Hamza Karimov: SOCAR’s high priority projects and the role of regional interconnections
The National Oil and Gas Company of Azerbaijan (SOCAR), one of the most important investors in major infrastructure projects for energy transport, joined the fuel retail market in Romania in 2011, with ambitious development plans. Focused mainly on the expanding of the gas stations network, Mr. Hamza Karimov, CEO SOCAR Romania, has revealed us the details of the regional strategy and SOCAR’s zero priority: the interconnection projects.
Q: SOCAR is one of the most important investors in regional interconnection projects. What priority projects is the company currently envisaging?
A: SOCAR is an important part of the essential projects for the energy market in the area. Together with our European partners we try to identify the best solutions to ensure regional energy independence.
If I were to point just a part of the projects, I would start with AGRI. On June 24 the Joint Declaration was signed by the participating states. It is a new step that brings us closer to the project’s completion, which will supply natural gas on the route Azerbaijan-Georgia-Romania-Hungary. It is a project of major importance for all the countries involved.
Just as important as AGRI are the TAP and the TANAP. The Trans-Adriatic Pipeline (TAP) project aims at the supply of gas from the Caspian region via Greece and Albania and the Adriatic Sea to southern Italy and further on to Western Europe. The annual capacity of the pipeline will be 10 billion cubic meters.
Another significant project, the Trans-Anatolian gas pipeline (TANAP), SOCAR’s largest investment in Turkey, aims at the supply of Azerbaijani gas to Europe via Turkish territory. The pipeline, which is designed to carry 16 billion cubic meters of gas per year, is to become operational in 2018. An impressive investment is also the Sangachal terminal. The oil from Azeri-Chirag-Gunashli and the natural gas from Shah-Deniz are exported via this terminal through the route Baku-Tbilisi-Ceyhan and through the South Caucasus pipelines. The Sangachal terminal is considered one of the largest and most profitable in the world. It has a processing capacity of over 1.2 billion barrels of crude oil per day.
I would like to remind also the Baku-Tbilisi-Ceyhan pipeline to export Azerbaijani crude oil from the Caspian Sea to the Mediterranean Sea across Georgia and Turkey. Inaugurated in 2006, with a length of over 1,700 km, it has a capacity of 1 billion barrels of crude oil per year. Another ongoing project is the Baku-Tbilisi-Erzurum one. The gas pipeline is operational since 2007, with a capacity of 20 billion cubic meters annually.
The list of SOCAR’s projects includes many investments in the energy field because Azerbaijan is among the countries with the largest oil and gas deposits in the world. It is true that we focus greatly on regional interconnector pipelines. I can assure you that, for each investment, we consider the impact on the regional situation, but also on people.
Q: The European energy equation includes several key factors. Among the major players on the market, what state do you believe stands most chances to become a regional hub and on what considerations?
A: In my opinion, we cannot nominate a particular state, however energy independent it may be. The key lies in the interconnections that state manages to achieve with other countries. By these interconnections it becomes really a strong state and starts to count in the world energy scheme. The best example in this regard is the case of Azerbaijan which, after signing the ‘Contract of the Century’ 20 years ago, through which Azerbaijani gas is exported to other states, it has become a key state in maintaining energy security.
In its turn, Romania is one of the most important countries regarding the energy resources, from the quantitative point of view and especially from the diversification of resources one. From this viewpoint, it is obvious it can be a real energy hub. On the other hand, in the absence of projects like AGRI, which connects countries in this part of Europe, Romania’s energy power will not be exploited to its full potential.
To answer your question, I think the whole region, of which Romania is part, is an energy hub with global impact in this field.
Q: In the current context of reconfiguring the hydrocarbon transportation routes in the region, what is the meaning of the Silk Road revival?
A: We discuss a lot about the Silk Road revival and about its interconnection part to be played at regional level.
Leader Heydar Aliyev, the former President of Azerbaijan, emphasized in 1998 that the organizing of a summit on the new Silk Road in Baku had a historic role in terms of cooperation and ensuring prosperity in each country and throughout the Eurasian space.
There are some undeniable advantages, such as: the development of trade-economic relations between the countries in the region; the development of international truck and passenger transport links; the harmonization of transport policies, etc.
Today, however, any economic strategy is closely related to energy. I believe that energy is a key element that highlights the roadmap for this New Silk Road.
For Azerbaijan, the New Silk Road is a step towards development, because from the very beginning we were a ‘gateway’ between China and Europe. Oil and gas are valuable resources in the current geopolitical context. In Azerbaijan we have them both and we were able to capitalize them for the country’s development. Then we made a step forward and started working on options to contribute to the regional development, so that to expand our example to as many actors on the international scene.
Q: In the light of new developmentsof AGRI project (the recent signing of the joint declaration of support anditsinclusion on the EU list of Projects of CommonInterest), how do you see the future of this project?
A: As I said before, the route created by building AGRI will bring many economic and social benefits to all the countries involved, but also to the region. Moreover, the Southern Corridor was built to meet the growing demand of natural gas for the European market. The President of Azerbaijan, Ilham Aliyev, said that the main objective of the Southern Corridor is to redraw Europe’s energy map. In my turn, I could say that the Shah Deniz II deposit, as well as others in Azerbaijan, is the ‘insurance policy’ for Europe’s energy independence.
Q: How would you characterize the oil and gas market in Romania and in the region and their development in latest years?
A: There have been many changes in recent years, including from the geopolitical point of view. The most relevant is the situation in Ukraine. The struggle for energy resources has worsened worldwide.
It is difficult to say how the sector will evolve, as we must also consider the foreign developments - oil prices, regional conflicts, the financial availability of investors, completing the interconnections, etc.
In Romania, we have seen a concentration of efforts to strengthen the energy independence and, moreover, we have seen a paradigm shift in the orientation of Romanian companies operating in the energy field.
The listing of Romanian companies on the stock market, especially the listing on the London Stock Exchange, is a positive development by allowing the investors’ access in order to exploit market opportunities. I’m not referring only to the local market but, similarly to the model followed by SOCAR - Azerbaijan, Romania may use its own strengths to the benefit of the national economy.
Q: How do you experience the effects of falling prices on the oil market and what changes in the company’s optimization strategy has this development drawn?
A: First of all, many companies have questioned the investment plans until the market gets stabilized. At the macro level, it is obvious that the output will decrease, but also will the demand. The last announcement from the Organization of Petroleum Exporting Countries draws the attention that the petroleum exporting countries will no longer invest in the development of extraction.
In Romania, SOCAR will continue to expandthe network of gas stations, while focusing on a nationwide presence. We want to have SOCAR filling stations in the main Romanian cities. We are glad Romanians appreciate our services and, at the same time, we offer an exchange of experience both economic and cultural between the two peoples, Romanian and Azeri.
Q: What are SOCAR’s most important projects for market expansion in Romania and in the region for the near future?
A: As mentioned above, on the medium term, we envisage increasing our market share in Romania, either directly or by buying other gas stations, either by opening new stations. We’ve had a rapid development and we’ve succeeded that, in just four years, starting from 2011, to become a major player on the fuel market in Romania. Now the company has more than 30 gas stations throughout the country. We would want the infrastructure projects announced by the Government to be implemented, so that the local gas stations may enter into another stage of development.
On the regional and international level, we focus on interconnection projects of which I have spoken. They are our ‘zero’ priority.
In the region, SOCAR has representative offices in Georgia, Turkey, Romania, Austria, Switzerland, Kazakhstan, the UK, Iran, Germany and Ukraine.
Q: How did SOCAR Romania conclude 2014 and what investments do the business programmes include for 2016?
A: Year 2014 ended with a total of 31 operational gas stations.
Until the end of 2016, we plan to open another 12-14 stations throughout Romania, especially in the big cities.
Q: How do you intend to get involved in the further development of energy infrastructure in Romania? Is there a planned budget in this regard?
A: We will continue to pay attention to the development opportunities on the local market and we have the network expansion in mind. We will announce in due time the following locations for SOCAR filling stations. As road infrastructure will develop, the number of SOCAR gas stations will increase.
Due to the Azerbaijan’s energy strategy on the long term, we are ready for any scenario. Today, the oil prices have fallen by more than 50%. Despite this, SOCAR continues to invest in Azerbaijan and in other countries, including in Romania.
Q: In your opinion, what ‘best cards’ should a major player on the regional energy market have?
A: There are several factors that depend on each other. I think that countries enjoying a mix of energy resources are at advantage. It’s also Romania’s case, as it holds important onshore and offshore resources. Romania has natural gas, coal, hydropower, wind power, solar power, etc., as well as specialists in the field. Romania holds all that is needed to grow and to become an influencing factor on regional level. The authorities should increase the volume of investments in production capacities and in interconnections.
Romania has another very important advantage – the reserves in the Black Sea. They are a decisive factor in the context of the current geopolitical situation. Therefore, I believe that Romania would have to play this card at the EU level as well, in particular when discussing the Energy Union project.
For investors it is important to know what the strategy chosen by Romania in exploiting these resources is and how will the country position itself at regional level.