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Higher Gas Production Should Support Economic Growth in Azerbaijan, S&P Says

Over the long term, higher gas production should support economic growth and compensate for stagnating oil production in Azerbaijan, Standard & Poor's Rating Services said in its report on Aug.4.

"The major new Shah Deniz II gas field is expected to come on stream in 2018, and will bring gas directly from Azerbaijan to Europe for the first time. The final gas pipeline route was determined in late 2013 and currently the development of the Trans-Anatolian and Trans-Adriatic pipelines are on track. These will be constructed by a consortium of Azerbaijan's state-owned oil and gas company (SOCAR), international oil and gas corporations, and the newly created Southern Gas Corridor CJSC, that will likely benefit from capital support via the State Oil Fund of the Republic of Azerbaijan (SOFAZ), the country's sovereign wealth fund," S&P said.

"Hydrocarbon exports will continue to underpin the current account surplus, although until gas output picks up in 2018, the balance will likely gradually decline. We forecast the current account surplus will decrease to about nine percent of GDP in 2016 from an estimated 17 percent in 2013".

"Still, we think Azerbaijan will maintain its strong external position. We estimate gross external financing needs will remain less than 70 percent of current account receipts (CARs) plus usable reserves, and the country's narrow net external asset position will remain at approximately 100 percent of CARs over the next three years," the report said.

The gas to be produced as part of the Stage 2 of the field's development will be exported to Turkey and to the European markets by means of expanding the South Caucasus Pipeline and construction of the Trans-Anatolian Gas Pipeline (TANAP) and the Trans-Adriatic Pipeline (TAP).

Under the project, "Shah Deniz" gas annual production will increase from nine billion cubic meters in the first phase of an additional 16 billion cubic meters in the second phase.

Shah Deniz reserves are estimated at 1.2 trillion cubic meters of gas. The contract to develop the offshore Shah Deniz field was signed on June 4, 1996.

Participants at the development of the Shah Deniz field are SOCAR (the State Oil Company of Azerbaijan) with a share of 16.7 percent, BP (28.8 percent), Norway's Statoil (15.5 percent), Iran's NICO (10 percent), French Total (10 percent), Russia's Lukoil (10 percent) and Turkish TPAO (nine percent). Earlier, Total sold its share to Turkish TPAO and after completion of the transaction, the share of the latter will be 19 percent in the project.

Source: Trend

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