Socar Optimistic Despite Low Prices
Azerbaijan state oil company Socar lost over manat 1bn ($662mn) in 2015, with low oil and gas prices a major factor, but it managed to finish the year with zero balance, thanks to its overseas activities, a senior executive said.
"As we have significant activities denominated in international currency, we managed to complete 2015 with an almost zero balance when we converted it into manats,” Socar’s vice-president for economy Suleyman Gasymov told the Caspian European Club business forum in Baku April 27. Net profit for 2014 amounted to manat 1.274bn.
“Despite all the challenges we have fulfilled our oil-gas production plan for 2015 and for the first quarter of 2016. We also fulfilled our obligations for the state budget,” he said.
Socar’s total consolidated debt is around $6.3bn from international and domestic sources. However, it is manageable, being mainly long-term borrowings.
“For instance, we issued Eurobonds for 10 and 20 years, we have direct borrowings from banks for five years and more,” he said, adding that the company is not planning to issue new notes soon. In fact it proposes to buy back outstanding eurobonds worth $500mn.
Socar's main goal for this year is to keep oil production stable and increase gas production, which is reflected in the company’s investment programme.
The state-run company is aiming to complete a programme of domestic gas supply this year. It includes starting gas supply to remote areas that are off-grid.
Gasymov said the company is in the process of buying a methanol plant near Baku, whose owner AzMeCo has been forced to sell to repay debt to the International Bank of Azerbaijan. "The evaluation of the asset is almost complete. We expect that Socar will buy the company then,” Gasymov said.
AzMeCo has been struggling to set stable methanol production as the company did not have a long term gas supply agreement with Socar. It had to stop receiving gas from Russia started last October as it was uneconomical.
Socar will continue with its international projects, mainly in Turkey. According to Gasymov, the Star refinery in Turkey will be completed in 2018. The company and its partner, Azerbaijan's minister for the economy, have already invested $1.9bn into the project.
Socar's profit from the Petkim petrochemical complex in Turkey was lira 500mn ($178mn). Last year Socar spent its dividends on repaying debt and financing Star.
The other major project in Turkey is Trans Anatolian gas pipeline where Socar is a partner in the Southern gas corridor company. “We issued our first eurobonds and there are no financial problems,” Gasymov said.
Kama Mustafayeva