Socar by East Coast Promotions

COMPANY PROFILE

2014

SOCAR

+994 52 921 0282 | new.socar.az

Fuelling up for European demand Editorial: Roland Douglas

Now recognised as a hugely important region for oil exploration and development, Azerbaijan and The State Oil Company of the Azerbaijan Republic is at the centre of a number of important developments that will impact not just Azerbaijani people, but the wider European community. Today, Azerbaijan is recognised as one of the most important regions in the world for oil exploration and development. Two thirds of Azerbaijan is rich in oil and natural gas and in September 1994, a 30-year contract was signed between the State Oil Company of Azerbaijan Republic (SOCAR) and 13 oil companies; among them Amoco, BP, ExxonMobil, Lukoil and Statoil to tap deepwater oilfields untouched by Soviet exploitation. State-owned company, SOCAR, was founded in 1992 after the merger of Azerbaijan’s two state oil companies, Azerneft and Azneftkimiya, and operates

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the country’s two oil refineries and the running of oil and gas pipelines throughout the country. It also works in neighbouring countries, operating fuel filling stations under the SOCAR brand in Georgia, Ukraine, Romania and Switzerland. Because of Azerbaijan’s position in the international energy industry and the on-going focus that the Caspian region receives from the world’s big name oil and gas players, SOCAR’s role has changed over the years but its reputation has always remained one of strength and excellence.

And recently, there have been many developments that are keeping this major organisation in the headlines, all as it looks to continue with its mission of “providing energy security of the Republic of Azerbaijan, strategic interest on development of oil and gas, and petrochemical industry, support the increase of scientific and technical, economic and intellectual potential of Azerbaijan by applying advanced and eco-friendly technologies, hold crucial position in regional and international energy projects, and maximize the profit from the sale of hydrocarbon reserves

SOCAR and derived products in the domestic and foreign markets.”

FUELLING INTERNATIONAL GROWTH In September, the company announced that it was planning to open 10 new filling stations under its own brand in Romania next year. Romania is an important region for SOCAR and provides huge opportunities for export and expansion. With the current challenges that surround oil and gas exports from Russia, Romania has a need for diversification in its fuel supplies. It does have domestic reserves of oil and gas, but chiefly relies on Russia for its imports. SOCAR has been expanding in Romania for some time and opened its first filling station (29th in Romania overall) in Valcea County following a EUR1 million investment in August. “Aside from the increase in the number of filling stations, we aim to enhance our national coverage. Our future strategy will continue in line with that of 2014. Thus, the company has increased its share capital by over EUR58 million in June,” said Hamza Karimov, CEO of SOCAR Romania. SOCAR entered the Romanian market after buying local filling stations from

Romtranspetrol and re-branding them in 2011. The news of the 10 new filling stations came after the launch of the company’s first filling station in Arad County. This is the largest SOCAR filling station in Romania in terms of total area covered, with over 12,500 sqm. The location includes a substantial green area of 7,800 sqm, the actual building having 240 sqm. Customers are provided with four feeding pumps, one of which is specially designed for trucks. The storage capacity amounts to 180 cubic meters of fuel. The entire investment in the station is reportedly EUR1.4 million. Additionally the company created 15 jobs on site adding to the more-than-400 that have already been created in the other stations around Romania. “Through this new filling station we are also entering the market in Arad and I am convinced that our products and services, which meet the highest standards, will be extremely well received by customers. We have reached 30 filling stations, in 13 counties, in less than three years since launching this business. In 2014, we registered the highest growth, in terms of filling stations number, as well as presence in towns,” said Karimov.

Currently, SOCAR has filling stations in the following counties in Romania: Botosani, Suceava, Neamt, Iasi, Bihor, Buzau, Bacau, Vrancea, Timis, Ilfov, Cluj, Valcea and Arad. As well as Romania, SOCAR was recently working with Bulgaria on cooperation projects with gas. In September SOCAR President Rovnag Abdullayev received the representatives of Bulgartransgaz and Bulgargaz in Baku. The group celebrated the twentieth anniversary of the signing ‘The Contract of the Century’ and ground-breaking ceremony of the Southern Gas Corridor. Following the celebrations and the reported ‘friendly discussions’ about cooperation between Azerbaijan and Bulgaria, the group signed two gas cooperation agreements. A Memorandum of Understanding was signed between SOCAR and Bulgartransgaz Company and also a Protocol of Intentions was signed between SOCAR and Bulgaria’s Bulgargaz Company. CEO of Bulgartransgaz, Kirill Temelkov and head of the Board of Directors of Bulgargaz, Botyo Velinov signed the agreements on behalf of the Bulgarian contingent and Abdullayev represented SOCAR.

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EXPLORATION IN THE CASPIAN Azerbaijan’s total gas reserves are estimated between three and five trillion cubic metres and energy companies from Western Europe continue to encourage Azerbaijan and SOCAR to further exploit these reserves. To further bolster the company’s already strong reputation when it comes to exploration and development, the company announced in September, through first vice-president Khoshbakht Yusifzade, that it had issued a tender for the joint exploration of two major gas deposits in the Caspian Sea with total preliminary reserves of about 600 billion cubic metres (bcm). The tender is for the Umid and Babek gas deposits Back in 2010, SOCAR announced that it had found at least 200 bcm of gas at the Umid field in the Caspian Sea, describing it as the largest discovery since the giant Shah Deniz deposit that was operated by a consortium of companies led by BP and

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was estimated to contain 1.2 trillion cubic metres of gas. Babek has estimated reserves of 400 bcm of gas and 80 million tonnes of condensate and SOCAR has produced 390 million cubic metres of gas and 65,000 tonnes of condensate at Umid since 2010.

FURTHER EUROPEAN DEVELOPMENTS With the aforementioned demand for Azer-products from Europe, SOCAR has looked to major European partners to enhance development of its upstream and downstream activities. One such development is currently being realised in Turkey, in the Aegean region. The STAR refinery project involves the realisation of a new refinery to produce jet fuel and diesel to substitute the imports of these products into Turkey. SOCAR and Turcas Aegean Refinery, as one of the main projects in the refining/oil/chemistry/energy/logistics

industry in Turkey, will be the largest private investment in this field in the history of the country. The refinery to be built in the Petkim Aliaga Complex Area will have the capacity of 10 million tons of crude oil per year with an estimated project cost of $5.3 billion. Currently under construction, the facility is due to be operational in by 2018. The establishment of this enterprise started from the date of acquisition of the controlling shares of Petkim by SOCAR-Turcas in 2008. In December 2009 the Environmental Impact Assessment was approved and in 2010 the licensing process was finalised by the Turkish Energy Market Regulatory Authority. SOCAR controls 41.5 percent of the stakes in the project while Turcas has 18.5 percent and the Azerbaijan Economy and Development Ministry owns the remaining 40 percent. In March 2014, Turcas announced that it was in talks to withdraw from the

SOCAR STAR project by transferring all of its 18% shares to the majority shareholder, SOCAR and in the same month, SOCAR Turkey announced it had agreed a fresh financing package with Denizbank of $500 million to replace the World Bank’s International Finance Corporation and the European Bank of Reconstruction and Development who had withdrawn from a consortium financing the project. SOCAR says: “The establishment of the plant will provide supply security for raw materials of Petkim and will also create an integrated chain between refining and oil chemistry. The production at Aegean Refinery will meet the standards in relation to quality of oil products of the European Union and also the plant will possess the clean technologies for production of environmentally-friendly products.” The other major development that has received much attention from SOCAR

is the development of a new oil, gas processing and petrochemical complex (OGPC) close to the city of Baku. In April 2012, SOCAR presented this $17 billion capital expenditure downstream project in Baku and in March 2013, it was announced that Houston-based engineering company, KBR, had been selected to provide project management consultancy for the front end engineering and design (FEED) of the gas processing plant (GPP) within the OGPC. To be located on 1,500 hectares, 60 kilometres from Baku in the Garadagh district, the OGPC project will include a refinery, a gas processing plant and a petrochemical complex. With this project, SOCAR is intending to supply the local market with refined products to cover the increase in the domestic consumption of transportation fuels, while the natural gas and the petrochemical products will be exported.

These two major projects follow other huge developments for SOCAR which include the announcement in May 2012 that BP and SOCAR had decided to commence the FEED for the $25 billion capital expenditure Shah Deniz phase 2 project and the announcement in March 2013 that SOCAR and ConocoPhillips started a hearing program in 14 Azeri regions to get the permit for an onshore 2D seismic exploration campaign. With all of the development going on at SOCAR and with all of the potential that the land of Azerbaijan offers, it is certain that this organisation will continue to be a key player in not just European but global energy industries now and long into the future. As key projects are realised and retail expansion in other European nations continue, the name SOCAR is sure to become more and more popular among governments and the public all over the EU and further afield.

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