Azerbaijani President: We achieved maximum diversification of gas supply

-Azerbaijan is a very big oil producer. What do you think about price of oil?

-I think that now price is fair. The prices satisfy the needs of produces, consumers and at the same time allow companies also to invest. Because, the price below the current level will make difficult for companies to invest in new development, exploration and production. I think this price is balanced and we are happy about that.

-Prices are going up, why not let it continue to go up. Wouldn’t you be happy if it passes 100 dollars?

-As a result of sharp rise in oil prices, of course, we had extra money in our budget, but at the same time we had a very high inflation and now the consumer prices went up. And so for balanced development of the country and to have opportunity to protect social conditions of the people, I think the price should be around 90-100 dollars, 70 is also OK.

-I would like to ask about natural gas. It is a big part of the future story of Azerbaijan. Gasprom, as you know, offered to buy Azerbaijan's gas. How much today it offered to buy and how much can you actually export through the existing network of pipelines?

-We are exporting our gas to various directions and it is very important for us because we achieved maximum diversification of the gas supply. As you know, diversification is very important not only for consumers, but also for producers. So, we export gas to neighboring countries. Of course, entering the new markets for any country is very important. Our agreement with Gasprom provides that there is no upper limit of our exports. And that we agreed that they will buy as much as we can supply.

-That is, as much as you would like?

-Yes.

- As a whole, how much you can supply? And how much can you supply giving existing network of pipelines?

-The most important, actually, in this case, is the level of production. Today, we keep the level of production so that we can have exports to the markets. If we have new opportunities for exports and new markets, of course, we will invest a lot in order to increase the production. But in order to do it, we need to have contracts, we need to have commercial obligations. We can not invest tens of billions of dollars to have more production and just without any opportunity to sell it.

-That is why Russia is doing right that? They've offered to take as much gas of your hands as you can give them. Whether it opens possibilities for additional investment, that is, doesn`t it seem like that as a kind of card-blanche for you?

-But we have huge reserves. We have minimum proven reserves of gas equal to 2 trillion cubic meters. But according to the real situation, it could be up to 5 trillion. So we have enough to supply ourselves and our partners in various parts of the world for at least 100 years. So, we need to have all these arrangements in place. In our relations with Gasprom, the advantage is that we do not have somebody in between. We do not have transit country. It is just on the border. And we have infrastructure.

-I want to ask you about yours largest gas field, Shahdeniz. Is the existing network of pipelines coming out of Azerbaijan threaten to the limitation of that network, does it threaten to delay the development of that gas field?

-Not only actually the capacity of the existing infrastructure, but unresolved issues with transit and with the price for our gas. Because, the Shahdeniz field is one of the biggest gas fields in the world. It contains 1.2 trillion cubic meters of gas, actually may be half of our total proven reserves. We can expand the infrastructure and we are planning to build maybe a new gas pipeline or to enlarge the existing ones. Therefore, the absence of such an opportunity today doesn`t mean this is a major obstacle. As soon as we resolve transit issues and we get the fair price, Azerbaijan and our partners, foreign oil companies will invest billions and billions of dollars in order to build the new infrastructure.

-These are issues in terms of transit and price that you are talking about. Do you consider these factors the conditions necessary to agree to Nabucco or for Nabucco to really make sense? Is that right?

-Actually, this is one of the elements of the “Southern Corridor”. We call it the Southern Corridor, the project which allows taking our gas to the western markets. It is Nabucco, TGI (Turkey-Greece-Italy) and TAP (Trans Adriatic Pipeline).

- That is, through Georgia and Turkey to Western Europe?

-Yes, exactly. That is why, unless transit issues are unresolved and we do not have guarantees to purchase our gas, it is premature to talk about expansion of the infrastructure.

-Let us talk about the Southern corridor. It would go from Azerbaijan through Georgia, Turkey and to Western markets. Conversations were going on for a while, do you think it is really going to happen?

-It is difficult to say. Because as you mentioned, conversations are going on for quite a big period of time. And there are several important steps made. First of all, the political declaration was signed in May 2009. And Azerbaijan also joined the political declaration. And also there was an agreement between the members of Nabucco about how to move forward this project. And several elements must be in place in order to move it forward. First of all, a strong political will to do it. Second, financial recourses. Resolution of the transit issues, which as I mentioned before, are the major obstacles. At the same time, the price, the market price for our gas must be agreed.

-As you noted, the major obstacles are the prices of oil and transit. I would say the biggest transit issue for Azerbaijan is Turkey. You have been working on this agreement, on sales agreement to Turkey for a while as well. What holds it back now?

-We are exporting our gas to Turkey. We are exporting gas from Shahdeniz field, on stage one. And we don`t have any problem in that respect. The only problem is the price, which exists today, is not a market price. And it does not satisfy our needs and also our Turkish colleagues say that the price is not fair. So, there should be renegotiation of the price.

-As you pointed out during this conversation, some of these issues are business and some of them are politics. For you, as the president of Azerbaijan, obviously you well aware of this concept of energy wars, alternative energy routes. What is the political belief of Azerbaijan? Should this be business, if Russia comes along and says it will take gas? Theoretically, if they take your gas so far, why you need pipeline? And now how you see it? Are you really, truly politically dedicated to give western consumers an alternative route for gas or, maybe, it does not meet national interests of Azerbaijan?

-In our case it is hundred percent commercial. I can tell you our previous experience, when we diversify our oil, it was also commercial. That is, we needed a major pipeline to bring our oil to Mediterranean Sea. That was Baku-Tbilisi-Ceyhan pipeline. At the same time, we have two other pipelines. One of them brings our gas to Russia`s Black Sea coast, and the other to Georgian Black Sea coast. And the same in gas, it must be purely commercial. One of the problems of Nabucco, it is too much politicized. So, we must concentrate on commercial terms, they must be attractive, they must be reasonable, they must be fair and the balance of interest between producers, consumers and transiters must be observed.

-In any case, today for Azerbaijan, price for its gas is an important issue, isn`t it?

-This is one of the important issues. Another important issue is diversification. We can not afford to depend on only one route.

-Final question. When we get to see a peace between Armenia and Azerbaijan?

-As soon as Armenia takes its occupational forces from internationally recognized territory of Azerbaijan, the peace will come.

-Thank you very much.

/AzerTac/