Tag Archives: Azerbaijan

Business comment: Big Projects

JUNE 29 2016 (The Conway Bulletin) – Azerbaijan may resume its dream of building a mega petrochemical processing complex in an effort to revive its oil and gas sector. This alone is good news for the economy of Azerbaijan, which is poised to see its GDP shrink this year for the first time in two decades.

The intent of SOCAR, the state-owned energy company, is to salvage the project, which it had effectively abandoned in February, after its initial investors had either pulled out or stalled financing.

This is the effect of sustained low oil prices. Besides shying away from upstream exploration and production for costly fields, oil and gas companies have also been forced to rethink their plans for downstream processing facilities.

The project initially included an oil refinery, for a total cost of $16.5b. After scrapping parts of the complex, including the refinery, and downsizing the gas processing facility, the project’s price tag fell to around $4b, a cost that Chinese and Russo- Italian ventures, the new potential investors, now deem feasible.

This is a common problem. Big projects have had to face both the doubts of investors in a low oil price era and the protests of locals, who would rather see resources allocated to combating the enduring crisis.

In January, South Korea’s LG pulled out of a project to build a $4.2b petrochemical plant in Kazakhstan, Russia fled an investment to build a $2b hydropower project in Kyrgyzstan, and Azerbaijan seemed to have abandoned hopes for its project.

As oil prices timidly pick up again, Azerbaijan’s announcement that the project might still see the light could potentially lure investors, who had kept themselves at arm’s length from the rather toxic market it had become in the past two years.

ENDS

(News report from Issue No. 287, published on July 1 2016)

Azerbaijan downgrades plans for processing plant

JUNE 29 2016 (The Conway Bulletin) – In an effort to revive its aspirations to build a mega petrochemical plant, SOCAR, Azerbaijan’s state-owned energy company, said it would cut the capacity of its gas processing section, lowering the cost by a third to $4b.

SOCAR now plans to build a plant with a processing capacity of 10b cubic metres/year, down from 12b cubic metres/year. Downsizing the project would save around $2b, according to the company.

The original plan was much more grandiose. The OGPC petrochemical complex at Sangachal, 55km south of Baku, had at one point included an oil refinery and was quoted for a total of $16.5b. Azerbaijan wanted the project to become the region’s hub for refined products.

Last year, first Japan’s Mitsui, then the Britain-based unit of US’ Fluor Group came forward to participate in the project, but later dropped out.

SOCAR then scrapped plans for the refinery, bringing down costs to around $6b. In February, company representatives said that construction work had been frozen, due to the sustained economic malaise, triggered by low oil prices.

Now, Suleyman Gasimov, SOCAR’s VP for financing, said the company is considering two offers, one from China’s CNPC and one from a Russo-Italian consortium of Gazprombank, Russia’s export credit agency EXIAR and Italy’s credit agency SACE.

“Currently, we think the proposals from CNPC and Russian-Italian partners are the most suitable for us,” Mr Gasimov said.

If Azerbaijan manages to resurrect OGPC, even in a downsized fashion, the project will give a much-needed boost to the country’s economy.

ENDS

(News report from Issue No. 287, published on July 1 2016)

Iran’s ATA Airlines flies to Azerbaijan

JUNE 17 2016 (The Conway Bulletin) – Iran’s ATA Airlines flew to Azerbaijan for the first time, officially opening the new Tehran-Baku Tabriz route. The new route, which will operate twice weekly, is a sign of the growing importance of transport links between Azerbaijan and Iran. AZAL, Azerbaijan’s national carrier, also operates a direct flight to Tehran.

ENDS

(News report from Issue No. 286, published on June 24 2016)

Deficit grows in Azerbaijan

JUNE 20 2016 (The Conway Bulletin) – Azerbaijan’s Central Bank published economic data that highlighted a current account deficit and a drop in FDI for Q1 2016, compared to the same period last year. This is the second consecutive quarter that Azerbaijan has run a trade deficit. Statistical projections say that Azerbaijan will face an economic recession in the first half of the year.

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(News report from Issue No. 286, published on June 24 2016)

Business comment: BREXIT, Oil & Crisis

JUNE 24 2016 (The Conway Bulletin) – As the results of the referendum on Britain’s EU membership came in early on Friday, the decision to leave the EU has shaken the global market.

The Leave vote has hit the London stock market, where most of the companies focusing on Central Asia and the South Caucasus are listed. Economists now expect more volatility in the short term for the London Stock Exchange.

The so-called Brexit also negatively affected oil prices, sending both Brent and WTI down by 6% in just a few hours. Analysts have said that the period of uncertainty regarding oil prices will now last longer.

Currency markets were also hit, as the British pound lost value against the US dollar, effectively strengthening the greenback.

This had an immediate domino effect on currencies across Central Asia and the South Caucasus, where local currencies weakened against the US dollar.

The increasing uncertainty and volatility is now poised to harm, at least in the short term, local markets in the region, prompting elites in from Tbilisi to Astana to brace for more tough times. It will also hit global markets in general, forcing investors to flee to safety and this means missing out Central Asia and the South Caucasus.

Now both the Fed in the US and the Bank of England will have to revise their economic policies and this is likely to insulate further their economies and pull investment back from Emerging Markets.

In these uncertain times, countries in Central Asia and the South Caucasus cannot but hope that Western investors will go against the tide and continue investing in the region.

ENDS

(News report from Issue No. 286, published on June 24 2016)

Azerbaijan’s electricity production falls

JUNE 18 2016 (The Conway Bulletin) – Azerbaijan’s Statistics Committee said electricity production fell by 7% in the first five months of the year to 9.3b kWh, compared to the same period last year. Azerbaijan’s thermal power plants, which generate the bulk of electricity in the country, produced 10% less electricity than last year. Hydroelectric power plants increased production by 15%.

ENDS

(News report from Issue No. 286, published on June 24 2016)

OSCE to monitor contact line between Azerbaijan and Armenia

JUNE 20 2016 (The Conway Bulletin) – At a meeting in St Petersburg hosted by Russian president Vladimir Putin, Armenian leader Serzh Sargsyan and Azerbiajani leader Ilham Aliyev agreed to continue discussions reaching a permanent peace deal over the disputed region of Nagorno-Karabakh.

They also said that an OSCE mission would be sent to the region to monitor the contact line between the two sides.

The Organisation of Security and Cooperation in Europe is Europe’s democracy watchdog and conflict resolution group. Its involvement in the disputed region of Nagorno-Ka- Karabakh, which suffered its worst outbreak of fighting in April since a UN-brokered peace deal in 1994, is considered vital.

“The OSCE [will] monitor the line of engagement between the Armenian and Azerbaijani troops near the village of Agdam in Azerbaijan’s Tovuz district on June 22,” Azerbaijan’s defence ministry said in a note following the meeting.

The fighting in April between Azerbaijan’s army and Armenia-backed forces killed several dozen people and looked at one time that it would drag in neighbouring countries and spread.

The two presidents had previously met in Vienna in mid-May. After the St. Petersburg meeting they are likely to schedule another summit to evaluate the progress made in Nagorno- Karabakh. Analysts have said that continued meetings between the two leaders is important.

ENDS

(News report from Issue No. 286, published on June 24 2016)

Court convicts former head of Azerbaijan’s biggest bank of money laundering

JUNE 23 2016 (The Conway Bulletin) – In one of the biggest corruption scandals in Azerbaijan, a court convicted Jahangir Hajiyev, former head of the International Bank of Azerbaijan (IBA), guilty of embezzlement and damages.

The government owns a 55% stake in the bank. A government spokesperson said Hajiyev, arrested in December, conducted illegal activity during his tenure as CEO of IBA, the largest bank in Azerbaijan.

“In 2001-2015 Jahangir Hajiyev entered into a criminal conspiracy with a group of persons and carried out a number of illegal actions of fraudulent nature,” a statement said.

Misappropriation, through fictitious loans, accounted for 41m manat ($31m), according to the ministry, which also calculated 212m manat ($139m) in damages. For a comparison, in the first half of 2015, the bank posted a loss of 216m manat.

Hajiyev left his post at IBA in March 2015, after a sharp devaluation of the manat against the US dollar, which put pressure on the bank’s loan portfolio.

The bank handles over 60% of the country’s loans.

The Prosecutor General said that Hajiyev’s wife, Zamira, is also on the wanted list.

She fled before police could arrest her. Her location is unknown.

ENDS

(News report from Issue No. 286, published on June 24 2016)

Nico Rosberg wins F1 in Azerbaijani capital

JUNE 19 2016 (The Conway Bulletin) – German driver Nico Rosberg won the first F1 Grand Prix in Baku. President Ilham Aliyev wanted to host the Grand Prix to boost the profile of Azerbaijan. His critics, though, accused him of wasting money and hosting an expensive vanity project while Azerbaijan’s economy shrinks.

ENDS

(News report from Issue No. 286, published on June 24 2016)

Azerbaijan’s Pasha issues Eurobond

JUNE 16 2016 (The Conway Bulletin) – Pasha Bank, one of the largest banks in Azerbaijan, said it will launch a $200m Eurobond issue in the second half of the year. The bank expects yields of around 5%, Ivan Uglyanitsa, head of investment banking, told Reuters. Azerbaijan’s sovereign debt gives a yield of around 3.5% currently.

ENDS

(News report from Issue No. 285, published on June 17 2016)