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Yagub Eyyubov: Azerbaijan would export gas via cost-effective routes - EXCLUSIVE

Yagub Eyyubov: Azerbaijan would export gas via cost-effective routes - <font color=red>EXCLUSIVE</font>

24 September 2008 15:16 (UTC +04:00)

Baku. Elbrus Seyfullayev-APA. Azerbaijani First Deputy Premier Yagub Eyyubovâ€™s interview with APA-Economics

-Azerbaijan has recently seen a rapid increase in oil and gas output. What quality changes are expected in the 2009 energy balance?

- 42.6 million tons of oil and 17 billion cubic meters of gas were produced in Azerbaijan last year. It is expected to extract 50.5 million tons of oil and 26.1 billion cubic meters of gas for this year. For 2009, Azerbaijan is predicted to produce 60 million tons of oil and 30 billion cubic meters of gas. This is a very dynamic growth rate. In percentage terms, this growth rates are a 19% and 54% against 2007 and 19% and 15% against 2008. The 2009 energy balance sheet is under the developmental stage. The increase in output allows basing the fuel and energy balance more on the natural gas. 424 000 tons of fuel oil (mazut) were used to produce electricity this year. It is slated not to use fuel oil for electricity generation next year. This will add $212 million to the state coffers. Of course, the incomes will help further improve well-being and salary of the population. In addition, it is necessary to stress pluses of the power system running on natural gas from an environmental point of view. Currently, we have sufficient gas resources that can bring gas supply to the maximum level. As you know, to date, 84% of the population of the republic is provided with uninterrupted gas supply. Azerbaijan has reached such a success for the first time. For the level of gas provision, Azerbaijan is one of the leading nations. All these achievements are the result of the national oil strategy and the economic development concept by the National Leader Heydar Aliyev. All the successes have been made possible thanks to the consistent execution of strategy by President Ilham Aliyev. In 2009, the volume of gas consumed is expected to rise to 11.9 billion cubic meters, up 1.1 billion cubic meters on this year, 150 million cubic meters of which will be for the needs of the population, 200 million cubic meters for the needs of industrial enterprises. All this will enable to improve the gas supply in the country.

- Of course, the growth dynamics of the oil and gas production would have an impact on the development of other areas in the country. This requires the creation of new generating capacity and a reliable power system. How about expanding electricity generation capacity?

- In 2007, 21.4 billion kilowatts of electricity was produced Azerbaijan. In 2008, this is expected to be 22.3 billion kilowatts and 25 billion kilowatts in 2009. Along with production, energy consumption has improved significantly in the country. 21.2 billion kilowatts of electricity was consumed in 2007, of which 12.7 billion kilowatts were for the population. This year, consumption increased to 21.8 billion kilowatts. In 2009, consumption is expected to be 24.8 billion kilowatts, including 13.4 billion kilowatts for the growing needs of the people and the new production sites. It is known that the Nakhchivan Autonomous Republic had a problem with electricity for long time. It imported electricity from Turkey and Iran. For several years, problems with electricity supply were completely solved in Nakhchivan. Thanks to new generation capacities, Nakhchivan is repaying electrical power that it then imported from neighboring countries. Electricity sector, for the volume of investments, is the second in the countryâ€™s economy after the oil industry. So far more than $1.2 billion government-secured foreign loans were received for this sector, and this process is ongoing. During 2006-2007, 5 multi-fuelled power plants with the total capacity of 452 MW were constructed in Astara, Sheki, Khachmaz Baku and Nakhchivan, and Vaykhir hydropower plant, with capacity of 4.5 megawatts, was launched. A diesel power plant in Nakhchivan was reoriented to run on gas, its capacity was increased to 60 MW. As part of reconstruction in Azerbaycan Thermal Power Plant in Mingechevir, the fifth power block was upgraded and a 150 MW increase was achieved. As a result of these works, the number of existing power plants in the country has been brought up to 15 and their total capacity to 5440 MW. At the same time, work on advanced projects in connection with the establishment of new generating capacities is under way. By the end of this year, a 525 MW thermal power plant is expected for operation in Sumgait. A 36 MW hydroelectric power plant is being design-engineered in Nakhchivan. It is scheduled to launch in a 300 MW Sangachal in early 2009 and a 104 MW multi-fuelled power plant at in Guba at the end of 2009. Thus, the capacity of the power grid will increase by 17.1%. In addition, a 780 MW Cenub oil-gas power plant will be launched in 2010 in Shirvan.

-The prospects of gas production in Azerbaijan are most associated with the exploitation of. When do you think it will be possible to export Shah Deniz gas to European markets?

- Of course, in terms of todayâ€™s realities, main export and future strategies of Azerbaijani gas is more related to the Shah Deniz Project. There are also sufficient reserves of natural gas in Azeri shelf of the Caspian and on land. The export of Azerbaijani gas is possible in several directions, including routes to European countries through Russia, Iran, Turkey and other alternative options. Naturally, the priority should be given to the most favorable from commercial standpoint. Which route we will choose depends on feasibility reports. Thus, I would like to reiterate that Azerbaijani gas will be exported through the routes which are more commercially profitable and cost-effective.