Bulletin Political News
Bulletin Economical News
Bulletin Energy News
Bulletin Finance News
Markets review
Political Monitoring
Economic Review
* * *
Want to Say
Photo sessions
Actual report
Significant Azeris
«Georgian case»
* * *
Enter Main - TURAN.AZ AZ ... RU

Energy news
Bulletine Energy 

2017 October 27 ( Friday )  10:20:17
Print version


What Does Iran"s Refusal to Accept Proposals of Russian Companies Mean?

Baku/27.10.17/ Turan: National Iranian Oil Company (NIOC) announced that it considers the projects of Russian oil companies to develop Iranian fields inefficient.

In response, the head of the Ministry of Energy of Russia Alexander Novak said he considers this the beginning of a traditional market bargaining.

"There is a process of trade for the price between the companies and the Ministry of Energy of Iran. Each side will say what it wants to receive. Let"s not interfere in commercial negotiations and the development of proposals for the entry of companies into specific projects," Novak said.

On discontent with the Russian proposals on the Iranian fields, the head of the NIOC Exploration Directorate, Sayed Saleh Hendi, stated in an interview with RIA Novosti. According to him, NIOC asked these projects to be finalized. And the head of the Iranian Oil Ministry Bidjan Namdar Zanganeh informed his Russian counterpart Alexander Novak about this.

Recall that over the past few months, NIOC has signed memorandums of understanding with Lukoil, Rosneft, Zarubezhneft, Tatneft, Gazprom and Gazprom Neft. And until March 2018, NIOC plans to sign 10 agreements based on a new model of oil contracts (IPC).

The most priority for Iran is the development of such fields as South Pars, Azar, Sohrab, Ab Teymour, Mansouri and Azadegan, Zanganeh told reporters. Zanganeh also explained that all the contract documents have already been finalized.

"All the fields have their own technical difficulties, so we need specific documentation and we cannot apply documents for the development of one field to another," he said. According to him, "the technical aspects should be sufficiently transparent to have the opportunity to discuss possible financial issues and investment procedures."

The interest of Russian companies is caused by 11 Iranian hydrocarbon fields, for the development of which Tehran requires foreign investment. -0-

Gazprom Eyes Tax Cuts for Foreign Gas Producers

Baku/27.10.17/Turan: Russia is considering cutting the mineral extraction tax (MET) for joint projects between state monopoly Gazprom and partners German Wintershall (a subsidiary of BASF) and Austrian OMV, Russian business daily Kommersant reported October 26.

Both BASF and OMV are key financiers of Gazprom's major Nord Stream 2 55bn m³/yr export pipeline project.

According to the report which cited anonymous sources, BASF CEO Kurt Bock raised the tax issue during a meeting with the Russian government-foreign investors' discussion group, the Foreign Investment Advisory Council (FIAC), on October 16.

The report says that prime minister Dmitry Medvedev instructed the finance, energy and economic development ministries to work through this issue this week.

Demanding the tax reduction on mineral extraction came as the government is preparing to adopt further taxes on Gazprom to fill the budget deficit. During a meeting in June, the government examined the possibility of taking an additional roubles 30bn ($520mn) revenue in 2017 by increasing MET on Gazprom. This was expected to be approved later this year.

Wintershall has two ongoing projects in Russia: the development of the first block of the Achimov deposits of the Urengoi field (Gazprom and Wintershall have half each in terms of financing) and the development of the Yuzhno-Russkoye field (which is 35% owned by Wintershall, 25% by Austrian OMV and the rest belongs to Gazprom).

Wintershall also has a 25% stake in the development of the fourth and fifth blocks of the Achimov deposits of the Urengoy field, expected to start in 2020-2021. OMV should receive an equal chunk after it finishes its asset swap deal with Gazprom, expected next year.

According to Gazprom"s annual report, it is Russia"s biggest taxpayer, last year contributing roubles 900.4bn, up by almost a tenth year-on-year. Key factors behind the growth of taxes in the reporting year include:

  • a 36.7% upward revision of the coal equivalent unit used in the formulae for calculating MET on natural gas and gas condensate;
  • an 11.9% increase in the MET base rate on crude oil (up from roubles 766 to roubles 857/metric ton);
  • a 30% increase in the property tax rate applicable to trunk pipelines, power transmission lines, and facilities that comprise an integral technological part thereof (up from 1.0% to 1.3%);
  • and the introduction of a new type of excisable goods, "middle distillates" (to refer to what was previously known as "heating oil") and a 20% to 26% increase, from 1 April 2016, of excise tax rates for motor gasoline, diesel fuel, straight-run gasoline, and middle distillates.

Gazprom and MED declined to comment the matter, while OMV and the Ministry of Energy did not respond to the publication's request. -0

Total Shows Interest in Umid-Babek Gas Project

Baku/27.10.17/ Turan: The Ministry of Energy of Azerbaijan hopes for a timely start of gas production from the Absheron field, the ministry said.

The development of the Absheron deposit and the participation of Total in the project were discussed by Energy Minister Parviz Shahbazov with the Vice-President of the group of companies Total for Southern Europe and the Caspian region, Bernard Clement.

The Minister stressed that the Absheron field, which possesses large gas reserves, will play a big role in ensuring domestic demand for "blue fuel" inside the republic and achieving strategic targets for its export.

Clement, in turn, stressed that within the second phase of development of the Absheron field, which will cover the period from 2020 to 2023, the annual volume of gas production from this area will amount to 5 bcm.

The parties also discussed the possible participation of Total in the development of the offshore block, which includes the Umid field and the promising structure Umid-Babek.

Previously, SOCAR President Rovnag Abdullayev said the first gas from the Absheron field would be produced in 2019. Within the first phase, it is planned to drill one production well at a depth of 450 meters. The production from the field will amount to 1.5 bcm of gas and 700 thousand tons of condensate per year. Reserves of the Absheron field are estimated at 350 bcm of gas and 45 million tons of condensate.

On January 12, 2017 SOCAR for the first time signed an agreement on a risk service contract for the exploration and development of the sea block Umid-Babek. SOCAR"s partner in the project is SOCAR Umid Oil and Gas Limited. The project was approved by the country"s parliament on May 2, 2017. The matter is that this block is considered very difficult from the geological point of view, therefore SOCAR is looking for a partner who would master modern technology and have experience in working out offshore gas fields.

The Umid field, with reserves of about 200 bcm of natural gas, was discovered by SOCAR"s own forces in November 2010, and its development began in September 2012. From September 2012 until July 1, 2017, the field produced more than 1.4 bcm of gas and 220,000 tons of condensate. The Umid field is located 75 kilometres from Baku, 40 kilometres off the coast.

As for the Babek structure, it is located 25-30 km to the east of Umid. Primary geological studies have shown that it is a continuation of the Umid field: only productive layers are located in more complex geological conditions. The reserves of Babek can double the reserves of Umid. -12B

Government Assesses Risks Associated with Oil Prices

Baku/27.10.17/ Turan: The Azerbaijani government notes the existence of a number of internal and external fiscal risks that may have a direct and indirect impact on the budget and macroeconomic stability in the country in 2018.

According to the budget materials for the next year, all possible risks are divided into two groups.

The first group includes the risks associated with the external environment. The main risk in this direction is the decline in oil prices in world markets, which may lead to a reduction in the revenues of the state budget of Azerbaijan and the State Oil Fund (SOFAZ).

According to the estimates of the Ministry of Finance, the decline in world oil prices by $ 5 per barrel will lead to a reduction in the revenues of the state budget of Azerbaijan by 62.5 million manat, and the revenues of SOFAZ by 794 million manat (by $ 467 million at the current rate).

The same group includes risks associated with a possible sharp increase in interest rates on international financial markets. "Under such circumstances, the growth of costs associated with borrowing in foreign markets will be inevitable, which will entail the growth of public and private sector spending on borrowing, and the reduction of income tax revenues to the state budget of Azerbaijan," the documents of the Ministry of Finance state.

In addition, a slowdown in economic activity in partner countries may lead to a slowdown in the growth of the Azerbaijani economy and a reduction in non-oil revenues of the state budget.

The second group includes risks related to the internal environment. In this direction, the main risks are related to possible challenges in the financial and banking system, and the growth of expenses for the restructuring of banks. "In general, the risks possible in the financial and banking system can lead to an increase in the state budget expenditures and have a direct impact on the macroeconomic balance," the budget materials note. -0

Gas Production in Azerbaijan to Grow by 60% in 2021

Baku/27.10.17/ Turan: Gas production in Azerbaijan in 2021 is projected at 46,711.4 mcm, which is 60.7% more than the forecast for 2017.

According to government forecasts, in 2019 gas production in the republic will amount to 37,027.7 mcm, and in 2020 - 41,532.3 mcm.

The increase in gas production is expected due to the receipt in 2018 of the first gas within the Stage-2 development of the Shah Deniz field and due to the start of gas production from the Absheron field in 2019.

The Azerbaijani government expects gas production in 2017 at the level of 29,060 mcm, and in 2018 - 30,498.3 mcm.

In 2016, gas production in Azerbaijan amounted to 29,331.4 mcm. -12B-

Transfers from Oil Fund to State Budget to Be Reduced

Baku/27.10.17/ Turan: The Government of Azerbaijan plans in 2019-2021 to reduce transfers from the State Oil Fund (SOFAZ) to the state budget by 28.8% - up to 6 billion 561.6 million manat.

According to budgetary materials, next year transfers from SOFAZ to the state budget will amount to 9 billion 216 million manat or 45.8% of all budget revenues.

In 2019 transfers from SOFAZ are forecasted at the level of 7 billion 520.7 million manat or 40% of budget revenues.

In 2020, transfers from the State Oil Fund are projected at 7 billion 520.8 million manat or 39.3% of budget revenues.

In 2021 transfers from SOFAZ are planned to be 6 billion 561.6 million manat or 35.5%. -12B