Perspective gas reserves of Azerbaijan hit 5 tcm

Apr 19, 2009 02:00 AM

During his visit to Moscow, the President of Azerbaijan, Ilham Aliyev, answered some questions.

Question: Both President Medvedev and you say that close and friendly relations connect you. What is their basis?

Answer: This is actually so. Probably, several factors play a role here. We are the representatives of one generation. We got approximately the same education. We have been in politics since early years. And before becoming Presidents, we actively dealt with various issues that are of great importance for our countries.
Surely the personal sympathy plays a role in the relations between the countries. I am very pleased that the relations that I have with the President of Russia create a good foundation for building full-value relations between our countries.

We have many topics for discussion. This time I had the opportunity to meet with Dmitry twice. On the first evening, we had a meeting in a family circle, and formal negotiations took place on the next day.
We touched upon various topics, but not only the policy. This is very important for me. I am very pleased that such relations exist, and I believe they will be strengthened in the future.

Question: Yesterday formal negotiations took place. What were the key points you have made?

Answer: The agenda between our countries is quite wide. Therefore, we tried to cover, analyze and exchange views on issues that are of priority. Today, cooperation between our countries is carried out in various spheres. The relations are developing very efficiently and rapidly.
Naturally, we discussed the questions of political cooperation, issues relating to the strengthening of political cooperation. There is a good legal framework for this, which was signed in Baku in the summer last year, an agreement on friendship and strategic partnership. It just covers all these spheres.

We focused on a detailed economic agenda. We were satisfied that over the last year the turnover grew 40 % to nearly $ 3 bn. Despite the crisis this year, the drop is not such as could be.
Qualitative changes were made to the structure of trade. All these are the result of strong political relations between our countries. Since my last visit to Moscow, significant events have also took place in the humanitarian cooperation -- opening of a branch of Moscow State University in Baku and opening of a Russian culture centre. That is the practical implementation of the decisions that were made. These decisions were implemented promptly.

The Nagorno-Karabakh conflict settlement and Russia's role as a co-chair of the OSCE Minsk Group were also on the focus of attention. The position of Azerbaijan on Nagorno-Karabakh reflects the security of people who live now and will live there; reflects the issues of local self-government of Nagorno-Karabakh; reflects the restoration of the territorial integrity of Azerbaijan.
In this context, the decision on the status of Nagorno-Karabakh may be postponed to an indefinite period. Unilateral decision on the status of Nagorno-Karabakh cannot be made.

Azerbaijan does not and will never participate in the process that would suggest a mechanism of legal separation of Nagorno-Karabakh from Azerbaijan. This is our unique position. It needs to remove the consequences of the conflict, attain the withdrawal of Armenian occupying forces from the territory, which is located around the administrative border of the former Nagorno-Karabakh Autonomous Republic. But step by step.
Baku hopes that the Armenian side will approach these issues in a constructive manner and from the point of view of international law. Because it would be impossible to resolve this issue outside the international law.

We understand the importance for the Armenian side to have a ground connection between Armenia and Nagorno-Karabakh. We see no problems in this regard. And the questions related to the Lachin corridor can be effectively solved -- so there is no concern for those who live in Nagorno-Karabakh today, and the Azerbaijani population, who willreturn there after the solution of the conflict.
At the same time, we understand that in order to resolve the conflict, the people who live there should feel safe, should have an opportunity for self-government, should live their lives. In this regard, we have no attempt of diktat or attempt of interference in their lives. So, I think that the combination of these factors could lead to a breakthrough in the solution.

The energy dialogue continues and covers new spheres. The gas sphere is added to the traditional cooperation in the oil sphere and in the sphere of electricity. This is an important element in the bilateral relations and regional development. So it is difficult to list all that we told about.
But even those that I described show how our relations are of strategic character, how they cover different spheres. We have a mutual understanding on all these issues, cooperation and willingness to move forward. Successful implementation of all programs that we planned in these spheres leads to a stronger relationship between our countries, and fully meets our interests, and I believe the interests of Russia as well.

Question: Yesterday at the press conference, you and President Medvedev said that there is a great probability to sign a gas deal. If possible, please can you say under what conditions and when can this be done?

Answer: This topic is relatively new in our relations. Previously, the gas cooperation between Russia and Azerbaijan was carried out in a different format. Azerbaijan was a recipient of the Russian gas nearly since 2006. Since 2007, this cooperation has ceased, and today it already deals with the supply of Azerbaijani gas to Russia.
During this relatively short period, we succeeded to implement our investment projects and become essentially exporters. We export about 7 bn cm of gas to the Turkish market. Part of this gas is re-exported by Turkey to Greece. Thus, our gas is already physically in the European Union.

Via another gas pipeline, we export gas to Georgia. And through the third pipeline, we have exchange of gas with Iran. Therefore, amongst our neighbours, unfortunately, we have no practical results in the gas sector, only with Russia. In order to fill this gap, as well as to have complete diversification of gas supply, the Russian market seems very attractive for Azerbaijan.
The Russian side is also interested in this cooperation, and we received Russia's proposal for cooperation in the gas sphere a year ago. This was the initiative of the Russian side, and we accepted it very positively.

Recently a Memorandum was signed between Gazprom and State Oil Company of Azerbaijan. Currently negotiations are held. I think that they can and should be completed positively. Naturally, the companies will agree upon all conditions -- commercial, technical and guarantee issues, i.e. the whole complex of issues that must be decided at the company level.
There is a political will of the two states in the gas cooperation. Therefore, if the negotiations are successful, surely the contract can be signed. And with regards to the volumes of gas, this will be discussed at the company level. I think that the importance of this agreement is that a new direction will be opened for the Azerbaijani gas.

Question: Saying that the production is increasing, did you mean the Shah Deniz field?

Answer: Not only. Crude oil production in Azerbaijan is carried out in several fields. The Shah Deniz project is developed by us together with our foreign partners. In addition, we obtain gas from the Azeri-Chirag field, which also goes to the general gas balance.
The State Oil Company almost doubled its production, bringing it to almost 8 bn cm. This is today's natural gas potential of Azerbaijan in gas production -- more than 20 bn. There is a potential to enlarge this production within a short period. We injected part of associated gas from oil fields into oil reservoirs to increase the oil production. This gas can be used for export as well. We noted the Shah-Deniz-2 project, which involves production of 12 bn to 14 bn plus to the current volume.

Question: When can it take place?

Answer: It can take place under different rates of work -- 3 to 5 years after project approval. The project has not been approved yet. And the reason is that we have no market.
We have not resolved the questions of gas transit through the traditional ways of delivery and additional transit. It needs to be negotiated with potential buyers. Because unlike oil, the gas business has its own specifics. Therefore, certain delays in approval and development of the Shah-Deniz-2 project occurred not due to our fault. And surely, for Azerbaijan, which possesses proven gas reserves of at least 2 tcm, prospectively 5 tn, it is a disappointment not to be able to add the gas, which we have, due to the unresolved transit issues.

Therefore, I think that the main issue is to reach an agreement on the possible transit and on sale-purchase of gas between Russia and Azerbaijan and to move forward. One of the advantages in our relations is that already there is a transport infrastructure/pipeline, which is today capable to transport at least 5 bn cm of gas without additional investments. In our case, there are no issues of transit, we are neighbours.
Thus, the question, which creates certain difficulties, is removed. It is necessary to only agree upon the commercial conditions in a mutually beneficial manner, to agree upon long-term co-operation guarantees so that any elements, including market conditions, should not interfere in our further cooperation. The agreement must be so that later it does not incur amendments in any way.

Question: Possibly, Azerbaijani companies will join the Nabucco project. How true is this and in what condition is the project?

Answer: The Nabucco project is being discussed. But when the first initiative of this project was made, Azerbaijan was not considered as a supplier. There were other suppliers that are still essential for Nabucco, according to the participants ofthis project. We are not a member of the Nabucco consortium. At the first stage, Azerbaijan was considered as a transit country for transportation of gas to the east coast of the Caspian Sea.
At some stage, we were considered as potential suppliers due to the fact that we started to increase the volume and transformed from an importer into an exporter country. Of course, to have access to new markets is of great interest for any country. The larger market, the more competition, the better prices, the greater guarantee that delivery will not be interrupted for any reason. Therefore, in this sense, surely we are interested in participating in this project if it will be realized.

But the difference of the Nabucco project from other projects, especially those that we realize is that in this case, our project should be devised by consumers, not producers. And, of course, the consumers should reach an agreement on the financial issues as well through the support of the international financial institutions. Naturally, it will be very difficult to implement this project without strong political support.
Building pipelines is not so easy. We recently built the Baku-Tbilisi-Ceyhan pipeline and the Baku-Tbilisi-Erzurum gas pipeline. These are difficult technical projects, taking into account the topography and geography of our territory.

So, there are many difficulties. But it may be feasible if there is a political will, financial components and coordinated activity of all members of the project. I want to emphasize that Azerbaijan is neither the initiator of the Nabucco project nor its participant. If as a transit country, we are requested, of course, we will be pleased to join because we, like any other country, are interested that any cargos, including hydrocarbons, would be transported through our territory.
We also signed the Energy Charter, which implies such position of the transit country. If the Nabucco pipeline is built, surely we can supply part of our gas in this direction. But now it is difficult to say when this project will be shifted from the dead centre, and who would do it.

Question: How is it possible to achieve prosperity in the Caucasus, both political and economic, under such difficult conditions?

Answer: Over the past five years, Azerbaijan's economy has grown 2.6 times, poverty has declined from 49 to 13 %. Unemployment, as a social phenomenon, was virtually eliminated, for 3 months of the crisis 2009 the GDP growth was 4.1 %, and oil GDP -- almost 114 %.
This is a positive tendency.

Market Research

The International Affairs Institute (IAI) and OCP Policy Center recently launched a new book: The Future of Natural Gas. Markets and Geopolitics.


The book is an in-depth analysis of some of the fastest moving gas markets, attempting to define the trends of a resource that will have a decisive role in shaping the global economy and modelling the geopolitical dynamics in the next decades.

Some of the top scholars in the energy sector have contributed to this volume such as Gonzalo Escribano, Director Energy and Climate Change Programme, Elcano Royal Institute, Madrid, Coby van der Linde, Director Clingendael International Energy Programme, The Hague and Houda Ben Jannet Allal, General Director Observatoire Méditerranéen de l’Energie (OME), Paris.

For only €32.50 you have your own copy of The Future of Natural Gas. Markets and Geopolitics. Click here to order now!


Upcoming Conferences
« May 2018 »
1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31

Register to announce Your Event

View All Events