markets for azeri crude
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SOCAR Trading
All pages strictly confidential and not for public use
Markets for Azeri CrudeHEG Commodity Trading Major– Friday, 11 th November 2011
Ludwig Hachfeld – Project Director
All pages strictly confidential and not for public use
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SOCAR IS THE STATE OIL COMPANY OF AZERBAIJANAzerbaijan – location, history and economy
Source: SOCAR
Azerbaijan
IranTurkey
Russia
Georgia
Armenia
Turkmenistan
Kazakhstan
Independent republic Independence - 1991 from Soviet Union Territory - 86.6 thousand km2 Population - 8.7m Capital - Baku
Oil producing country First industrial well - Bibiheybat 1846-1847 1890-1900 – 50% of world supply 1994 - Contract of the Century on ACG fields Current production – over 1m barrels per day
Stability and pro-business reform Government – Presidential Republic (Ilham Aliyev) UN Transparency – Public Service Award 2007 IFC Doing Business - top regulatory reformer
2009 WEF Competitiveness – largest improvement
ever 2010
Fast economic development Currency – Manat stable against USD GDP – ca. US$55bn and US$10,000 PPP per capita GDP growth – 20-30% pa 2005-2007 and 5% in 2010 Non-oil sector - 55% of GDP growing 7% pa
All pages strictly confidential and not for public use
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READY FOR FURTHER DEVELOPMENTAzerbaijan economic and social indicators
Sources: Statistical Office Azerbaijan, SOFAZ
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 40735
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
491.5 692.2 815.6 964.0 1,394.3 1,454.5 2,475.4
11,219.2
14,900.0
22,766.8
30,357.0
USD
bn
2005 2006 2007 2008 2009 2010 2011
0%
10%
20%
30%
40%
50%
60%
70%
26%
35%
25%
11% 9%5% 3%
Azerbaijan GDP growthOil sectorNon-oil sectors
GDP growth GDP diversification
State Oil Fund Assets
2007 2010
36% 44%
57% 49%
Non-oil Sector Oil SectorNet taxes on products and imports
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AZERBAIJAN UPSTREAM CONSORTIUMAzerbaijan and SOCAR legacy
4
Sources: SOCAR, BP
*COP: Chirag Oil Project
Since 1993, Azerbaijan and SOCAR have created a strong track record cooperating with international oil majors in upstream consortia.
Contract of the Century – signed on 20 September 1994 creating the AIOC consortium for the development and production sharing of ACG
AIOC – consortium investing >$15bn to develop ACG
ACG – oilfields located some 120km off the coast of Azerbaijan over 430 km2 with >7bn bbl (1bn ton) in recoverable reserves and producing 850,000 bpd
BTC –1m bpd capacity crude export pipeline from Baku to Ceyhan via Tbilisi in Georgia (1,768 km), built over 2003-2005 after an investment of $4bn
SOFAZ – State Oil Fund of Azerbaijan established in 1999 to manage the Republic’s share of PSA receipts, amounting to $18bn in total assets by mid-2010
SOCAR – State Oil Company of Azerbaijan Republic, incorporated in 1993 to manage all oil and gas assets and activities on the part of the Republic
NovorossiyskSupsa Baku
Ceyhan
BP (operator) 34%
SOCAR 10%
Chevron 10%Inpex 10%
Statoil 9%
ExxonMobil 8%
TPAO 7%
Devon 6%
Itochu 4% Delta Hess 2%
AIOC consortium BTC and other pipelines
BTC (2005)
Baku Supsa (1999)
Baku Novorossiysk (pre-1993)
Azeri Quality ACG production profile
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
0.0
200.0
400.0
600.0
800.0
1,000.0
1,200.0 COP GUNESHLI DW AZERI CHIRAGCeyhan Supsa
API 36.6 34.8
Sulphur, wt% 0.15 0.15
TAN, mg KOH/g 0.31 0.26
Vanadium, ppm < 1 < 2.0
*
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SOCAR HANDLES 75-80% OF AZERBAIJAN’S PRODUCTION
Source: SOCAR *FOB Other: Supsa, Novorossiysk
Production AIOC partner exports SOCAR Refineries SOCAR exports
Non-ACG11
ACG40.63141
13
6.2206
CIF-CFR21
FOB Ceyhan7.030266328
FOB other*5
Mill
ion
MT
SOCARTrading from Ceyhan
33
2010 Crude Entitlement
Mill
ion
MT
2008 2009 20100
10
20
30
40
50
60
1219 21
10
1112
14
1413
8
7 6
Azeri barrel consolidation
SOCAR Trading - System Barrel Azeri SOCAR MO Other exporters
Refining domestic
44
51 52 52
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1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100.0
200.0
400.0
600.0
800.0
1,000.0
1,200.0 Crude exports - CeyhanCrude exports - SupsaCrude exports - NovorossyiskRefining - product exportsRefining - domestic consumptionProduction
Mill
ion
bpd
AZERBAIJAN: EXPORTS STILL INCREASINGExport routes and volumes
Source: SOCAR
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MEDITERRANEAN IS AZERI NATURAL MARKETAzerbaijan main oil export destinations from 2008 to 2011
Sources: SOCAR, BTC, press sources and SOCAR Trading estimates, BP
2008 2009 2010 2011
49% 54%64% 64%
13% 7%
6%9%
26%20%
12%8%
12%19% 17% 12%
1% 4%
AfricaAsiaAmericasNW EuropeMed
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System crude
SYSTEM BARREL: NOW GROWING THROUGH CONSOLIDATION
SOCAR Trading – system crude marketing 2008-2010
Source: SOCAR Trading
Consolidation
Customers
Markets
2008 2009 2010
6.2 10.213.2
1.6 1.31.3
3.33.8
2.4
1.53.6 3.6
0.1
Africa
Asia
Americas
NW Europe
Med
MM
T
Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 20110
5
10
15
20
25 System barrel Azeri Third party Azeri BTC programme Turkmen
M B
bls
/ Mon
th
14.8
19.3
Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 20110
2
4
6
8
10
12
14
16
11.110.0 9.8
12.410.1
11.8 12.4 11.6
14.2 13.311.7
9.010.9
M B
bls
/ Mon
th
M M
TM
MT
2008 2009 2010
7.2 10.6 10.6
3.9 5.0 6.7
1.4 3.3 3.5
NOC
Major
Refineries
All pages strictly confidential and not for public use
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RECENT INTERNATIONAL EVENTS BOOST AZERI PRICESAzeri premium VS Es Sider OSP
Sources: SOCAR, Reuter, press sources and SOCAR Trading estimates
01 January 2008 01 July 2008 01 January 2009 01 July 2009 01 January 2010 01 July 2010 01 January 2011 01 July 2011-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
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SOCAR CONTINUES TO DEVELOP AND EXPAND INTERNATIONALLYSOCAR – key assets
10
Source: SOCAR
Turkey downstream Petkim petrochemical factory – 2008 Refinery - under development
Ukraine downstream Retail network - 2010
Azerbaijan upstream Shah-Deniz gas – 2006 ACG Deepwater oil – 2008 Umit gas discovery – 2010
Azerbaijan downstream Retail network development Gas distribution – 2009 Refining and petrochemicals
complex - under development
Georgia mid- and downstream Supsa crude pipeline – 1999 Kulevi product terminal - 2008 Retail station network -2008 Gas distribution - 2008
SOCAR HQ - Baku BTC and other pipelines
Kulevi Terminal - Georgia Oil Refinery - Baku
Petkim plant - Turkey SOCAR station - Georgia
Romania downstream retail network - 2010
BTC pipeline - 2005
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SOCAR TRADING: ACHIEVEMENTS AND EXPANSIONSOCAR Trading - commercial and corporate development
Source: SOCAR Trading
SOCAR TRADING, established in 2008, is achieving its three corporate objectives: Market SOCAR system barrel globally: since 2008 <50% volume is sold in Med basin Develop third party trading: since 2009 >30% of volume and gross margin Assist strategic development: achieved in 2010 with processing and investment in oil logisticsGrowth on all three fronts continues in 2011, with increased attention for Asia-Pacific, Africa and the Americas
System crude production
Key system crude customers
Third-party crude
Third-party crude under development
Product trading
Product trading to under development
SOCAR Trading offices
SOCAR Trading office to be opened
Processing contracts
Investments in oil logistics
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FUJAIRAH: FIRST TANKS OPERATIONAL THIS YEAR
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1. First 3 fuel tanks operational – Q4 2011
2. All 6 fuel tanks complete– Mid 2012
3. First 6 distillates tanks – Mid 2012
4. Final 8 distillates tanks – Early 2013
Phase Construction Type Tanks Total m3
1 2010-2011Main Infrastructure
3 x 38,000 m3 114,000Fuel tanks
2 2011-2012
Fuel tanks 3 x 38,000 m3 228,000
Distillates tanks5 x 22,000 m3 340,000
1 x 6,000 m3 346,000
3 2012-2013 Distillates tanks7 x 39,000 m3 621,000
1 x 20,000 m3 641,000
All 2010-2013 20 Tanks 641,000 m3
Source: SOCAR Trading
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Sources: Korea National Oil Corporation
5 M bbl storage agreement in Yeosu
Vessels handling capacity Panamax up to VLCC with min vessel PBL(parallel
body length) of 105m
Qualities of crude that can be stored
API Gravity: more than or equal to 27 RVP (psi): less than 9.5 (0.67kg/cm2 at 37.8 deg C) Wax Contents (wt%): less than 9 Viscosity (cst): less than 22 at 20 deg C Sulfur (wt%): less than 3
Current Storage places KNOC Facilities
Opened in 1998:Underground and aboveground reserve Tank volume: 49.7 MMB
YEOSU
Partnership with the Korea National Oil Corporation
KOREAN STORAGE
SOCAR TradingRue de Villereuse 22
1207 Geneva, SwitzerlandTel: +41 (0) 22 562 00 00Fax: +41 (0) 22 562 00 99
All pages strictly confidential and not for public use
Ludwig Hachfeld – Project Director
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