INVESTMENT TRAIN

The implementation of oil contracts and major energy projects has not only affected the development of the country, but has also created conditions for expanding Azerbaijani investments on the international market. In this process, the pioneers are the State Oil Company (SOCAR) and the State Oil Fund (SOFAR).

Besides a large contribution to the social sphere of Azerbaijan, the State Oil Fund has been actively funding Baku-sponsored regional economic projects for several years and allocated funds for SOCAR projects. Over the past year, SOFAR has also started actively investing in liquid real estate abroad. And the time was chosen perfectly - with the continuing economic crisis in Europe, the price of real estate has fallen.

As a result, SOFAR acquired the Gallery Actor retail and office centre at Pushkin Square in Moscow for $ 133 million, property in London for 177.35 million pounds sterling and in Paris for 135 million euros. The Fund plans to invest in commercial real estate in South-East Asia, is exploring opportunities in Singapore, China, Japan, South Korea, Hong Kong, and Australia. SOFAR is ready to allocate up to $ 1 billion for these purposes.

The latest acquisition of the Fund is a 2.95-per-cent stake in one of the largest Russian banks - VTB. SOFAR acquired a stake as part of the bank's stock floatation, spending $ 500 million on this package.

For its part, SOCAR also evolved from a company focused on dealing with oil and gas production problems inside the country into a leading player on the global market.

If five years ago SOCAR was just trying to expand its market of oil and oil products, the recent period is characterized by active investments not only in neighbouring countries but also in Europe. Along with Turkey, Georgia and Ukraine, the State Oil Company of Azerbaijan is also an investor in the economies of Romania and Switzerland.

SOCAR's largest investment in-volves the purchase of the Petkim petrochemical complex in Turkey. Having invested $ 2 billion in its acquisition, the company has built its investment strategy concerning the fraternal country around it. Then, the company invested another $ 1.8 billion in Turkey - the funds were used to expand Petkim production, initial work on the construction of a new oil refinery STAR, as well as on a wholesale system for petroleum products and natural gas.

In the next five years, investment in Turkey (except for the construction of the Trans-Anatolian gas pipeline TANAP) will be about $ 8 billion, of which $ 5.5 billion will be spent on the construction of the STAR oil refinery, $ 1.5 billion - on a power plant, $ 350 million on a container port and $ 585 million - on the expansion of the Petkim production complex.

In other countries, SOCAR is concentrated mainly on the sale of petroleum products through its chain of fuel stations. Having invested about $ 1 billion in Georgia at the beginning, the company opened more than 100 fuel stations in the neighbouring country, upgraded the port of Kulevi and part of the country's gas pipeline network, which is also being managed by SOCAR.

Investments in the retail network in Ukraine amounted to $ 180 million - these funds were used to open 34 petrol stations and establish a wholesale system for petroleum products. In the next two years, it is planned to invest $ 150 million to expand the chain of fuel stations to 100-120 units.

But the expansion of SOCAR's investments is not limited to CIS countries. Its largest acquisition in Western Europe was the purchase of Ecco Schweiz, a division of the US oil giant ExxonMobil in Switzerland. Having paid $ 330 million for the assets of the company, SOCAR received a chain of 160 fuel stations, units for wholesale trade in petroleum products, the division of the company engaged in fuel marketing for industrial and wholesale customers, a gas-filling factory in Wangen bei Olten, aviation fuel stations at the airports of Geneva and Zurich, etc. So far, the company has invested another $ 110 million in Switzerland.

For the time being, SOCAR's most modest investments are in Romania - $ 25 million for a chain of 14 stations. In the current year, it is planned to invest another $ 30 million and increase the number of fuel stations to 38.

There are also prospects for investments in Greece - SOCAR is one of three candidates for the privatization of the assets of the DEPA gas company. The tender for privatization is still continuing, active negotiations are underway, and their results may be known already this summer.

But all these investments were made mainly in the petroleum refining sector and wholesale and retail sales, while the main activities of the oil company have always been associated with oil and gas production. If a company is not producing resources, it will not receive the prestigious title of an "oil company". The entire extractive activity of SOCAR has so far been concentrated only in Azerbaijan, but it is planned to change the coverage area in this case too.

According to Interfax news agency, the Mineral Resources Department in the Republic of Kalmykia (Kalmnedra) has received an application for participation in the auction for the right to use the reserves of the Caspian sector in order to explore and produce hydrocarbons.

According to a representative of the department, the only application was received from SOCAR Rus LLC (Moscow), a subsidiary of SOCAR.

The auction itself will be held in late June, and the documents of SOCAR Rus LLC are being studied by Rosnedra for compliance with the requirements and conditions of the auction. The starting fee for the right to use mineral resources is 516.5 million roubles ($ 16.2 million). The area of the Caspian sector is 100.4 sq. km, projected reserves - 4.697 million tons and recoverable reserves - 0.378 million tons of oil.

"For us, this is the first step in Russia. We opened a subsidiary in Moscow - SOCAR Rus, and will move forward on the Russian market through it," a representative of SOCAR told R+.

At the same time, in Russia the company is not interested in the sphere of processing and selling petroleum products. "Retail sale and the chain of fuel stations rather promote awareness of the company, playing the role of advertising. In Russia, upstream (production sector) is important for us," the company said, noting that even if the reserves of the Caspian sector are small, it is precisely successful work in Kalmykia that may become the key to the expansion of extractive activities in the Russian Federation.

Another area of SOCAR's activity in upstream abroad is involvement in the Shemen project in the Israeli sea shelf. "In this project, the operator is the Azerbaijan Caspian Drilling Company Ltd (CDC), in which SOCAR owns 92.5 per cent. Drilling at Shemen is already under way," said the representative of SOCAR. In addition, CDC and Israeli partners own a licence for Oz, where seismic exploration work has been carried out, and based on its results a decision might be made to drill an exploratory well there.

The company also plans to enter the US market - SOCAR has already opened a division in the United States and is exploring the potential of the market. In this case, we can also talk about investing as the sale of crude oil has already been underway for a long time - Azerbaijani oil has been supplied to the United States since the launch of the Baku-Tbilisi-Ceyhan oil pipeline.

Thus, SOCAR is gradually becoming equal to major oil companies, expanding its presence in almost all areas of the oil sector in all corners of the world.