September 16, 2014
The President of the State Oil Company of Azerbaijan Republic (SOCAR), Mr Rovnag Ibrahim Abdullayev, discussed with Dimitris Rapidis, Director and Project Coordinator at Bridging Europe, on a string of issues ranging from energy supply and production, regional cooperation, ongoing and forthcoming projects and partnerships, to the risks of climate change, corporate social responsibility, and the special relationship with Greece as the linking corridor towards the expansion of the company in the Western Mediterranean Basin and the European Union.
*The interview was first published by Bridging Europe. It is republished here.
What is the positioning of SOCAR in the global energy run in terms of production and supply?
Let me first share the vision of SOCAR with you. SOCAR aims to become a vertically integrated international energy company resting upon advanced experience on operation efficiency, social and environmental responsibility, and so far has undertaken major steps to strengthen its international presence both in terms of energy production and supply.
SOCAR positions itself as a reliable energy partner of Europe. We truly believe that diversification of energy supply is one of the most important topics of today’s energy policy of the European Union, and SOCAR is here to support its European partners.
From historical perspective, the Caspian region always has been and is again re-shaping itself as a hub for global energy supply. SOCAR is currently working on development of a number of upstream and midstream projects together with 25 global companies, which are involved in oil and gas projects in the Caspian region.
Being one of the major players in the industry in the region SOCAR is seeking to raise its own gas production from new fields it is exploring in the Caspian Sea. SOCAR hopes to see its gas production soar in the coming years as production capacity is expanded at existing fields and new ones are discovered and brought into production. Most of the gas produced is likely to be exported to consumers in Europe via forthcoming TANAP and TAP pipelines.
The formation of export routes was crucial for exporting our hydrocarbon potential to the global markets, with the large-scale production of oil and gas only possible once the BTC oil pipeline and SCP gas pipeline had been commissioned. The pace of the next phase of SOCAR’s output growth is to be set by the construction of export routes, especially TANAP and TAP pipelines that will carry the gas produced from Shah Deniz 2.
Which are SOCAR’s existing and forthcoming projects?
Today, SOCAR is actively involved in several significant projects both in a regional and in an international context. In these projects we closely cooperate with well-known global companies and highly experienced teams. Currently OGPC (Oil and Gas Processing Complex) is considered as the largest downstream project of SOCAR in Azerbaijan, which is of strategic importance. The construction of the Complex includes an Oil Refinery with around 9 m. tons, a Gas Refinery with 12 billion bcm capacities and a Petrochemical Plant. The Complex is planned to be fully operated in 2020.
The President Aliyev signed a decree in February establishing a closed joint-stock company (CJSC) for effective management of projects within the second phase of Shah Deniz gas and condensate field’s development, expansion of the South Caucasus Pipeline, Trans-Anatolian Gas Pipeline (TANAP) and Trans Adriatic Pipeline (TAP). The gas which will be produced at the second stage of Azerbaijan’s Shah Deniz field development will be the main source of the Southern Gas Corridor, which envisages the transportation of the Caspian gas to European markets.
In addition to the main projects developed by SOCAR, there is a number of projects and business activities run by our daughter companies in Europe as well as in UAE and Singapore. Fuel retail networks in Georgia, Ukraine, Romania and Switzerland together with the infrastructure projects in UAE, Turkey and Georgia are amongst the most notable ones.
As an example of the diverse nature of projects run by SOCAR’s foreign subsidiaries we can mention “PETKIM Value-Site 2023 Refinery-Petrochemicals-Energy-Logistics Integration” project in Turkey. The project implies construction of a brand new Star refinery, new petrochemical plant facilities, STEP energy plant and Petkim Container Port in Turkey.
Another significant project is the recent acquisition of Greek Natural Gas Transmission system Operator (DESFA). This is work in progress at the moment as this asset provides an excellent diversification opportunity for SOCAR’s investment portfolio.
What is the goal of SOCAR’s Summer School
As part of talent acquisition strategy to develop and attract young professionals to oil and gas sector each year SOCAR purposefully launches sets of diversified projects. Summer School Project initiated by SOCAR since 2010, is one of the decisive activities respectively serving the mission of attracting young, potential and competent students, and retaining young professionals already working at different divisions of SOCAR, through creating deep understanding of SOCAR’s culture and activities both in domestic and international markets. As was clearly mentioned, the program has been launched since 2010, and year by year, every possible development is implemented to make program more comprehensive and useful for the participants. The project is based upon prearranged program, which covers all the chains of energy sector, starting from geology and geophysics of oil and gas wells, and continuing with drilling, production, transportation, refining of produced oil and gas.
The last but not the least, during the program the participants gain deep information on the sales and marketing of produced oil and gas products. It is worth noting that the program is not restricted only to lectures, but also excursions to different production units of SOCAR are organized in accordance with the topic of the day. Overall, the project has substantial positive outcomes in staff development and recruitment strategies of SOCAR.
Baku High Oil School
On 29th of November 2014, the Baku High Oil School was established under the aegis of SOCAR. The Baku High Oil School signed a cooperation agreement with Heriot-Vatt University of the United Kingdom with the purpose of specialists training under a Bachelor Degree Program in the fields of oil and gas engineering and chemical engineering. Since its establishment Baku High Oil School has managed to create modern infrastructure, to form professional administrative and academic personnel.
This higher education institution continues to successfully expand its international ties and attract advanced educational programs and technologies widely applied in Western countries. In the short run, it is expected that the Baku High Oil School will be able to train highly educated in-house specialists who will make their valuable impact in country’s dynamically developing industry and contribute to effective implementation of SOCAR projects both inside and outside of our country.
Baku French Lyceum
The Baku French Lyceum (“BFL”) was established in accordance with an agreement on establishment and activity of the Baku French Lyceum signed between the governments of the Republic of Azerbaijan and the Republic of France on 07.10.2011. BFL commenced its activity on 15.09.2013. Currently 120 children attend kindergarten and school functioning under the lyceum. A supreme governing body of BFL is a Management Committee. The Management Committee consists of 4 persons representing the Heydar Aliyev Foundation, the Ministry of Education of the Republic of Azerbaijan, the Embassy of the Republic of France in Azerbaijan and SOCAR, by one representative from each organization. The Principal of the school and main teachers are citizens of France. Lessons are held in accordance with curriculum of international french schools with observance of requirements of the Law on Education of the Republic of Azerbaijan.
What do you expect from the 2nd SOCAR Oil and Gas Processing and Petrochemical Complex Forum (OGPC) held in November 2014?
SOCAR OGPC Forum is designed to provide a detailed presentation of the new Oil and Gas Processing and Petrochemical Complex (OGPC) to be constructed by SOCAR. In April 2012, we organized the first forum devoted to SOCAR’s Oil-Gas Processing and Petrochemical Complex Project. During that Forum, the extensive discussions and productive meetings have greatly benefited to both SOCAR and other participants of the event. Over two years after the first Forum, the OGPC activities have advanced considerably. Now, we are completing the FEED for the Gas Processing Plant and passing to EPC tendering. The works on the Petrochemical Plant will run in parallel. We have also completed the OGPC constructability study and other site surveys. At the same time, the FEED for utilities and off-sites and conceptual design for off-plot facilities has been carried out. As you see, the Project is now passing to a more significant phase. We are receiving more and more requests from various companies to organize another forum, which would help companies to obtain sufficient information about current stage of the Project and discuss the possibilities of further cooperation. That is why we decided to organize the second OGPC Forum, which we hope will help to establish close connections and promote cooperation and discussions on Project related issues at one single platform between potential stakeholders such as engineering companies, EPC contractors, licensors, manufacturers, vendors, service providers etc. We believe this event will play a crucial role in the future sustainable development of the Project.
In November 2014, the 2nd SOCAR OGPC Forum will be organized in Fairmont Hotel located in Flame Towers complex in Baku. Let me use this opportunity to invite our Greek colleagues to visit us in Baku in November!
How are you dealing with the climate change problem and environmental advocacy?
First of all, I would like to note that the dealing with climate change is an ethical issue for us and SOCAR has been taking regular actions to deal with climate changes. Moreover, we actively work with a variety of international institutions on climate change.
After Azerbaijan Republic ratified UN “Framework Convention on Climate Changes” and SOCAR enhanced its financial capabilities, it has started to pay more attention to enforcement of global ecological conventions and ecological issues in all company premises.
In 2008 SOCAR approved its Ecological Policy and actions were taken in the same year to enforce Framework Convention on Climate Changes.
It has been 7 years since SOCAR has been taking inventory of greenhouse gas (GHG). After inventorying process, steps were taken to conceive and implement new projects’ ideas regarding minimization of potential GHG emissions having adverse climatic effects. So accumulation and supply to consumers of associated gas produced with oil, substitution of old power-consuming equipment with modern power-saving equipment may be brought as examples. During these years to enforce these processes successful cooperation affairs have been established with the World Bank, GGFR, European Bank for Reconstruction and Development, Asian Bank of Development, companies from Germany, Norway, Japan and other countries. In frame of these cooperation activities such documents as “Plan on minimization of flue-gas emissions”, “Strategy for minimization of adverse effects of climatic changes” were developed.
Concurrently with the foregoing SOCAR also takes focus-oriented steps in other directions regarding environmental protection. Thus, in order to ensure ecological security, regular ecological monitorings are conducted at SOCAR in all offshore and onshore activities, including also oil-gas, petrochemical operations. Currently Environmental and Social impacts of SOCAR projects are assessed and preventive measures are being identified to minimize them. Mining sites traditionally polluted by oil and oil products are reclaimed and recovered to the natural-landscape design. Provisions were made to control in a closed system of produced waters extracted during the production on SOCAR oil-gas operation sites. Besides, maintenance was provided on biological purification plants of all production facilities.
The discharges from vehicles globally along with other areas of industry also cause one of the most serious ecological problems. Ecological impacts are crucial due to the growing number of vehicles in our country. In this regard, SOCAR Ecological Measuring Center conducts ecological diagnosis of vehicles.
One of the priority issues in SOCAR’s environmental protection activity is waste management. Work in this area is organized according to requirements of a Waste Management Plan approved by SOCAR. All types of industrial wastes generated at SOCAR facilities are taken over in Waste Management Center (WMC) being a part of a valid waste management system.
Expansion of plantation sites is one of the major directions of ecological policy in our Republic. SOCAR also contributes to planting activities implemented on a national scale. One of the essential environmental projects implemented by SOCAR was designing and constructing the Ecological Park. The main objective of laying out this Park was to create a contemporary form of society-environment relations, and to show that environmental propaganda, environmental upbringing and protection of the environment is a first priority duty of every citizen. It has been 3 years since SOCAR launched the project titled Eco-Park. As a result of the works performed in this scope, 574434 different types of trees-bushes and flowers were planted in an area of 400 ha. Ecological awareness and enlightening activities are implemented in conformance with the SOCAR’s “Action Plan on Ecological Awareness”. In the frame of the plan, ecological days are celebrated at SOCAR enterprises and facilities, and cooperation with international ecology-oriented organizations is continuously broadening. In order to enhance environmental protection, to develop “approach to the environment with care” traditions and to educate the youth in the spirit of sensitive approach to the environment SOCAR expands its ecological awareness activity from year to year.
What are the major fields of involvement when addressing to corporate social responsibility (CSR)?
There are several key fields of the CSR in our day-to-day work and we think of corporate social responsibility across SOCAR in a strategic way.
Mainly, it is the idea of implementation of sustainable solutions in all areas of our operation. This implies working on strategy to improve working conditions, to integrate labour standards into our business practice, to monitor our facilities, and to collaborate with our partners in order to drive industry-wide change.
The next level concentrates on our employees and on making SOCAR a place where people can build their careers in a positive work environment. Particularly on this point, SOCAR has been a pioneer in developing various activities on employees’ health and labour safety in accordance with the requirements of Single management system for labour protection in the Azerbaijani oil industry.
Another key field in corporate social responsibility for us is the environment. For instance, SOCAR developed its own “Waste Management Plan” in order to ensure that the systems designed to manage waste, generated at our facilities work efficiently and that collection, sorting out, transportation, utilization of waste is conducted in line with the industry practice. Also, Environmental Department regularly carries out the quantitative and qualitative monitoring of harmful wastes in gaseous, liquid and solid forms emitted to the atmosphere as a result of natural and anthropogenic impacts at enterprises and companies subordinated to SOCAR.
Our CSR policy does not stop here of course, there are number of other projects that SOCAR is involved in, however I am afraid that we will need to have another interview to discuss them all.
What is SOCAR’s involvement in Greece? Do you perceive the country as a strategic partner for your company’s expansion in the West?
As you may be aware, SOCAR has been selected as the preferred bidder in the DESFA privatisation process that is still in progress and that is expected to be finalised within the course of coming months. DESFA is SOCAR’s first project of this scale in the European Union and we are very happy to collaborate with our Greek partners towards the success of it. Furthermore, Greece is one of the “TAP countries” and it certainly plays a central role in realisation of the TAP project.
As a result of our increasing activity in Greece, it was decided to open the country office in Athens so that we have our permanent presence in the country as well as in the region. Now, when SOCAR Energy Greece S.A. has been fully established it shall be much easier for us to manage our relationship with our existing counterparts and look at further business opportunities in Greece.
Indeed, Greece is a good friend and a reliable strategic partner of Azerbaijan. Perhaps, one of the most significant indicators of the friendship between our countries is the fact that our collaboration is not limited to the oil and gas industry and that it had constantly evolved during the past years. I believe that the relationship and the economic cooperation between our countries will grow even stronger in the future. I think that numerous official meetings of the Azerbaijani and Greek leadership and the recent official visit of the President Aliyev to Athens only support my point of view.
What is the company’s project plan for energy supply in the EU?
At the times when Europe needs reliable suppliers, supply from SOCAR and Azerbaijan is viewed as a part of Europe’s strategic goals. The challenges to security of supply could be political, technical or even due to extreme weather and demand. I would like to stress that SOCAR met its supply demands during the harsh winter of 2012 due to its storage facilities and strong commitment to meet its contractual obligations. Recently, SOCAR has engaged in expansion of its storage facilities in order to continue to be a reliable supplier.
Instead of selling to regional markets, SOCAR decided to embark on a chain of mega project to export gas to Europe: a chain that crosses 7 countries, deals with six regulatory systems, involves 12 investing companies, includes 12 gas buyers and requires 45 billion USD of investments. By the way, this chain of projects is called the Southern Gas Corridor, or shortly SGC. The mega project will be able to facilitate the transportation of gas not only from Azerbaijan but also from Central Asia and Middle-East countries. The pipeline is being built with the potential to double the capacity and can be scaled up to 30 bcm/a. This is the first project in decades to introduce new gas supplies into Europe rather than simply re-routing existing supplies, thus diversifying sources.
As we plan, the first gas explored from the second stage of the Shah Deniz field will be delivered to Turkey through TANAP in 2018 and then to Europe through TAP in 2019. Today successful execution of these projects is of top priority for SOCAR. The Southern Gas Corridor will be a strong catalyst for interconnectors across Southern Europe, while the TAP section will be able to connect Caspian gas to multiple European markets. In addition, there are signs of strong commercial interests in adding a component of the project into the Balkans.Dimitris Rapidis