JUNE 3 2016 (The Conway Bulletin) — In 2016, Azerbaijan found itself in the midst of a crisis that it had tried to ignore for months. Low oil prices hit both revenues and investment opportunities for SOCAR, the state-owned energy company.
It is now trying to cut expenditures and raise cash through bonds and loans for its main projects. In Turkey, SOCAR’s subsidiary is divesting from a large petrochemical complex and readying for an IPO, in an effort to go full-steam into the Southern Gas Corridor business.
And Turkey is a key partner in the pipeline game, as it will become the gateway for Azerbaijani gas to Europe.
Now, though, SOCAR faces a problem. It can either diversify its portfolio, cut investments and wait for sunnier days or go ahead and pour cash — borrowed cash — into the US and Europe’s pet pipeline project.
Little does it matter that US President Barack Obama and British PM David Cameron both sent kind words to Azerbaijan’s international energy conference this week. SOCAR still has a problem.
But if it invests disproportionately into infrastructure, it might not have enough to ensure that production upstream is steady enough to fill the pipelines, which would be a repeat, though a much faster one, of the fate of the BTC oil pipeline, now constantly used below capacity.
The incessant movements, even marginal, in foreign markets in the past few months reveal how shaky SOCAR’s position is. Last week it closed representative offices in three countries to save money. But that won’t be enough to pay back the gamble it has taken with all the outstanding loans and bonds to build the West’s dream pipeline.
ENDS
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(News report from Issue No. 283, published on June 3 2016)
