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Azerbaijanâ€™s President: BP does not fulfill its commitments

10 October 2012 21:55 (UTC +04:00)

Baku-APA. "We have the right to be proud of our oil strategy. Azerbaijanâ€™s successful economic development, increase of its political influence and active participation in the ongoing processes in the world are directly connected with the economic opportunities of our country. It is our oil strategy that created these economic opportunities for us," Azerbaijanâ€™s President Ilham Aliyev said at the meeting of the Cabinet of Ministers on the outcomes of the socio-economic development within 9 months of 2012, APA reports.

The president noted that unlike some other countries Azerbaijan used those opportunities efficiently, spent the oil revenues on the development of the non-oil sector.

"Actually, the implementation of infrastructure projects and other economic reforms enabled us to speak about the present realities with pride. But due to the gross mistakes made by the consortium, oil production from Azeri, Chirag oil fields has begun decreasing recently. It is not the first year that oil production is decreasing. Of course, those who work for the oil industry, oil experts know that every oil field has its term. Production increases, reaches its peak, remains stable within some years and then comes recession. So, every oil expert is familiar with this process. The question is not that we reached the peak and then followed recession. The question is that the forecasts are not fulfilled. I can also say that production sharing agreement has been signed on Azeri, Chirag oil fields. In the initial stages the production sharing was a little different. In the initial stages big investments were made, the share of foreign investors was bigger - approximately 75-25 percent in favor of the foreigners. After they got back their investments, production sharing began to change - it was shared as fifty-fifty. In the middle of 2008 taking into account the efficiency of Azeri, Chirag oil fields and terms of the agreement, the production sharing changed in favor of Azerbaijan and at present - since the middle of 2008 it has made up 75-25%. That is, 75% of the profit oil belongs to Azerbaijan."

The president underlined that after changes were recorded in the production sharing basing on the terms of the agreement, oil production in Azeri, Chirag oil fields began to decrease for some reason.

"I want to show concrete figures. In 2009 production forecast for Azeri, Chirag fields was 46.8 million tonnes. Actually, 40.3 tonnes of oil was produced. In 2010 the forecast was 42.1 million tonnes, while actually it was 40.6 million tonnes. In 2011 the forecast was 40.2 million, real production was 36 million tonnes. The forecast for 2012 is 35.6 million tonnes. Taking into account the current production, we can guess that BP will be unable to produce more than 33 million tonnes of oil from Azeri, Chirag fields by the end of the year. Compiling all these figures and considering the price of oil as $100 - though it was higher during all these years - we will see that Azerbaijanâ€™s missed profit is $8.1 billion. This is a reality. This reality stands behind a small statistical figure. Therefore, the decrease of the production in the oil industry from year to year, from month to month, from quarter to quarter is the logical result of this situation," President said.

The president underlined that big investments had been made in Azeri, Chirag oil fields.

"We are grateful to all investors for this and I reiterate that due to these investments Azerbaijan is one of the most rapidly developing countries in the world. I want the public to know that these investments were not charity. This is absolutely a business project. Again I want to announce several figures. Up to now $28.7 billion has been invested in Azeri, Chirag oil fields by the consortium led by BP. Up to now the consortium has made $73 billion profit. That is, great profit has been made. Of course, all this profit has been possible basing on the terms of the agreement. Azerbaijan has also made a great profit. A great part of our currency resources that have reached 45 billion belongs to the Oil Fund. A lot of funds have been spent within the past 12 years. The State Oil Fund was established in December, 1999. Our oil industry is the main source of the funds invested in countryâ€™s economy, infrastructure projects, construction of schools, roads up to now. Therefore, this is absolutely a commercial project. I think that all promises, forecasts must be fulfilled. I should note that this unexpected recession was caused by the gross mistakes of BP that is leading the consortium on Azeri, Chirag fields. We have been cooperating with BP for long years. We have always supported their activity. We supported them when they had hard times. We expect an adequate attitude. The wrong forecasts given to us are inadmissible. The false promises given to the State Oil Company are inadmissible. Such relations are impossible in the world business, on this level of business. We have always been fair towards all partners - both in politics and economy. We have always kept our promises. We expect adequate attitude. I think very serious changes must be made regarding this matter. Why do I make public this information today? Because last month BP officially promised me that all those unpleasant cases would be prevented in a short period of time. All these mistakes were admitted. It was admitted that the situation was not satisfactory. I was promised that very serious changes would be made in a short period of time, the working program would be amended, measures would be taken to keep the production on the stable level and what is more the persons who made those gross mistakes would be replaced. Though a month has passed I do not see these promises kept. On the contrary I think they are playing for time. Therefore I consider that it is absolutely inadmissible. The State Oil Company has been instructed to officially raise the issue and take necessary steps. The investors, who fail to fulfill their duties, the terms of the agreement must draw a lesson, serious measures must and will be taken," President said.