CESD;  other recommendations should be also considered in order to simplify visa regime

“A program to issue visas electronically is being drafted. Azerbaijani visas will be issued within the 15 days from on-line submission. In future, however, this period could be reduced,”- Ministry of Culture and Tourism of Azerbaijan Republic based on policy recommendations developed by the Center for Economic and Social Development (CESD).

CESD worked with the Ministry of Culture and Tourism of Azerbaijan Republic to simplify the visa regime, according to the Center.

The Center developed the recommendations as part of the EU EaP Initiative Project, a program supported by PASOS, with financial support from the Local Government and Public Service Reform Initiative (LGI) of Open Society Foundations.

The CESD mentioned that although on-line visa recommendation will be approved, soon, getting Azerbaijani visa will remain complicated. The problem is that issuing of Azerbaijani visa will take 15 days which can be considered one of highest periods for issuing visa in the world. Unfortunately, only one from nine recommendations will be approved. Even though it is positive step, but it is not enough for visa facilitation. Therefore, Government of Azerbaijan is recommended to work on reducing of period for issuing visas, decreasing of number documents needed to attach to a visa application form, applying free visa regime for European Union citizens and issuing long term and multi visas for certain category visitors.

It s reminded that under presidential instruction visas would be issued at Azerbaijan’s international airports for visitors to the Eurovision Song Contest, to be held in Baku in May.

At present, visitors to Azerbaijan have to apply for visas at the nearest Azerbaijani embassy or consulate, with the exception of residents of a country which has direct flights to Azerbaijan but no embassy.

© CESD, 2012

Nabucco consortium considers Nothern Iraqi gas as an option to secure future gas supply to Europe, Dow Jones Newswires reported on Wednesday with the reference to the project official representative.

“Why shouldn’t we pipe gas from Northern Iraq,” Nabucco Gas Pipeline International GmbH spokesman, Christian Dolezal said. He stressed that Northern Iraq has huge potential as a gas producer.

“We should explore that as an option to secure future gas supply for Europe,” Dolezal said. Nabucco gas pipeline is one of the Southern Gas Corridor projects, which is designed to transport gas from the Caspian region and Middle East to the European countries. Gas produced during the second stage of Azerbaijani Shah Deniz gas condensate field development is to be the main source for the Nabucco project.

The construction of Nabucco pipeline with maximum capacity of 31 billion cubic meters is planned to start in 2013 and its first supplies are scheduled for 2017.

The project’s partners include Bulgarian Energy Holding, Romanian Transgaz, Turkish Botas, Austrian OMV, German RWE and Hungary’s FGSZ. Dolezal also stressed that teh consortium still remains focused on its primary project of a major pipeline to carry Caspian natural gas to Europe.

European Union (EU) already submitted draft document on Visa Facilitation and Readmission to Government of Azerbaijan (GoA) last week- said Vugar Bayramov, co-coordinator of Economic Integration and Convergence Working Group at EU EaP CSF.  He mentioned that negotiations on simplifying visa regime between Azerbaijan and the European Union will be held on March 1-2, 2012.

V. Bayramov added that draft document consists of reducing visa fees from 60 euro to 30 euro, reducing number of documents needed for applying to Shengen visa, simplifying of visa producers for certain category of applicants such as public servants, students, sportsmen,  researchers and others.

It should be reminded here the EU Ministerial Council issued a mandate for holding negotiations on visa facilitation with Azerbaijan on December last week. Visa facilitation considers not canceling this regime as a whole, but decreasing the visa fees, reducing the number of documents required of decreasing the visa fees, as well as easing visa issue for persons of some categories.

© CESD, 2012

CESD; “SOFAZ too late with investing in gold”

The State Oil Fund of the Azerbaijan Republic (SOFAZ) reported that the fund has started to invest in gold in order to diversify its portfolio and increase revenue. According to the Oil Fund’s Investment Policy, 5% of the investment portfolio’s total value in 2012 can be invested in gold.  To this end, from 1 February 2012, the fund began to purchase gold bullion from market-maker banks of the London Bullion Market Association.

CESD Analysts mentioned that SOFAZ delayed making decision to invest in gold. The center offered transferring 20 % of assets of SOFAZ in gold in 2008 when global financial crisis started. SOFAZ did not make decision to invest in gold that time due to weak of investment policy of the fund. Price of gold increased 1,5 times after global financial crisis started. Last year, gold price increased 25,6 % although there was fall in the gold market in last 6 months; price decreased 1,6 %. SOFAZ was too late with investing in gold although it should have been done before when CESD recommended.

Experts said that changes in SOFAZ strategy such as investing in gold or assets of foreign managers will not increase SOFAZ returns. The strategy must clearly delineate the share and dynamics of national consumption, public investments, government expenditures and trade with other countries with the hydrocarbon resources deducted and oil money added to the national assets. A good strategy will measure and use the oil money not for separate consumption expenditures or investment projects, but in line with all public spending, while accumulating and saving that oil money separately. The diversification principle need to be prepared to illustrate the ceilings expressed in percentages of the Fund’s resources can be allocated in each country, in each currency, each type of the business, and each company, as well as ceilings expressed in percentages of the invested company’s assets.

CESD Analysts added that the existing policy framework and execution have clearly failed and a new one needs to be designed and implemented to ensure the efficient management of oil revenues. The technical challenge is to create the scheme such that the amounts withdrawn during the resource exploitation phase and the post-resource financial return phase are the same.  However, the details of the Permanent Income scheme have not yet been worked out and agreed to and it has not been implemented.  Thus, the pressure on SOFAZ to relinquish funds continues and intensifies. One of the difficult elements of the Permanent Income approach is that in order to determine the current levels of withdrawals, the value of the stock of oil in the ground must be known, and therefore knowledge of the future profile of oil prices until the resource is exhausted is necessary.  To date, this calculation has been based on “expected” or historical averages of oil prices, and several scenarios have been posited.  As the recent past has shown, oil prices can be extremely volatile and relatively unpredictable.

© CESD, 2012

SOCAR has not announced any price, yet

The price of Azerbaijan’s gas exported to neighboring Turkey is currently $330 per 1,000 cubic meters, a senior Azerbaijani official was quoted by the Sabah newspaper as saying on Monday. ”Turkey imports gas from Russia for $450 and from Iran for $420 per 1,000 cubic meters. Azerbaijani gas is supplied to Turkey at the lowest price,” said Novruz Mammadov, the Presidential Administration’s head of foreign relations.

At present Turkey receives gas from the Azerbaijani gas condensate field Shah Deniz in the Caspian Sea via the South Caucasus Pipeline, a section of the Baku-Tbilisi-Erzurum (BTE) pipeline. According to the contract, Turkey is to receive 6.6 billion cubic meters of gas during the first phase of Shah Deniz field development. During Phase 2 of the project, Turkey will receive 6 billion cubic meters of gas.

Earlier, the price of Azerbaijani gas sold to Turkey was $120 per 1,000 cubic meters. Reserves of Shah Deniz field are estimated at 1.2 trillion cubic meters of gas.

The contract to develop the offshore Shah Deniz field was signed in 1996. Parties to the agreement are: BP (operator), with 25.5 percent, Statoil with 25.5 percent, NICO (10 percent), Total (10 percent), LukAgip (10 percent), TPAO (9 percent), and Azerbaijani state energy firm Socar (10 percent).

The Nabucco consortium is considering a much smaller project than the originally planned pipeline to carry Caspian natural gas to Europe, bowing to the reality of low gas amounts available at the moment in the region, according to people familiar with the situation, The Wall Street Journal reported.

Nabucco’s original project was a 3,900 kilometer-long natural-gas pipeline running from the eastern Turkish border with Georgia all the way to Austria, with a capacity of 31 billion cubic meters, while the new proposal would only run between Bulgaria and Austria and have roughly half of that capacity, the people said. However, the original project is still officially on the table, a person familiar with the matter said.

The consortium – formed by German utility RWE AG and six other European energy companies -confirmed it is looking at different alternatives. “We are in the process to calculate several scenarios, including different sizes in terms of capacity and length of the pipeline. However, our preferred scenario still is the base-case and no final decisions have been made yet,” Christian Dolezal, spokesman for the Nabucco consortium, said Friday.

The news comes in the midst of a tight battle among different pipeline projects to bring the first gas ever from the Caspian to Europe – roughly 10 billion cubic meters expected from Shah Deniz II, a field in the Azerbaijani area of the Caspian basin which is being developed by a consortium that includes energy giant BP PLC.

The issue is crucial for the European Union, which is seeking to open up a new “corridor” of gas imports from Central Asia, in an effort to diversify its gas supplies away from Russia, and Nabucco has long been the European Commission’s favored project.

But experts have been questioning whether there is enough gas in Central Asia to fill the originally planned pipeline, as the Shah Deniz volume amounts to only a third of Nabucco’s capacity. And the chances of getting additional gas from Iraq or Turkmenistan have been fading, prompting the consortium to consider an alternative. “It’s evident: there aren’t 31 [billion cubic meters],” a person familiar with the matter said.

The re-focus of Nabucco on the European bit of the transit comes as the state-controlled oil company of Azerbaijan, Socar, and its Turkish peer Botas are proposing to build a pipeline to carry the gas across Turkey, called TANAP. If built, TANAP would effectively make a portion of Nabucco’s original project redundant.

The consortium has been planning to build the Nabucco pipeline for years, but doubts about some members’ commitment to the project have recently emerged. Last month, RWE’s Chief Executive Jürgen Grossmann said that, while still keen to import Caspian gas to Europe, RWE favors options “that keep our own financial exposure limited.” The company, which has been badly hit by the German retreat on nuclear power, could support other pipelines that have competed with Nabucco, Grossmann noted.

Nabucco is competing with a similar project called South East Europe Pipeline designed by BP, and with two other pipeline plans that aim at carrying the Caspian gas to Italy. The Trans Adriatic Pipeline, or TAP, is sponsored by a group of companies that includes Statoil ASA, the Norwegian energy giant that also has a 25.5% stake in the Shah Deniz consortium. The other competitor is the Interconnector Turkey-Greece-Italy, or ITGI, which is being developed by Italian utility Edison SpA and Greek gas company DEPA.

Nabucco’s prospects have also been challenged by the Russian-led South Stream pipeline, whose partners include European giants like Germany’s BASF SE and France’s Électricité de France SA. South Stream is an even bigger and more expensive 63 billion cubic meter pipeline project that would take Russian gas across the Black Sea to Europe.

Nabucco consortium continues supporting the project’s original conception, which envisages the construction of the pipeline from Turkey’s eastern borders to Austrian Baumgarten, Reinhard Mitschek, Managing Director, Nabucco Gas Pipeline International told Trend.

“The Nabucco concept, whereby the pipeline travels from the Eastern borders of Turkey to Baumgarten in Austria continues to be our preferred option as it is a comprehensive solution for all parties involved,” Mitschek said.

However, he said that the consortium is currently evaluating different scenarios in order to find the best solution for suppliers and transportation customers.

Nabucco gas pipeline project is designed to transport gas from the Caspian region and Middle East to the European countries. Gas to be produced during the second stage of Azerbaijani Shah Deniz gas condensate field development is considered as the main source for Nabucco.

Earlier this week Shah Deniz consortium’s official representative told Trend that Nabucco submitted the project’s new conception, according to which the pipeline will be laid from the Turkish-Bulgarian border to the Austrian Baumgarten. The original concept of Nabucco project envisaged the construction of the pipeline from the Georgian-Turkish and Iraqi-Turkish borders to Baumgarten. The pipeline was expected to run through Turkey, Bulgaria, Romania, Hungary and Austria over a distance of 3,900 kilometres.

Shah Deniz consortium is currently considering three possible export routes – Nabucco, South East Europe Pipeline (SEEP) and TAP projects.

Mitschek said that the negotiations between Nabucco’s shareholders and the Shah Deniz consortium are underway and no final decision has yet been made.

“The Nabucco pipeline project remains the most solid proposition to bolster both Turkey’s and European countries’ diversification of supply,” Mitschek added.

The shareholders of Romanian National Gas Transmission Company Transgaz S.A. sanctioned a decision to contribute to the consolidated budget of Nabucco Gas Pipeline International GmbH (NIC), Romanian ACTMedia news agency reported with the reference to a statement sent to the Bucharest Stock Exchange on Friday.

According to a decision, sanctioned by Ordinary General Shareholders Meeting of Transgaz on February, 10, the Romanian company will contribute 10.21 million euros to the NIC consolidated budget in the first half of 2012.

Appropriated funds will be used for operation and development costs of Nabucco project.

Transgaz is one of the six shareholders in Nabucco gas pipeline project, which is designed to transport gas from the Caspian region and Middle East to the European countries. The project’s other partners include Bulgarian Energy Holding, Turkish Botas, Austrian OMV, German RWE and Hungary’s FGSZ.

The estimated cost of the project is 7.9 billion euro. The shareholders will invest 30 percent of total cost of the project, the rest 70 percent will be paid owing to the loans.

The construction is planned to be launched in 2013 and the first supplies will start in 2017.

The gas to be produced during the second stage of Azerbaijani Shah Deniz gas condensate field development is considered as the main source for Nabucco.

Drillings of new test wells and boreholes as part of the second stage of the Azerbaijani Shah Deniz offshore gas condensate field development is not allowed until authorisation of the second phase, a source in the oil and gas market told Trend news agency on Monday.

Currently work on the SDX-07а test well drilling is being carried out, the source said. ”The second phase involves a multi-billion dollar investment. It also requires costly drilling of new wells and therefore there will be no drilling work until official authorisation,” the source said.

The authorisation of the second phase of Shah Deniz development is likely to take place in the spring at the expected time of completion of the SDX-07а drilling by the end of April. The current depth of the well is 4940 metres.

Two offshore platforms and 20 subsea wells will be installed for the production of an additional 16 billion cubic metres of gas under the Shah Deniz-2 project. Peak production is projected at 9 billion cubic metres in the first stage of development. According to forecasts, gas production can be increased up to 24 billion cubic metres a year in the second stage of development.

Shah Deniz reserves are estimated at 1.2 trillion cubic metres of gas.

The contract to develop the Shah Deniz field was signed on June 4, 1996. Participants to the agreement are: BP (operator) – 25.5 per cent, Statoil – 25.5 per cent, NICO – 10 per cent, Total – 10 per cent, LukAgip – 10 per cent, TPAO – nine per cent and SOCAR-10 per cent.

The U.S. Emerson Process Management signed a contract with the Azerbaijan International Operating Company (AIOC) to automate a new offshore platform in the Azerbaijani sector of the Caspian Sea, within the Chirag Oil Project, the U.S. company reported.

The Chirag Oil Project, to be completed in 2013 and operated by BP Azerbaijan, will enable additional oil to be recovered from the Azeri-Chirag-Guneshli field.

The Project assumes construction of new oilfield platform Western Chirag to be installed at sea depth of 170 meters between production wells Chirag and Gunashli, which have already been in operation. The Chirag Oil Project requires $6 billion in investments.

According to the report, in addition to providing measurement instruments and asset management and automation systems to help BP operate the platform safely and efficiently, as Main Automation Contractor Emerson will deliver project-management services to ensure the equipment is properly installed and integrated to meet technical, budget, and schedule requirements.

The company will be responsible for all automation engineering, acceptance testing, commissioning and configuration, startup and will also provide ongoing support of the automation system. The President of Emerson Process Management Steve Sonnenberg welcomed the opportunity to work with BP Azerbaijan on this project.

“We look forward to applying our automation technology, our experience managing offshore projects, and our local support capabilities to help make the Chirag Oil Project a success,” Sonnenberg said.