Jun. 7, 2015


Rovnag Abdullayev

Azerbaijan

Rovnag Abdullayev

President, State Oil Company of Azerbaijan Republic (SOCAR)

TBY talks to Rovnag Abdullayev, President of State Oil Company of Azerbaijan Republic (SOCAR), on the Southern Gas Corridor, investment strategies, and low oil prices.

BIO

Rovnag Abdullayev was born in Nakhchivan. In 1982, he enrolled at the Azerbaijan Institute of Construction Engineers (now Azerbaijan University of Architecture and Construction). He served in the army in 1983-1985, after which he was transferred to the Moscow Civil Engineering Institute named after V.V. Kuibyshev, and in 1989, after graduate from the institute, began working on “Oil Rocks.” He worked as an Engineer in the 28 May OGPD from 1990. From 1991 to 1997, he was Department Chief and Chief Engineer at Caspian Sea Oil Gas Construction Trust. He became the Director of Trust in 1997. Abdullayev was appointed Director of the Baku Oil Refinery named after Heydar Aliyev in 2003. On December 9, 2005, he was appointed President of the SOCAR. He is President of the Association of Football Federations of Azerbaijan (AFFA) since March, 2008. He was elected the member of Milli Majlis (Parliament) in 2005 and 2010.

How would you assess preparations for the delivery of Azerbaijani gas through the Southern Gas Corridor (SGC) to Europe?

The SGC Projects are of strategic importance to the whole country and are supported not only by Azerbaijan but also by the EU. As a shareholder and participating party, we continuously track and keep control over the preparatory works to ensure the timely and efficient realization of the SGC. We have strong support from the government. In addition, a special governmental commission represented by the relevant top government officials has been established by the President of Azerbaijan to secure a smooth and timely delivery of the SGC projects. These projects are successfully realized within the planned timeframe, and we are even ahead of schedule in some areas. We even completed seven production wells in preparation for first gas. Preparatory and design works are almost completed, and the start of the construction process is not far off. The construction of South Caucasus Pipeline (SCP) and Trans Anatolian Pipeline (TANAP) commenced in 2015, and Trans Adriatic Pipeline (TAP) will start in 2016. We assess the overall progress, which is circa 30%, positively, and have confidence that the projects and the whole SGC will be delivered on time.

SOCAR has increased its share in the various pipelines of the Southern Gas Corridor. To what extent is SOCAR's investment strategy changing?

SOCAR has increased its shares in Shah Deniz and SCP projects by 6.67% in 2014. SOCAR also has a 58% share in TANAP and a 20% share in TAP projects. This strategic approach reflects our vision on SGC as strategically important project not only for Azerbaijan, but also globally. Taking into account the importance of SGC for the sustainable development of the energy sector and capital-intensive nature of the Projects, the SGC CJSC was established. This was done to ensure that Azerbaijani shares in these projects are financed effectively and in time and in the integrated manner. The company is jointly owned by the Ministry of Economic development and SOCAR, with 51% and 49% shares, respectively. The government provides a major part of the financing. The very fact that the Azerbaijani side has increased its share in the projects underlines once more our confidence in future investment plans.

In 2013, SOCAR, BP, and the State Migration Committee were involved in a forum to discuss the nationalization of Azerbaijan's energy sector. What steps have been taken so far to implement this?

A structured approach toward development of local workforce and the further supply of professional skills are being delivered through provisions of developed policies and procedures within the Nationalization Strategy. Following the protocol, a new procedure has been agreed and established between the State Migration Service of the Azerbaijan Republic (SMS), Ministry of Labor and Social Protection of Population of the Republic of Azerbaijan (MLSP), SOCAR, and BP to regulate the endorsement and issuance of the work permits (WP) and temporary residential permits (TRP) for expatriate specialists involved in the oil and gas projects in the country. SOCAR Investments Division is vested with the authority to monitor and regulate the target manning levels of national employees pertaining to petroleum operations, and its compliance with local legislation, PSAs, and other contracts, in order to provide smooth replacement of foreign personnel with competent local professional staff. Until now, 80 companies operating in Azerbaijan's oil and gas industry have joined this process. In February 2014, SOCAR signed a MoU with the MLSP, which provides for, among others, placing unemployed local specialists in a job. As a part of the MoU, parties agreed to exchange information on the current and future demand for foreign workforce in the oil and gas sector.

How have lower oil prices affected investment activity of the company?

Negative dynamics on the global oil market has affected practically all the players in the market, and SOCAR is not an exception; however, we were prepared for this and moreover, we are seeing more and more opportunities to improve the effectiveness of our daily operations. None of the investment contracts that have been signed earlier will be cancelled or changed. We will not allow for any delays to take place in their implementation, and all the projects will be carried out as planned. In terms of future contracts, the continuously changing situation on the market is forcing us to reevaluate our plans. Still, as a company with clearly established goals, we are always careful to identify priority and non-priority projects. In other words, lower oil prices do not affect our ongoing projects, although we might re-consider some of our future ones.

How would you assess the quality of the services market in Azerbaijan for engineering and maintenance?

We have always had an industry that was practically self-sufficient and well respected. Our service companies, geologists, engineers were the first, in 1949, to establish offshore oil and gas production. They also made discoveries in Siberia and supplied oil equipment and machinery for the discoveries made. That was done with the strong participation of our specialized design institutions and our oil machinery plants here in Baku. After the collapse of the Soviet Union, some of the ties that were in existence were cut; however, we continued to develop our own industry. There were also areas where we were lacking some expertise, and were trying to attract such expertise from the outside. An example of this would be our deep-offshore structures production plant, which is a combination of a yard, a machinery plant, and the shipyard. It was the first of its kind in the Soviet Union. Now, it is an example of the cooperation between SOCAR and the companies that are working with it on turning it into the modern industrial complex. We are working in alliance with Boyuq Offshore for this particular industrial complex named Bos shelf. We have also signed a working alliance with a number of companies, including Italian Saipem, to develop different areas of services required by the industry. KBR and Foster Wheeler are other examples of such cooperation. KBR was present in Azerbaijan since the beginning of the modern development of our industry from 1994 to 1995. It has always worked in the area of design activities in close cooperation with our own design institutions. SOCAR has two design institutes: one for offshore and one for onshore activities. This cooperation was established long ago, and we are working together with our partners successfully. This recent execution of the joint activities is a logical continuation of our work.

How is SOCAR involved in the First European Games?

The European Games was another major chance for SOCAR to get involved in sport and promote itself in the international arena. SOCAR already has strong presence around the world, and we hope to expand even more. This sponsorship will provide us another boost and increase the awareness of SOCAR throughout the world. SOCAR is one of the largest, if not the largest, companies in Azerbaijan, employing around 60,000 people. Their health and social lives are one of our main our priorities and sports are considered as one of the important aspects of social development. We believe that these inaugural European games will not only create jobs but also will bring many benefits, not just in the short term, but also in the long term for the citizens of Azerbaijan, our 60,000 employees, and their families.