Oil Fund’s incomes go own every quarter, what’s next?

From January to October 2015 proceeds from sale of profitable oil from the Azeri-Chirag-Guneshli (ACG) bloc of fields to the State Oil Fund of Azerbaijan (SOFAZ) totaled $5,856,000,000.

            According to the Fund, since 2001 till November 1, 2015 $116,077,000,000 was transferred to SOFAZ from sale of profitable Azerbaijani oil from the ACG bloc of fields.

            Caspian Barrel reminded that during 2014 incomes of the Oil Fund from the ACG project totaled $15,118,000,000 ($16,261,000,000 n 2013).

Table of SOFAZ’s income from profitable oil from ACG

Looking at this table one can ask why growth of oil prices in quarter 2 did not affect proceeds of the Fund? However, if we pay attention to the final data of the operation company for the first semi-annual period, we will see that from January to June 2015 the production volume decreased by 2.8 million barrels (116 million barrels from January to June 2015 against 118.8 million barrels during the same period last year).

The government should take this factor into consideration while forecasting its plans for the several years to come. In three years oil price will go up to $80.00 per barrel, this will not bring significant incomes to Azerbaijan (about $10 billion of oil incomes a year). In 2018 not 31 billion tons as this year, but at best 29 million tons of oil will be extracted from the ACG. As the contract of the century is getting older, the cost price grows for objective reasons and the incomes go down.

Based on the data from the table, one can forecast the Fund’s incomes from the ACG project for year 2015 more accurately.

During October 2015 incomes of the Oil Fund of Azerbaijan from the ACG totaled $631 million.

Considering that in mid-November 2015 oil extraction on the Chirag platform will be suspended for three weeks (50,000 barrels a day) and average daily production will go down by 5,000 barrels for objective reasons by the end of the year, from November to December, 2015 the Fund’s incomes will total about $1.1 billion. SOFAZ’s annual incomes will reach about $6.96 billion, down 2.17 times against last year.

By October 1, 2015 assets of the Oil Fund totaled $34,738,100,000, decreased by $2,567,200,000 during a year. However, the Fund’s resources decreased by 2.36% against early this year (by January 1, 2015 they totaled $37,104,100,000).

The government forecasted the Oil Fund’s budget for fiscal year 2016 with the average export oil price of $50.00 per barrel. The Oil Fund’s incomes are forecast at 6,711,600,000 AZN, while expenses at 8,200,000,000 AZN. The Oil Fund’s budget deficit is expected to be 1,488,400,000 AZN.

92-93% of the Oil Fund’s incomes come from the ACG project.

* The contract for development of Azeri and Chirag as well as deep-water section of Guneshli fields was signed on September 20,1994 and entered into force on December 12, 1994. The ACG project partners include BP (35.78%),Chevron – 11.27%, ExxonMobil (8,0006%), Indian ONGC Videsh Limited (2.72%), Japanese Inpex (10.96%) and Itochu (4.3%), SOCAR (11.65%), Norwegian Statoil (8.56%) and Turkish TPAO (6.75%).