SOFAZ optimistic over oil prices

By: Gulgiz Dadashova

Azerbaijan’s state oil fund SOFAZ which is in charge of accumulating and managing the country’s oil and gas revenues announced that the average price of Azerbaijani oil will not fall below $100 per barrel.

Despite continuing decline in oil prices – global oil’s fell below $70 – the fund does not expect a deficit in its budget.

“The price of oil incorporated in the State Oil Fund budget for 2014 was set at $ 100 per barrel. Given that, the average cost of a barrel of oil in January-November stood at $105.6, regardless of oil prices in the coming months, no deficit is expected in the budget execution of SOFAZ for 2014,” the fund told Trend.

Thus, SOFAZ will meet its obligations to the state budget. The fund, established in 1999 aimed at transforming rising hydrocarbon reserves into financial assets, transferred recently about 7, 400 millon manats to the state budget.

SOFAZ budget revenues for the period of January-September, 2014 reached roughly 10, 132 million manats, while budget expenditures constituted 8, 041 million manats.

Revenue of about 9,970 million manats was received from the implementation of oil and gas agreements, including 9, 948 million manats from the sale of profit oil and gas, 6.8 million manats as transit payments, 13.3 million manats as bonus payments and 1.7 million manats as acreage fees.

The revenues from managing assets of the fund for January-September, 2014 amounted to 162.3 million manats.

Noting that the oil price set in the 2015-state budget of Azerbaijan stands at $ 90 per barrel, SOFAZ said the oil price in the state budget is set on the basis of macroeconomic forecasts of the Economy and Industry Ministry. In turn, the state oil fund’s budget is formed using an indicator of oil prices in the state budget.

Oil prices are set for the biggest annual drop since 2008 as the Organization of Petroleum Exporting Countries resists calls to cut supply, even as it contends with the highest U.S. output in three decades. Brent for January settlement slid as much as 52 cents to $69.12 a barrel on the London-based ICE Futures Europe exchange and was at $69.27 at 2 p.m. Singapore time. The contract lost 28 cents to $69.64 yesterday, the lowest close since May 2010. The European benchmark crude traded at a premium of $2.79 to WTI, compared with $4 on Nov. 28. Prices, down 1.3 percent this week, have dropped 37 percent this year.

The assets of SOFAZ, that hit $37.305 billion as of July 1, 2014, are placed partly in securities and money market instruments (deposits, bank accounts).

The main goals of SOFAZ include accumulation of resources and placement of the fund’s assets abroad in order to minimize the negative effects on economy, prevention of ‘Dutch disease’ to some extent, promotion of resource accumulation for future generations and giving support for current social and economic processes in Azerbaijan.

Oil figures

Azerbaijan’s main export crude oil streams are Azeri BTC and Azeri Light. These two grades are fairly similar and are mainly sold to European and Asian markets. Also, the SOCAR-produced crude oil is blended in Russia and marketed as Urals blend because of its poor quality.

The price of AZERI LT CIF Augusta was $72.56 per barrel on Dec.3, or $1.12 per barrel less compared to the price on Dec.2, Azerbaijan’s state energy company SOCAR reported.

The average price of AZERI LT, exported from Azerbaijan via the Ceyhan, Batumi and Supsa ports to Italian Augusta port, was nearly $78.1 per barrel on Nov. 24-28 or by $2.2 less than the previous week. The maximum price for AZERI LT was $82.14 per barrel and the minimum price was $73.36 per barrel during the reporting period.

The average price of Urals (Ex-Novo) exported from Azerbaijan via the Novorossiysk port stood at $73.56 per barrel or by $2.14 per barrel less than the previous week. The maximum price for Urals totaled $77.42 per barrel and the minimum – $69.24 per barrel on Nov.24-28.

Azerbaijan extracted 43.1 million tons of oil and gas condensate in 2013 compared to 42.98 million tons in 2012. Crude oil and condensate production in Azerbaijan decreased to 32.1 million tonnes in January-September 2014 from 32.8 million tonnes in the same period last year.

The official exchange rate stood at 0.7845 AZN/USD on December 1.