Azernews.Az

By Gulgiz Dadashova

Azerbaijan's state energy company SOCAR, which is keen on expanding its presence in the oil and gas market abroad, invested $2.9 billion overseas as of August 2013.

"These funds were particularly invested in projects being realized in Turkey, Georgia, Ukraine, Switzerland and other countries where the company owns assets," SOCAR Vice-President Suleyman Gasimov said.

Earlier it was reported that SOCAR's intensive capex program will be 5.3 bn manats (including the company's obligations under the production sharing agreements; PSAs) over 2012-2015.

The company owns gas stations in Azerbaijan, Switzerland, Georgia and Ukraine. It has representative offices in Georgia, Turkey, Romania, Austria, Switzerland, Kazakhstan, Britain, Iran, Germany and Ukraine, and trading companies in Switzerland, Singapore, Vietnam, Nigeria and other countries.

Gasimov, who attended a meeting with members of the Caspian European Integration Business Club (CEIBC) on September 17, said that SOCAR's domestic investment exceeds 1 billion manats every year.

"These funds are allocated for projects and work carried out inside the country," Gasimov said.

Gasimov said further that the initial volume of investment proposed by international financial institutions to be spent on SOCAR's ongoing projects is about $7-$8 billion.

SOCAR has approved its financial strategy and has extensive experience of cooperation with the financial institutions, Gasimov said, adding that the loans attracted by the company earlier were restructured and currently these funds are borrowed on more favorable terms.

"In particular, today lenders are willing to make hefty investments in projects implemented by SOCAR, which indicates the company's high rating," Gasimov said.

Gasimov went on to say that the implementation of projects under the Shah Deniz-2 project, which envisions full field development of the Shah Deniz gas condensate field in the Caspian Sea, expansion of the South Caucasus Pipeline and the Trans Anatolian natural gas pipeline project (TANAP) and TAP, must be assessed as a complex and without their negative impact on the ratings of SOCAR.

"It is important to eliminate the negative impact of the host of these projects on SOCAR ratings so that their influence would be only positive," he said.

SOCAR is thereby working with the international rating agencies Fitch, Moody's and Standard & Poors.

"Of course, we want to implement these projects with the leading participation of the state," Gasimov said.

Earlier, Standard & Poor's granted SOCAR a positive rating. The agency said the positive rating may be improved. Forecasts may be reconsidered according to the stability rating. Standard & Poor's assigned a BB rating to SOCAR for its key role in oil extraction, tax-paying and employment in Azerbaijan.

Additional opportunities to improve the rating come from better creditability of SOCAR, such as financing major investments using state support rather than issuing bonds.

Moody's and Fitch have already granted ratings to SOCAR.

Speaking about the financing of TANAP, which envisages transporting gas from Azerbaijan's giant Shah Deniz field to Europe through Turkey, Gasimov said that so far the company has invested about $50 million.

Azerbaijan's share in the project will be financed either by increasing the authorized capital of SOCAR or through participation of relevant government agencies in the project.

Referring to financing the construction of the new Star refinery worth $5 billion in Turkey, Gasimov said that SOCAR expects proposals from foreign banks and government agencies to exceed the required amount of bank financing two or three-fold.

In particular, he said, all financial institutions will have to submit their proposals for financing the project by the end of this week.

"We believe that the bids will be about two to three times higher than the amount of the required bank financing in the amount of 65 percent," he said. According to him, this in turn will create the conditions for the selection of the most effective, cost-saving and long-term proposals.

Some 30 percent of the construction of the refinery is expected to be financed by the shareholders' assets, which will amount to about $1.8 billion, and the rest will be leveraged through bank loans.

Gasimov said that the preparations for the refinery construction are almost complete. The preparation of the territory where the processing plant will be located is at the final stage.

So far, SOCAR together with Turkas has invested $250 million in the project.

STAR Refinery is scheduled for commissioning in 2015 and it will contribute significantly to the economy of the region and Turkey by creating employment and boosting competitiveness.

SOCAR is involved in exploring oil and gas fields, producing, processing, and transporting oil, gas, and gas condensate, marketing petroleum and petrochemical products in the domestic and international markets, and supplying natural gas to industry and the public in Azerbaijan.