Minister Aliyev not expects consensus on output freezing deal
By Fatma Babayeva
Oil producing nations will not be able to reach any certain agreement during the next meeting of OPEC scheduled for June 2 in Vienne, believes the Azerbaijani minister.
“Iran and Libya will stick to their positions. Saudi Arabia stated that freezing or reduction of production is not negotiable until Iran and other producers give their consent,” said Natig Aliyev, Energy Minister in his interview with Caspian Energy News on May 26.
No changes were made in November 2014 meeting when OPEC members gathered for the first time after oil prices began declining in mid -2014. Everybody expected them to take some measures in order to restrain oil price decline or regulate them as they had enough levers for it, said the Minister, adding that after this meeting of OPEC, when it was apparent that the organization is going to take no preventive measures, the oil price has rapidly fallen down to $70 per barrel. Later, the price continued gradually declining throughout 2015 and finally fell below $30 per barrel in early 2016.
Aliyev further said that many experts explain this fact mainly by the influence of political factors and confrontation taking place between a number of countries.
“In this regard it would be enough to note the deterioration of Russia-Ukraine, Russia-Europe, Russia-Syria-Turkey relations which have serious economic consequences including the situation with price levels,” he explained.
Moreover, the reason lies namely in the OPEC countries. These are conflicts in North America, Syria and also the Middle East, Aliyev emphasized, adding that third reason is the lifting of sanctions imposed earlier on Iran.
These are three major political reasons which affected and caused an oil price collapse, according to the minister.
Aliyev went on to add that among economic reasons influencing the oil industry is the shale revolution in the USA – increase of shale oil production volumes. Oil production in the USA exceeded 10 million barrels per day. In other words, annual production volume increased by 3-4 million barrels just within 2-3 years.
A set of laws, permitting the US oil export, was approved in the USA, and it definitely affected oil price decline.
There are also important factors such as the situation and trends in development of the global economy. First of all, it is a decline of global economic development rates in China and India which substantially lowered its development rates and consumption of energy resources, said Aliyev.
Under these circumstances, OPEC was expected to take certain measures to reduce oil production rate which could have adjust market prices to certain extent. Unfortunately, it did not happen, he added.
On the contrary, in the course of sessions and meetings OPEC members noted that they have no intention to reduce oil production and export. The main reason for OPEC countries’ choosing this stance was a certain market share gained by each country, especially Saudi Arabia, Aliyev belives.
Considering the current global oil production rate, in reality there are three countries which can still afford oil production increase. They are Saudi Arabia, Iran and Libya. In this regard, everything depended on the wish and stance of these three countries at the OPEC’s Qatar meeting, Aliyev told.
On the other hand, oil production decline is recently observed in the USA, said Aliyev by stressing that he believe that this trend is going to continue.
Aliyev noted that high oil prices ($100 or over per barrel) observed for a long time till mid of 2014 were not speculative: “These were reasonable prices which reflected the market situation and were reached owing to an economic growth of countries, energy resource consumption and demand ratio, development of alternative and renewable energy and increase of energy efficiency.
Nowadays, it is evident to anyone that low prices observed for a long time have had a strong impact on the economies of not only energy resource producing but also consuming countries. It is abnormal when the oil price falls by 3-4 times and stays low for a long time. It became evident that something is wrong here and cannot continue just this way because all countries face losses, tremendous losses, especially producing countries.”
Aliyev claims that recovery of Libyan fields will make the situation complicated as their technical condition is not good now. But nevertheless, the tendency will be directed towards oil production increase in Libya.
SGS successfully continues
Commenting on the progress of implementation of the Southern Gas Corridor, Aliyev noted that Shah Deniz II, expansion of the Sangachal terminal and South-Caucasus gas pipeline projects are implemented ahead of schedule. About 70% of operations will be completed in 2016.
Assembling of the platform (topside facilities and jackets) for the development of Shah Deniz field is also underway and ahead of schedule. Compressor stations are under construction in Georgia, trenches are being excavated, full amount of pipes have been delivered within the framework of SGC, he added.
Aliyev also stressed that the implementation of the Trans-Anatolian gas pipeline (TANAP) has been recently discussed in Ankara at the session of the Turkey-Azerbaijan High Level Strategic Cooperation Council with participation of President Ilham Aliyev and President Recep Tayyip Erdogan.
TANAP capacity will be 25 billion cubic meters per year, he said adding that now about 6.6 billion cubic meters of gas is supplied to Turkey annually. Additional 16 billion cubic meters per year will be supplied at Stage 2. Moreover, 6 billion cubic meters of this volume will flow to Turkey while 10 billion cubic meters will flow to Europe. In total, it makes about 22-23 billion cubic meters.
As for the Trans-Adriatic Gas Pipeline (TAP), Aliyev reminded that the Host Government Agreement over the Greek section has been approved by the European Commission. “All legislative issues have been solved. Foundation laying ceremony of the first pipe of this gas pipeline took place in the Greek city of Thessaloniki on May 17. The documentation on construction is fully ready in Albania. Preliminary preparation work for the physical construction is underway. At the same time, the construction of the pipeline in Italy will begin. The only problem concerns the relocation of olive gardens, which is planned to be carried out no later than October and in experts’ opinion will not affect the schedule of construction operations,” he said.
Aliyev also said if any party has gas supply capacities for TANAP, either Iran, Iraq, Egypt, Israel or Cyprus, Azerbaijan is ready to expand the pipeline and transport. However, it should be a long-term liability of parties.
There have been no such proposals received by Azerbaijan, and Aliyev thinks that it will not happen in coming 5-10 years.
“If our partners have an opportunity to export gas, Azerbaijan is ready to negotiate it with great pleasure and try to allocate transit capacities,” added Aliyev.
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Fatma Babayeva is AzerNews’ staff journalist, follow her on Twitter: @Fatma_Babayeva
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