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0 Jun 8 2011 @ 10:55am by Matt Smith in Crude Oil, Economy, Global Energy, Natural Gas

Chorek and Qatik with Elmar Mammadyarov

Due to a random act of good fortune, I received an invite to attend a round table discussion in New York last Wednesday with the Foreign Minister of Azerbaijan, Elmar Mammadyarov, before he traveled on to Washington the next day for a meeting with Secretary of State Hillary Clinton. My superiors were suitably bemused / impressed that Energy Burrito would get invited to such an event, so faster than I could say ‘Ādharbādhagān’, I was given the thumbs-up to attend (….based on some other conditions…which I can’t disclose). (That makes it sound like a covert mission, but it wasn’t). 

So fast forward to the meeting. I was in a fortunate position at the round table (not literally…the table wasn’t round for a start…) in that everyone else there was interested in either the country’s bid for a seat on the UN, or the recent political turbulence. I was there, however, to ask about one of the most positive aspects of Azerbaijan: energy.

Azerbaijan is key to energyworld™ for two reasons:
1) It produces 1.1 million barrels a day of oil (21st in world)
2) It is to be a key natural gas supplier to the Nabucco pipeline, which is to supply gas to Europe, dramatically reducing reliance on Russia

Unfortunately for him (and me), this article appeared in that morning’s New York Times, covering the deteriorating political relations between Azerbaijan and Armenia, so it dominated much of the proceedings. On the upside, it made him all the more keen to talk about energy when the topic arose.

Plans to start construction on the Nabucco pipeline have recently been delayed once again. I wondered whether this was extremely frustrating. The minister was, however, decidedly upbeat. He explained how they had signed an agreement earlier in the year with the European Commission to exchange natural gas supplies from Azerbaijan (350 Bcf/annum) for Visa privileges for the Azerbaijani people. And the supply of natural gas was also not exclusive to the Nabucco project (he pointed out later in the discussion Azerbaijan is already working on another natural gas project with Turkey).

Azerbaijan’s natural gas reserves also appear underrated, with agency estimates at 30 Tcf, while the Azerbaijani President has been quoted saying proven reserves are over double that.

What I find to be the most intriguing aspect of Azerbaijan is their petroleum industry, as it accounts for a hugely huge part of Azerbaijan’s GDP (20% from my research). I wanted to know why they didn’t ramp up production further if the petroleum industry was such a vastly positive influence on GDP.

The minister explained that exploration and development was down to a consortium led by BP. He revealed Azerbaijan earned $60 million a day from the petroleum industry after costs and fees were removed. Based on a GDP of $43 billion in 2009 (source: World Bank), the petroleum industry makes up nearly 50% of Azerbaijan’s GDP (no wonder he quickly dismissed my 20% estimate). He also confirmed Azerbaijan had enough oil reserves to last until 2047 (which equates to over 14 billion barrels, more than double the estimate of  7 billion barrels from the Oil and Gas Journal).

He was keen to emphasize the government’s focus on putting the profits from the petroleum industry to work. He identified a shipbuilding program and the reconstruction of the cross-country railroad as two major projects that were underway to diversify, promote, and generate economic growth in the country. And a key point he returned to on a number of occasions in the meeting was the country’s poverty rate, which has fallen from 49% to 9% in the last 7 years.

Abruptly the Minister received a tap on the shoulder, and – with a swift round of hand-shaking – left the room. Although it was a shame there had been only a limited amount of focus on energy, I was happy to have gleaned a number of details which would otherwise not have been readily available. And given the Foreign Minister’s willingness to answer questions, he must have found us to be an accommodating audience. It was the calm before the storm, I’m sure; he was not in for such an easy ride with Hillary Clinton the next day.

By the way, chorek and qatik are Azerbaijani snacks; the meeting was very much on Mr. Mammadyarov’s terms, so no chips and salsa in sight.

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