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Markets for Azeri Crude

Markets for Azeri Crude. HEG Commodity Trading Major– Friday, 11 th November 2011 Ludwig Hachfeld – Project Director. Socar is the state oil company of azerbaijan. Azerbaijan – location, history and economy. Source: SOCAR. Independent republic Independence - 1991 from Soviet Union

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Markets for Azeri Crude

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  1. Markets for Azeri Crude • HEG Commodity Trading Major– Friday, 11thNovember 2011 • Ludwig Hachfeld – Project Director

  2. Socar is the state oil company of azerbaijan • Azerbaijan – location, history and economy • Source: SOCAR • Independent republic • Independence - 1991 from Soviet Union • Territory - 86.6 thousand km2 • Population - 8.7m • Capital - Baku • Oil producing country • First industrial well - Bibiheybat1846-1847 • 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 Kazakhstan Russia Turkmenistan Georgia Azerbaijan Armenia Iran Turkey

  3. Ready for further development • Azerbaijan economic and social indicators • Sources: Statistical Office Azerbaijan, SOFAZ GDP diversification GDP growth State Oil Fund Assets

  4. Azerbaijan upstream consortium • Azerbaijan and SOCAR legacy • Sources: SOCAR, BP • *COP: ChiragOil Project AIOC consortium BTC and other pipelines • 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 Novorossiysk Supsa Baku Novorossiysk (pre-1993) Baku Baku Supsa (1999) Ceyhan BTC (2005) Azeri Quality ACG production profile *

  5. Socar handles 75-80% of azerbaijan’s production • Source: SOCAR • *FOB Other: Supsa, Novorossiysk 2010 Crude Entitlement 52 51 52 44 Million MT

  6. Azerbaijan: exports still increasing • Export routes and volumes • Source: SOCAR

  7. Mediterranean is Azeri natural market • Azerbaijan main oil export destinations from 2008 to 2011 • Sources: SOCAR, BTC, press sources and SOCAR Trading estimates, BP

  8. system barrel: now growing through consolidation • SOCAR Trading – system crude marketing 2008-2010 • Source: SOCAR Trading System crude Customers M MT Consolidation Markets MMT

  9. Recent international events boost azeri prices • Azeri premium VS Es Sider OSP • Sources: SOCAR, Reuter, press sources and SOCAR Trading estimates

  10. socar continues to develop and expand internationally • SOCAR – key assets • Source: SOCAR Ukraine downstream Retail network - 2010 SOCAR HQ - Baku BTC and other pipelines • Georgia mid- and downstream • Supsa crude pipeline – 1999 • Kulevi product terminal - 2008 • Retail station network -2008 • Gas distribution - 2008 Romania downstream retail network - 2010 • Azerbaijan upstream • Shah-Denizgas – 2006 • ACG Deepwateroil – 2008 • Umitgas discovery – 2010 • Azerbaijan downstream • Retail network development • Gas distribution – 2009 • Refining and petrochemicals complex - under development Oil Refinery - Baku Kulevi Terminal - Georgia BTC pipeline - 2005 • Turkey downstream • Petkim petrochemical factory – 2008 • Refinery - under development Petkim plant - Turkey SOCAR station - Georgia

  11. socar trading: achievements and expansion • SOCAR Trading - commercial and corporate development • Source: SOCAR Trading 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 • 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 logistics • Growth on all three fronts continues in 2011, with increased attention for Asia-Pacific, Africa and the Americas

  12. Fujairah: First tanks operational this year 4. Final 8 distillates tanks – Early 2013 3. First 6 distillates tanks – Mid 2012 2. All 6 fuel tanks complete– Mid 2012 1. First 3 fuel tanks operational – Q4 2011 Source: SOCAR Trading

  13. Korean storage • Sources: Korea National Oil Corporation • Partnership with the Korea National Oil Corporation Current Storage places KNOC Facilities • 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 Opened in 1998: Underground and aboveground reserve Tank volume: 49.7 MMB YEOSU

  14. Ludwig Hachfeld – Project Director

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