The westward expansion of SOCAR, to Russia's detriment
Baku (AsiaNews/Agencies) - The state oil company of Azerbaijani (SOCAR) is increasing its production, and is seeking to extend into Turkey and Central Europe in order to become an alternative to Russian pipelines. The interest from energy-hungry Europe is strong, but the question is how much oil and natural gas the small state can provide.
The pipeline from the capital of Baku to Tblisi (Georgia) to Ceyhan in Turkey is still the main alternative to Russian domination. Constructed by a consortium that includes SOCAR, the Italian company Eni, and Total, it transported 20.5 million tonnes of crude oil in 2007. Ceyhan has become a primary European centre for oil trading, and SOCAR plans to construct a refinery there at the price of 4 billion dollars, with a capacity of 10 million tonnes per year.
Meanwhile, SOCAR has built up a strong presence in neighbouring Georgia, where it participates in the country's natural gas distribution network. The president of SOCAR, Rovnag Abdullayev, announced on February 2nd the inauguration of an oil terminal in the Georgian port of Kulevi, on the Black Sea, scheduled for mid February, with a capacity of 10 million tonnes per year. The oil, which will arrive by train in Kulevi, will be shipped to Europe.
According to analysts, SOCAR wants to equip itself with an adequate system of oil transport, distribution, and refinement in Central Europe, in order to attract energy from Kazakhstan and Turkmenistan and involve them in the construction of a pipeline under the Caspian Sea. This project also interests, among others, Georgia, Ukraine, Moldova, and also the European companies that are seeking alternatives to the Russian monopoly. For this reason, on August 17th, 2007, Assistant U.S. Secretary of State Daniel Sullivan was in Baku to discuss cooperation. The United States will pay 1.7 dollars million to study the possibility of building a pipeline from Kazakhstan to Azerbaijani, through the Caspian Sea. Is a possibility that Astana and Baku have been discussing for some time.
The ministry for energy and industry, Natig Aliyev, told the news agency Eurasianet that the government "has already received offers from various countries - Ukraine, Romania, Bulgaria, Poland, Belarus", to build refineries in their countries, and that it is studying the best way to do this. In January, Ukrainian President Viktor Yushchenko, after a meeting with Azerbaijani President Ilham Aliyev, announced that SOCAR will build a refinery in Ukraine to meet domestic demand.
Under these circumstances, the Baku-Novorossiisk pipeline is being used less and less: SOCAR has committed to exporting 5 million tonnes of crude per year to Russia, but is currently sending much less.
In expectation of possible agreements with Kazakhstan and Turkmenistan, the question is how much energy Baku has. In 2007, SOCAR exported at least 8 million tonnes of crude. It contributes about 15% of the country's gross domestic product, and has more than 50,000 employees. In 2007, it produced 5 billion cubic meters of gas, and expects to exceed 8 billion in 2008. It has opened offices in Great Britain, Romania, Turkey, and Switzerland. According to a report on February 4th from the agency Trend Capital, the country expects to earn 400 billion dollars from energy exports by 2024, double its earlier estimate. This market is essential for improving the basic quality of life in the country.
But experts observe that there are no studies demonstrating the true extent of SOCAR'S reserves, and therefore the possibility of assuring the operation of the terminal in Kulevi and the planned refinery in Ceyhan for a sufficient time to recover the significant initial investment that is necessary.
The expansion of the company is also hampered by its poor international reputation, linked to widespread corruption in the country. (PB)