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No Problem With Southern Gas Corridor's Financing, Minister Says

No Problem With Southern Gas Corridor’s Financing, Minister Says

There is no problem with financing of the Azerbaijan-initiated Southern Gas Corridor project, which envisages the transportation of the Shah Deniz 2 gas to European consumers.

Azerbaijan’s Energy Minister Natig Aliyev said during a panel discussion titled “The future of energy, the future of global governance” within the framework of the IV Global Baku Forum in Baku on March 11.

“The international financial institutions have also expressed their interest in financing the Southern Gas Corridor,” he said, adding that SOCAR also has no problem with financing its share in the project.

The Southern Gas Corridor project envisages the transportation of the gas extracted at the giant Shah Deniz field in the Azerbaijani section of the Caspian Sea. Shah Deniz Stage 2 gas will make a 3,500 kilometer journey from the Caspian Sea into Europe. This requires upgrading the existing infrastructure and the development of a chain of new pipelines.

The existing South Caucasus Pipeline will be expanded with a new parallel pipeline across Azerbaijan and Georgia, while the Trans-Anatolian pipeline will transport Shah Deniz gas across Turkey to join the Trans-Adriatic Pipeline, which will take gas through Greece and Albania into Italy. The first gas supplies through the corridor to Georgia and Turkey are given a target date of late 2018. Gas deliveries to Europe are expected just over a year after the first gas is produced offshore in Azerbaijan.

Aliyev believes that the Southern Gas Corridor project will become a new energy source for Europe.

“Europe considers the Caspian Sea region as a new source for delivering energy resources to its market,” he said, reminding that Azerbaijan’s gas reserve is 2.5 trillion cubic meters.

Noting that the Southern Gas Corridor is a very large project, he said technologies that were not used in the Caspian Sea region before will be involved in the implementation of this project.

Alternative energy

Aliyev, addressing the event, also noted that the era of alternative energy is coming forth in Azerbaijan.

Today, Azerbaijan implements a number of projects and studies the experience of European countries, particularly Italy and Spain, in this field.

“It is often windy on Absheron peninsula, therefore, there is a great potential to use wind power,” Aliyev said. “Moreover, there are many sunny days in the country in a year, so, the use of renewable energy sources is attractive.”

Today, the country’s generating capacity is assessed at the level of 7,635 MW, of which the used capacity is about 5,000 MW. Of these, 1,255 MW accounts for hydroelectric, wind, solar and bio-energy plants, that is, their share is currently about 25 percent.

Oil price forecast

The minister also voiced optimistic forecasts about oil price in the world market. He said that global oil prices cannot remain at a low level for a long time and expressed confidence that they will increase in the future. Oil prices are fundamentally important for the oil-producing countries, according to him.

“The fall in oil prices by four times is not a positive factor for the oil-producing countries,” he said adding that excessively high price is also not a positive factor for the consumer countries.

The fall in oil prices affects negatively the exploration and production in the producing countries, explained Aliyev adding that this in turn reduces the production level, so this situation can not last for long.

The minister later told journalists that oil will remain a dominant energy source at least until 2035.

He said that prices on global oil markets depend on many different factors: economy, politics, transportation, and so on.

“Some companies reduce operating costs,” Aliyev said. “It means that in the future, production of oil will decline. Falling prices cannot last long, despite the experts’ statements that it’s all political games. Oil has its prime cost, and the market prices cannot be lower than this cost.”

The minister went on to add that economic growth contributes to an increase in oil consumption in the world.

“Before 2035, electricity consumption in the world will increase by 35 percent, and oil will remain dominant source of energy,” Aliyev said. “If the demand grows, the price will grow, accordingly. Today, costs for exploration, production and transportation of oil rise, which means that oil prices will also grow.”

Aliyev also expressed confidence that oil production in Azerbaijan will remain at stable level in the future.

He said that SOCAR produces about 8.5 million tons of oil per year at the oil fields of the country.

“This is a very stable level, and I think it will remain at this level in the future. Azerbaijan supports the production level, and to this end, regular technical activities, geological work are being held. To keep the level of oil production is our task,” he noted.

Azerbaijan also takes measures to increase natural gas extraction, he added.

“This work is successfully underway. We will produce over 25 billion cubic meters of gas only from the Shah Deniz field in the next 2-3 years,” the minister stated.