Century’s Contract’s 14th Anniversary & Transparency

Initiative in Oil and Gas Industry

Gubad BayramovEITI Azerbaijan NGO Coalition

September 19, 2008

Talking about…

1. Role of oil in the whole economy;

2. Public opinion on this;

3. CSO concerns on:

I. Risks in depositing oil revenues;

II.II. Outcomes of absence of disaggregated Outcomes of absence of disaggregated reportingreporting;;

III.III. Conflicting moments in profit share schemeConflicting moments in profit share scheme

Volume Oil Production (million of tones)

2000

14

2002

15,3

2003

15,4

2004

15,5

2005

22,2

2006

32,3

2007

41,7

2008 2009 2010 2011

Total production,

Mln. ton

52.131 61.011 63.395 62.804

AIOC 43.381 52.311 54.745 54.204

SOCAR 8.750 8.700 8.650 8.600

oil production in 2008/11

Source: MOED

2010-2020- what’s next in this tendency?

• Staring from 2010 oil production in Azerbaijan will start decreasing.

• If the volume of production in 2009 will be 420 million barrels, in 2010 this figure will be 410 and in 2015 even 250 million barrels. 2020 figures will be 110 million barrels.

Volume of incomes, millions of barrels  

2005 2006 2007

Total incomes 2.736 3.676 5. 914

Total expenditures 2.617 3. 673 5.748

Years 2001 2002 2003 2004 2005 2006 2007 2008

State Oil Fund incomes (mln. AZN)

222 294,8 363,98 322,86 660 985,9 1886,2 10 144,7

State Oil Fund expenditures (mln. AZN)

0,812 86,8 236,02 147,24 233 981,3 1061,2 4, 380 8

Azerbaijan Oil Production

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

Millio

n T

on

s

Old Oil Early Oil ACG Phase 1 ACG Phase 2 ACG Phase 3 Shah Deniz Condensate New Oil

Oil factor in industry, figures of last 3 years

58,860,3

50,5

80,6

0102030405060708090

100

ÜDM Dövlətbüdcəsi

İnvestisiyalar İxrac

2005

2006

2007

Survey results among 500 people (financial support of Norway

embassy)

Accessibility information on oil revenues

12%

67%

5%

16%

obtain sufficient information

obtain some information

cannot obtain any information

are not interested in the process

Sources for access to information

8.28%

4.16%

4.16%

4.16%

12.40%

66.84%

Other sources

inofficial structures

internet

radio

newpapers

TV

Do people feel oil revenue impacts in their lives?

• Only 33.28% of respondents mentioned more or less impacts from oil revenues in their lives. 16.64% of them mentioned about positive impacts, the other 16.64% mentioned on little impact. 55.08% stated that the impact is felt through huge construction works only. And 12.48% told they did not have any feeling of an oil country, oil revenues and their spending.

To what extend efficient oil expenditures are?

• 8.3% of respondents thought they were efficient. 41.6% were partially satisfied, while 24.96% expressed great concern and dissatisfaction on oil revenue spending. 21.8% told they had no information on this data and 4.16% were totally not interested in the ongoing process.

Whom should oil revenue management be relied to?

• 87.36% wanted only official structures deal with this. 45.76% of them relied on president only. 29.12% of respondents mentioned State Oil Fund, 12.48% Parliament and 12.48% government.

• 8.32% mentioned NGOs and 4.16% political parties.

Coalition’s activities plan for 2008

• Establishing transparency and accountability assessment of oil companies;

• Advocating on disaggregated reporting by companies;

• Law on State Oil Fund;

• Recommendations on efficiency of oil revenue spending;

• Investigation on non-oil/gas EITI in Azerbaijan;

• EITI assessment in Azerbaijan and report.

Concerning issuesConcerning issues

I. Impacts of international financial crisis

• Bear Stearns

• Societe Generale

• Fannie Mae

• Freddie Mac

• Lehman Brothers

Regions with oil money deposits

Regions Million USD Share %

Europe 1,473.49 44,57

America 1,631 49,37

Asia 138,09 4,18

Others 62,25 1,88

State Oil Fund partners

• Barclays Bank Plc (UK) • BNP Paribas (France) • Deutsche Bank (Germany) • Dresdner Bank (Germany) • JP Morgan Bank (US) • HSBC (UK) • Royal Bank of Skotland (UK) • UBS AG (UK) • Hypovereinsbank AG (Germany)

Depositing Oil Money

• 75.5% of State Oil Fund actives are deposited into securities. According to the information of April 1, the amount of this deposits is around 2.5 billion USD.

• According to April 1 information, 244.3 million USD was given to management. 45.1% of this is held by WB, 34.45% to Deutche Asses Management, 20.45% to Clariden Leu.

• Annual income rate of State Oil Fund is less than 4%.

II. Company Attitude towards Disaggregated Reporting

• Companies that agree:

• 1) Middle east petroleum

• 2) Binagadi oil company

• 3) BP

• 4) Shell

• 5) Statoil-Hydro

II. Company Attitude towards Disaggregated Reporting

Companies agreed under condition (if all companies agree) :

• 1) Hess (ACG) Limited

• 2) SOCAR

Hasn’t replied yet:

• 1) Lukoil

II. Company Attitude towards Disaggregated Reporting

Disagreeing companies:• 1) Karasu operating company• 2) Petro-HongKong-Pirsaat Oil Limited• 3) Azgerneft• 4) Commonwealth• 5) Itochu oil exploration (Azerbaijan) Inc.• 6) ExxonMobil• 7) Devon• 8) Chevron• 9) Total• 10) Rafi Oil FZE• 11) Shirvan Oil• 12) Anshad petrol• 13) Apşeron  Operating 

III. Profit share scheme

Share of Azerbaijan Share of subcontracors

30 70

55 45

80 20

According to information above, share of Azerbaijan Government in 2003-07 was 30%, in first half of 2008 55% and in the second 80%№ dnf\5\1 -929 August 13, 2008

Zero balance dateOperational expenses Capital expenses Total expenses

1995 140

1996 416

1997 619

1998 131 467 598

1999 107 212 319

2000 91 158 249

2001 81 248 329

2002 88 1172 1260

2003 90 2104 2194

2004 90 2491 2781

2005 154 2711 2865

2006 234 2477 2711

2007 445 2822 3267

2008 (forecast) 611 1926 2537

Final 2122 16788 20285

CSO calculations

 

Incomes from oil revenue sell

Incomes from oil revenue sell (in natural mean),

mln barrels

Oil export of AIOC (mln bar)

Capex+opexmln $

Share of Azerbaijan from oil sell

(%-lə)

20071675 mln. AZN

$1970 mln30,349 217,2 3267 13,9

2006896,6 mln. AZN

$1005,4 mln19,03 155,1 2711 12,3

2005542,6 mln. AZN

$579,9 mln14,3 97,6 2865 14,6

2004258,9 mln. AZN

$263,8 mln6,7 50,6 2781 13,2

2003173,8 mln. AZN

$176,9 mln6,6 47,3 2194 13,9

Thanks a lot!

44 Jafar Jabbarly, Caspian Plaza 3, Baku, Azerbaijan AZ1065

Phones: (+99412) 437 13 20Fax: (+99412) 437 32 40web-site: www.eiti-az.orge-mail: office@eiti-az.org