shows “that our country possesses great opportunities, great potential and bright future.”

Sources: News.az, Wall Street Journal, Financial Times

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Azerbaijan and Russia sign another gas deal

Gazprom has secured an agreement to supply State Oil Company of Azerbaijan Republic (SOCAR) with double the amount of Russian gas in 2011, expected to total at 2billion m³. Under the agreement, Azerbaijan is expected to increase gas imports from Russian even further by 2012.

The agreement signed by Russia's President Dmitry Medvedev and Azerbaijan's President Ilham Aliyev is the third gas purchase agreement signed in the past year between the two countries. The first agreement, signed in October last year, provided for Russian purchases of 500million m³ of gas annually.

During a joint news conference on Friday 3rd September , President Aliyev said the gas deal with Russia was “open and sincere.” He also took the opportunity to reassure Azerbaijan's Western partners that energy co-operation with Russia would not come at their expense, saying "We don't see our work in the gas sector as an opportunity for unfounded competition. We are working not on the basis of political concerns, but economic practice".

Talking about the latest deal with Azerbaijan, President Medvedev said that both countries are serious, “gas suppliers,” and will not create obstacles for one another when it come to co-operation with international energy majors.

Source: EurasiaNet

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Iran's purchase of Azerbaijan gas to rise to 10 bcm

Tehran's Ambassador to Baku Mohammad Baqer Bahrami has said that upon completion of a new gas pipeline between Azerbaijan and Iran, the volume of gas purchased from Azerbaijani will rise to 10 bcm per year.

The two countries are currently in the process of signing a “long-term gas contract," and work is underway to expand the gas compressor station in Astara. Commenting on bilateral ties, Bahrami said that the Iran-Azerbaijan relations have entered a new phase.

"We want to buy five billion cubic meters of gas. In this direction, SOCAR implements the improvement of an existing pipeline," added Bahrami.

In March 2010, Chairman of the State Oil Company of the Azerbaijan Republic (SOCAR) Rovnag Abdullayev announced that Azerbaijan is ready to supply Iran with five bcm of natural gas per year once the infrastructures are set in place.

Source: Fars News Agency

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Azerbaijan increases gas supplies to Turkey by 2 billion m³

The State Oil Company of the Azerbaijan Republic (SOCAR) has increased gas supplies to Turkey from 13-14 million m³ to 16 million m³ per day. The increase in supply is partly due to an explosion near a pipeline transporting gas from Iran to Turkey, which meant that Iranian gas supplies in to the country were suspended. According to Turkey’s Energy and Natural Resources Minister Taner Yildiz supplies will resume in approximately 7 days.

Azerbaijan supplies gas to Turkey under a contract on the Shah Deniz offshore gas field. The countract stipulates that Turkey has to receive 6.6 billion m³ of gas per year during the field's first stage. The field's total reserves are estimated at 1.2 trillion m³.

The contract to develop Shah Deniz was signed 4th June 1996, and includes the following participants BP (operator) with 25.5 per cent, Statoil 25.5 per cent, NICO 10 per cent, Total 10 per cent, LukAgip 10 per cent, TPAO 9 per cent and SOCAR with a 10 per cent share.

Source: Trend Azerbaijan

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SOCAR keen to acquire Georgia's gas network

The State Oil Company of Azerbaijan Republic (SOCAR) has notified the Georgian government of its interest in the privatisation of Georgia's gas system, including the main gas pipelines, if the Georgian government were to decide to sell.

“We expect Georgia to decide its plans in the near future. If the country's government country decides to privatize, we will take part," said a SOCAR spokesperson.

SOCAR's interest in Georgian assets has been echoes by Kazakhstan's state oil and gas company, KazMunayGaz. While, the Armenian government, has shown interested in buying the Georgian section of the Russia-Armenia gas pipeline.

SOCAR has already purchased privatised gas-distribution networks in 30 Georgian districts and is presently developing its acquisitions. The company has an interest in a wide range of Georgian assets including the Kulevi oil terminal on the Black Sea coast and a network of petrol stations.

Source: News Azerbaijan

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Vietnam receives first crude from Azerbaijan

First oil tanker, carrying crude oil from Azerbaijan, reached Vietnam's Thanh Bay on Wednesday 11th August. The crude will be refined in a Dung Quat oil refinery in the province of Quang Ngai.

It is the first consignemt of crude oil under a deal signed by the Vietnam oil and gas group, PetroVietnam, State Oil Company of Azerbaijan Republic (SOCAR) and the BP Group.

According to the agreement, SOCAR will supply Dung Quat refinery with 65,000 barrels of oil in the month of August, and BP will export the same volume of crude. The imported crude will be mixed with oil produced in the Bach Ho field in southern Vietnam during the refining process.

Source: Vietnam News

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