SOCAR Trading SA, the marketing arm of Azerbaijan’s state oil company SOCAR, can focus on working with partners in mostly developing countries to help satisfy their power generation needs through LNG (liquefied natural gas) and linked power stations, Arzu Azimov, director general at SOCAR Trading SA, said in an interview with Platts.
SOCAR Trading SA, which this year commissioned the ambitious integrated LNG-to-power project in Malta, expects to agree deals for similar projects elsewhere in the world in the coming years, he said.
“Our strategy was based on the idea that the market was getting long on LNG sooner than expected,” Azimov said. “So one opportunity was to create a consuming project for LNG. We see ourselves as pioneering in this field.”
The integrated LNG-to-power project in Malta could be a model for the future, Azimov said, especially in growing economies in Africa and Asia.
ElectroGas Malta Consortium, where SOCAR is represented with a 20-percent share by its marketing arm SOCAR Trading, was chosen to implement the gas power plant construction project in Malta.
SOCAR Trading also participates in the project as a supplier of liquefied natural gas (LNG), floating installation for storing the LNG, and equipment for LNG processing.
The plant’s construction costs 175 million euros and its capacity will allow meeting up to 50 percent of Malta’s electricity demand.
“We are prepared to look at any location - we do all the necessary due diligence and look for partners looking to build or modernize a power plant,” Azimov said. “The Malta project was very complex with a lot of technological innovation. We learned a lot in that process.”
Different projects in different countries will need different solutions, he added.
“Some are willing to agree to a fully integrated project, with power station and LNG offtake contract and guaranteed supply,” he noted. “In some areas there are existing power plants, but not enough gas. We can source LNG for them. We are competitive and we are flexible,” Azimov said.
“We are not hostage to our own production - we can always take the cheapest LNG available on the market at any given time,” he added.
Azimov pointed to the start of US LNG exports as a key turning point for the industry - the ability to source flexible, cheap gas quickly.
With an “attractive” market set to stay in place for the foreseeable future, Azimov said there could be more project announcements in 2017.
“It depends how focused our partners are to complete their projects,” he noted.
Azimov added that SOCAR Trading was essentially open to offers when it comes to future LNG-to-power projects.
“We would look at LNG and gas-fired power generation projects in places isolated from any existing grid or pipeline supply - islands, or places with very regionalized consumption,” he said.
“Greener power supply is becoming a priority in developing countries so countries that are short on power are falling under our strategy,” he noted.
Azimov said most LNG suppliers have their own production that is mostly tied up in long-term contracts.
“They have to balance their own LNG production with their own term supply deals and find homes for any excess LNG,” he said. “But we are flexible and as such we will always be competitive.”
In Cote d’Ivoire, SOCAR Trading is part of a consortium that won a tender to operate an LNG-to-power project, Azimov noted.
“Other projects are currently at different stages of development - either with an MoU (Memorandum of Understanding) being prepared, due diligence being carried out or bilateral talks ongoing,” he said.
Azimov added that SOCAR Trading has no ambition to be a pure LNG trader.
“We don’t see the benefit in pure LNG trading - we don’t have our own supply and we don’t have customers we have to supply,” Azimov said.
“SOCAR is neither a producer nor a consumer of LNG, so trading LNG was not our priority.”
He noted that LNG spot trading was on the increase, a trend that is likely to continue.
“More and more term contracts are expiring and customers are not extending them, so the share of spot trading has grown and will continue to grow,” he said. “This is driven by the increased availability of LNG,
especially with the US volumes coming to market.” He added that technology was advancing quickly, allowing more LNG buyers to source import facilities.
“There are more carriers, more market participants, so more liquidity,” Azimov said. “There are new buyers - the likes of Pakistan, Egypt, Kuwait and Jordan - building up their consumption of LNG.”
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