Gas truth of Azerbaijan appeared to be bitter

When asking questions of journalists during the Forum of National Insurers in Baku, Azerbaijani Deputy Finance Minister Azer Bayramov made a sensational statement: “After four years we will not receive a penny of profit from sale of gas extracted on Shah-Deniz field.”

He said Azerbaijan must say goodbye to the perspectives of huge gas profit, because in the coming four years Azerbaijan will get nothing from the Shah-Deniz project.

Bayramov said that this is connected with the wide-scale investments, which partners of the consortium need to make since beginning OF the Shah-Deniz Phase 2 development. 

The partners of the consortium must invest about $40 billion (including costs for the infrastructure) since commencement of the project. Bayramov said next year the part of the contract related to the profit distribution will be revised, reported the portal www.haqqin.az.

If the profit from the Shah-Deniz field was received in 2013 (during 9 months, 2013 $289.8 million and from 2007 till October 1, 2013 Azerbaijan’s profit totaled only $1,497 million, according to the calculations by the Centre for Oil Studies. In 2006 – the first year of big oil extraction from Azeri-Chirag-Guneshli (ACG) – the government received 30% of profit, while the companies – 70%, net profit totaled over $1.2 billion), next year there will be no profit. Therefore, Azerbaijan will receive no economic preferences from the gas contracts till 2017-2018, said Bayramov. 

* The Shah-Deniz Phase 2 project is a very capital-intensive project: its initial cost is $25 billion. During the course of construction its cost could go up to $30 billion. The project will cost to the shareholders about $35 billion with return of bank credits. Considering the cost of infrastructure (some shareholders have huge shares in TANAP and TAP projects), then the total project costs will exceed $50 billion. The project recoupment will depend on the gas prices in Europe. Gas export from Shah-Deniz-2 will begin  in 2019. As minimum 15 years is needed for the full recoupment of the project, if an average export price will not be below $400 per 1000 cub.m.—0---

 

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