Rovnag Abdullayev: SOCAR strategy to ensure stable revenue
Azerbaijan’s state oil company SOCAR was focused on diversification of its investments even when the oil prices were high, and this strategy will ensure stability of the company’s revenues.
President of SOCAR Rovnag Abdullayev announced about this in his exclusive interview with Trend on September 2.
Thanks to the right investment strategy, the value of SOCAR’s total assets increased from 9 billion Azerbaijani manats to around 40 billion manats between 2007 and 2015, Abdullayev said.
He further added that SOCAR decided to diversify its investments when the crude oil prices were still high, while other oil companies pre- ferred to primarily invest in oil produc- tion and even in the fields the development of which was very costly.
In accordance with SOCAR’s strategy, aside from the production, the company also made investments in the projects for oil and gas processing, transportation and sale, and, thereby, has diversified its investment portfolio.
“In order to reduce the risks and increase the effectiveness, we started getting access to markets in various countries. Once we complete our main projects, everyone will see the results of this strategy, as this will ensure the stability and sustainability of our revenues,” Abdullayev said.
He noted that currently crude oil is sold at a very low price as compared to the previous period, nevertheless, the profitability of the oil and gas processing has increased.
“For example, in the independent analysis of Turkey’s Ak Yatirim, the forecast for earnings before interest, tax, depreciation and amortization (EBITDA) of SOCAR’s Petkim was increased from 498 million Turkish liras to 628 million liras,” Abdullayev said.
According to Abdullayev, currently Petkim is the most important petrochemical company of Turkey. “Ak Yatirim forecasts 10 percent increase for Petkim’s EBITDA in 20162019 and relates this growth to SOCAR’s investments in Petkim,” he added.
He also noted that Goldman Sachs’ purchasing a stake in SOCAR Turkey at $1.3 billion in 2015 shows that the value of SOCAR assets in Turkey has increased.
“We invest our revenues in STAR refinery, Petkim port and other large projects in order to discover Turkish and other strategic markets. After the completion of the mentioned proj- ects, the net profit will increase, as these projects will start to bring rev- enues,” Abdullayev said.
He further stressed that the Southern Gas Corridor (SGC) will bring tens of billions of net profit to Azerbaijan in 2018-2019.
“Shah Deniz 2 is one of our most promising projects. The development of the huge Shah Deniz field, which has around 1.2 trillion cubic meters of natural gas and 2.2 billion barrels of condensate reserves, will make it possible to increase the natural gas export and will give a momentum to gas and oil processing,” Abdullayev said.
Currently, SOCAR is on the verge of a new period in the oil and gas industry with such projects as Shah Deniz, Southern Gas Corridor, SOCAR Polymer, STAR refinery, and other large projects, according to Abdullayev.
“SOCAR is now investing its revenues in important industry projects. Once completed, these projects will bring billions of additional revenues to Azerbaijan,” he said.
The Southern Gas Corridor is one of the priority energy projects for the EU. It envisages the transportation of 10 billion cubic meters of Azerbaijani gas from the Caspian region to the European countries through Georgia and Turkey.
At the initial stage, the gas to be produced as part of the Stage 2 of development of Azerbaijan's Shah Deniz field is considered as the main source for the Southern Gas Corridor project. Other sources can also join this project at a later stage.
Abdullayev, speaking about the company’s driving force and the factors in the effectiveness of its work, he said these are the oilmen working in mines and other fields.
“He mentioned that in some companies, the interference of unprofessional shareholders in the management affairs results in the adoption of ineffective decisions. This is while SOCAR’s shareholder is the Azerbaijani state, he added.
“One of the main factors in the effectiveness of our work is that President Ilham Aliyev previously worked in the company’s management,” Abdullayev said.
“He closely follows the company’s current work and development strategy and guides it. I believe that there are two factors ensuring SOCAR’s achievement and future prospects: the competent and farsighted strategic decisions of the president and diligence of our oilmen,” he added.
SOCAR president also noted that the company’s total capital has almost doubled since 2007.
Abdullayev highlighted the fact that SOCAR is not alone in the large projects - the partner companies play an important role in financing the projects.
“Our recent achievements on financial markets make it possible to attract funds from outside for a longterm period and with suitable conditions. As a result, aside from implementing a number of investment projects, SOCAR is also able to fulfill its financial obligations to the Azerbaijani state,” Abdullayev said.
SOCAR is involved in exploring oil and gas fields, producing, processing, and transporting oil, gas, and gas condensate, marketing petroleum and petrochemical products in domestic and international markets, as well as, supplying natural gas to industry and the public in Azerbaijan.
Three production divisions, one oil refinery and one gas processing plant, a deep water platform fabrication yard, two trusts, one institution, and 23 subdivisions are operating as corporate entities under SOCAR.