In 2012 azerbaijan received profit of only $200,000 from development of two offshore fields

In 2012 incomes from sale of profitable oil and gas totaled $16,695 billion, reads the annual report of the State Oil Fund of Azerbaijan Republic (SOFAZ) for year 2012.

SOFAZ incomes from sale of profitable oil extracted from the Azeri-Chirag-Guneshli fields totaled $16,257 billion, Incomes from sale of gas extracted from the Shah-Deniz gas condensate field totaled $365.5 million. During 2012 profit received by Azerbaijan from the Shah-Deniz Phase 1 development totaled $1 million a day.

The remaining $72 million fell to the incomes, which the operation companies paid from development of Balahany, Binagadi, Zyh-Hovsan, Kursengi-Garabagly, Surahany, Kurovdag, Neftchala and Bahar fields. During a year Azerbaijan made only $72 million from the production sharing agreements (PSA) with eight operation companies or in average $9 million fell per one operation company. However, SOFAZ report mentioned that Balakhany Operating Company was the most productive among these operation companies and it paid $23 million, while the least productive was Bahar Operating Company (operator Bahar Energy Ltd). It paid Azerbaijan only $200,000.

In the past State Oil Company of Azerbaijan (SOCAR) concluded the agreement with the offshore companies from Dubai, which prior to coming to Baku did not have offshore production experience just to receive profit of 13,000 AZN per month from their activities. In 2010 two big offshore fields – Bahar and Gum-Deniz – were removed from SOCAR’s balance for the period of 25 years. On the day of the contract signing - on December 22, 2009 – the SOCAR administration assured that the foreign partners (the founders of Bahar Energy ltd are Baghlan Group, Greenfield International and RAFI Oil, the share of which was purchased by Baghlan Group) have committed themselves to improve production on the contract area by 1.5 times against 2008. It was reported that 25 tons of condensate and 500,000 cub.m. of gas a day is extracted on Bahar field and 190 tons of oil and 160,000 cub.m. of gas on Gum-Deniz. What are the production showings? Neither SOCAR, nor the operation companies have ever disclosed the results. Thus, it is hard to say how foreign partners honor their contract obligations to Azerbaijan.

During 2012 Azerbaijan received profit of worth $900,000 from development of Neftchala (operator Global Energy) field. Will SOCAR be brave enough to lay down conditions to the operators of the project- either increase production according to the contract, or to terminate the contract. Because there are no privileges for the incomes that foreign or local companies of the non-oil sector bring to the country.-0--