Speech by Ilham Aliyev at the fourth Ministerial Meeting of Southern Gas Corridor Advisory Council kicked off in Baku

15 february 2018, 10:00

- Dear ladies and gentlemen,

Dear friends!

Welcome to Azerbaijan! I am glad that you have accepted our suggestion and are attending the fourth ministerial meeting within the framework of the Southern Gas Corridor Advisory Council. Today we will review the work done in the past year and, of course, talk about plans for the future. I am glad that there are old and new friends among our guests today. I would like to specifically welcome the Vice President of the European Commission, Mr. Sefcovic, who had attended all the meetings of the Southern Gas Corridor Advisory Council. The European Commission's support for the implementation of this project is very important.

Today, I would also like to express my gratitude to the governments of the United States and the United Kingdom, whose high-ranking representatives are here with us, for the continued support not only of the Southern Gas Corridor project, but also of all the other energy security projects Azerbaijan initiated in the 1990s. In particular, the governments of the United States and the United Kingdom provided strong support for the Baku-Tbilisi-Ceyhan and Baku-Tbilisi-Erzurum oil and gas projects. This support continues, and it shows that a close partnership and strong ties with these countries help all of us to achieve our goals. Of course, I would also like to welcome our partners from the countries that are members of the Southern Gas Corridor – Georgia, Turkey, Greece, Bulgaria, Albania, Italy, the senior government officials, as well as our partners, future members of a large team. I can already consider them to be members of a large team, because we have already signed memorandums of understanding with Bosnia and Herzegovina, Croatia and Montenegro. I am glad that representatives of friendly countries, Romania and Turkmenistan, are also attending this meeting for the first time. Their participation in this meeting also demonstrates that they attach great importance to our project.

It is beyond doubt that the implementation of the project would have been impossible without the strong will of members of Shah Deniz, TANAP and TAP, as well as financial institutions. Let me also recognize representatives of the companies and leading financial institutions of the world for their contribution, determination and financial support. In fact, your participation in the Council meeting is evidence of the fact that we have managed to create a very strong and effective team implementing important global projects for all of us, projects of energy security, energy diversification and projects that will strengthen international cooperation in our region.

In 2015, Azerbaijan initiated the establishment of the Advisory Council for the Southern Gas Corridor, as we clearly understood the great need for a coordination of our efforts. In previous years, Azerbaijan had implemented important energy projects jointly with neighboring countries, Georgia and Turkey. However, more countries and companies were involved this time, so we needed coordination and maximum efficiency. I am very glad that the European Commission immediately supported this initiative, and the European Commission and Azerbaijan have organized this fourth meeting. I want to express my special gratitude to Mr. Sefcovic again for the great contribution to the implementation of this project.

We are already meeting for the fourth time. This format of cooperation has already proved to be effective as it opens the way for very good results. The Southern Gas Corridor project is one of the key elements of Azerbaijan's very successful energy strategy. It contributes a great deal to the diversification of our economy. Using energy resources, we have made investment in the non-oil sector, human capital and infrastructure, thereby ensuring the long-term sustainable development of our economy. There is no doubt that the projects we carried out in Azerbaijan in previous years have laid a solid foundation for the implementation of the Southern Gas Corridor. Our energy strategy began shortly after the restoration of independence, in a matter of three years. In 1994, Azerbaijan signed a contract with a consortium of leading oil companies of the world led by BP. And given the proportions of the project and the volume of investment, this contract was immediately branded as the Contract of the Century. In the time that has passed since our last meeting in Baku in February last year, we have signed a new contract related to the same field – the extension of the Contract of the Century. At present, the project has been extended until 2050. In the coming decades, we will enjoy the stable and sustainable development of one of the largest oil fields – Azeri-Chirag-Gunashli.

Year 1994 actually became a turning point in our history, in the history of oil development in Azerbaijan and the world. It also served to introduce Azerbaijan to the world community, opened the doors for a massive investment influx in our economy, especially at the initial stage in the oil and gas sector, and demonstrated that Azerbaijan is a reliable partner capable of creating the most favorable investment environment for investors. I simply want to remind you that all our major oil and gas contracts are ratified by parliament and signed into law. This, in turn, provides maximum guarantees to investors. Two years later, in 1996, a contract for the Shah Deniz gas condensate project was signed. At present, Shah Deniz is the only resource base for the Southern Gas Corridor. This has been an important event in our history, because it helped us attract billions of investment again, and Azerbaijan turned from an oil producer and exporter into a country also producing and exporting gas. Today, these two major energy projects play an important role in matters related to regional cooperation. This has given an impetus to the construction of the main pipeline infrastructure linking regions and continents. Today, these two megaprojects contribute to the diversification of energy supplies in the region and Europe. Subsequently, we had to build pipelines, because as a landlocked country we do not have access to international markets, which has necessitated regional cooperation. I think that this has also demonstrated our plans quite well. Thus, the first pipeline linking Baku with the Georgian seaport of Supsa was opened in the late 1990s, while the pipeline transporting crude oil linked the Caspian and Black Seas for the first time. However, this was not enough because the capacity of this pipeline was not sufficient to fully develop our oil resources. Therefore, the construction of the main oil pipeline was planned and the Baku-Tbilisi-Ceyhan oil pipeline connecting the Caspian and Mediterranean Seas was successfully opened in 2006. At present, the Baku-Tbilisi-Ceyhan oil pipeline, which transports oil not only from Azerbaijan but also from the opposite side of the Caspian Sea, the fields located on the eastern coast of the Caspian Sea, has turned Azerbaijan into a transit country and a reliable transit partner.

Year 2007 was also an important year, because Azerbaijan became an exporter of gas for the first time in its history. After the opening of the Baku-Tbilisi-Erzurum gas pipeline, our gas began to be exported to the markets of Georgia and Turkey, which also laid the foundation for the second stage in the development of the Shah Deniz field and the Southern Gas Corridor project. We are discussing ways of creating new opportunities for the new stage of the Shah Deniz development. Of course, to export gas to Turkey and Europe, we needed a pipeline of a larger diameter, and Azerbaijan and Turkey signed a historic document on the construction of the Trans-Anatolian pipeline (TANAP) in Istanbul in 2012. I believe that this historic document will have a strong impact on regional development and cooperation, and usher great economic benefits to our countries, because this has also become a turning point in modern history. TANAP is one of the fundamental elements of the Southern Gas Corridor, and 2012 actually opened the door to major investments in Shah Deniz-2. After all, the decision to invest in Shah Deniz-2 was made after this, in 2013. This would have been impossible without TANAP. 2013 was a year when the Trans-Adriatic pipeline was chosen as a continuation of the TANAP project. So this is a brief history of the work we have done. Of course, this history shows that we have been moving towards the implementation of the Southern Gas Corridor for more than 20 years. These 20 years have been a period of success, achievement, development, transformation and regional cooperation.

Today, we already have a format of strong regional cooperation which covers not only three traditional allies – Azerbaijan, Georgia and Turkey – but also other countries. In the time that has passed since our previous meeting, significant progress has been made in the implementation of the Southern Gas Corridor. I would like to bring some figures to your attention and to the attention of the Azerbaijani people because those present at this meeting know perfectly well what stage we are at now. However, let me say that over the past year the project has been implemented very successfully. We have made great progress on all four components of the Southern Gas Corridor. We have completed more than 99 per cent of the work on Shah Deniz-2 field. For comparison, this figure was at 90 per cent a year ago. Approximately 95 per cent of the work related to the South Caucasus pipeline has been completed. A year ago, this figure was 90 per cent. The implementation of TANAP is approaching 95 per cent and was at about 70 per cent a year ago. The progress of is at around 70, perhaps 66-67 per cent compared to last year's 34 per cent. So this is a very important development. It is evidence that 2017 may have been a decisive year in the implementation of the project, and we are very close to completion now. I would also like to note that the regional cooperation established by Azerbaijan, Georgia and Turkey 20 years ago has played an important role in the development of the energy sector in our region and Europe. This regional cooperation has not only ushered the implementation of giant and large-scale energy projects, but also created stability, predictability and close cooperation in our region. At the same time, it allowed us the opportunity to focus on other transport projects. In the time since our last meeting in February 2017, another important event took place in the region. At the end of October last year, we celebrated the opening of a new project in Baku: Baku-Tbilisi-Kars, a new railway link not only among the three countries, but also between Asia and Europe. This is already the shortest route from Asia to Europe, which reduces the time to transport goods more than in half. This railway already provides services to companies. I am sure that they will seriously consider this project as one of the main priorities. The current increase in freight traffic already shows that Baku-Tbilisi-Kars will become a very important element of the new Silk Road project. It is beyond doubt that if there were no close regional cooperation among Georgia, Turkey and Azerbaijan here in the Caucasus, if oil and gas projects had not been realized, the Baku-Tbilisi-Kars railway would probably remain an unrealistic project, a project for history. This is a tangible result we have achieved. Today, sitting at this table as a large team, we can see that we are capable of establishing the same cooperation among countries participating in the Southern Gas Corridor. This is already happening, and the participation of high-level delegations from partner countries demonstrate exactly that. So far, Shah Deniz is the only resource base for the Southern Gas Corridor. However, I believe and am sure that we will have additional resources in Azerbaijan in the future, as we are currently working on new projects, new gas fields in the Azerbaijani sector of the Caspian Sea together with our international partners. In particular, Azerbaijan is involved in active negotiations with foreign companies in respect of the Absheron field, where production may begin quite soon, in a few years and perhaps even sooner, and in respect of Umid and Babek fields possessing large reserves.

Another field we hope will soon be involved in international cooperation is called Karabakh. In addition, there are two fields with a large gas potential – Dan Ulduzu and Ashrafi. Thus, confirmed gas reserves in Azerbaijan exceed the reserves of the Shah Deniz field more than twice and amount to 2.6 trillion cubic meters. I am sure that there will be even more – our experience shows that actual reserves are much higher than expected. For example, in 1994, when the "Contract of the Century" was to be signed, the reserves of the Azeri-Chirag-Gunashli fields were estimated at a little over 500 million tons. According to the most modest calculations, at present this figure is twice as high – about 1 billion tons. I believe and hope that we will see the same picture on gas fields. Therefore, Azerbaijan will become a reliable and long-term supplier of energy resources to world markets in the coming decades. Today, Azerbaijani oil accounts for a third and perhaps even more, about 40 per cent, of oil consumption in some European countries. Azerbaijan is ready to access the European market with its gas resources.

The Southern Gas Corridor is an energy security project. If we talk about national security, then, of course, energy security is one of the most important components at the moment. The Southern Gas Corridor is a project of energy diversification. For us it is about the diversification of routes and sources. This is a real diversification, because the diversification of routes only is somewhat different from ours. The Southern Gas Corridor is a project of cooperation in the energy sector. it shows what cooperation should be like. Cooperation is possible only if all parties benefit from it. Therefore, our primary goal is to find the right balance between producers, transit countries and consumers. Only in this case can we succeed, and the successful implementation of the project shows that we are on the right track. The interests of producers, or the producer – there is only producer so far, Azerbaijan, transit countries and consumers are fully taken into account, and the Southern Gas Corridor opens the way to multibillion investments in all the countries involved. This means thousands of new jobs. This means not only energy, but also transport infrastructure, investment in the transport infrastructure. It will lead to the gasification of many territories in the countries along the route of the Southern Gas Corridor and members of the Southern Gas Corridor. All this means development, stability, predictability, and opens the way to cooperation. Countries participating in the Southern Gas Corridor today are very close partners of Azerbaijan. Azerbaijan has already signed declarations on strategic partnership with the vast majority of these countries. At present, we are in talks with the European Union, and the new partnership agreement will create a new format of cooperation between Azerbaijan and the European Union.

Of course, along with previous projects, the Southern Gas Corridor project brings new benefits to our country. Azerbaijan has effectively used its energy resources to diversify the economy, invest in human capital and completely transform the economy. At present, the private sector accounts for the absolute majority of the gross domestic product. Over the past 15 years, our economy has grown more than three times, and the gross domestic product 3.2 times. We have managed to use energy resources correctly to reduce unemployment and poverty. Although our population has increased by 1.5 million people over the past 15 years, unemployment is at a very low level of 5 per cent. The poverty rate is 5.4 per cent and literacy is almost at 100 per cent.

In order to diversify the economy, we have invested in human capital, created jobs and carried out modern infrastructure projects. The results of January 2018 indicate that our economy mainly develops in the non-power sector. Economic growth here constitutes about 4 per cent. In January, economic growth in the non-energy sector of our industry was 8.7 per cent. The foreign exchange reserves of Azerbaijan are equal to the gross domestic product. I believe that the best indicator of economic diversification is the assessment of the Davos World Economic Forum. The latest assessment shows that Azerbaijan is in 35th place globally in terms of competitiveness. According to the inclusive development index for developing countries, Azerbaijan is ranked in third place. Ahead of us are only 30 developed and two developing countries. This means that in terms of for competitiveness and development we are in 33rd and 35th places. This is the result of our policy underpinned by the energy factor. Of course, we will continue to work closely with our partners in Azerbaijan in connection with further energy development. At the same time, I would like to inform our guests that, of course, the most important sector for us is the non-energy sector. This was brief information on the benefits of the project for our country and our partners. It shows that the Southern Gas Corridor project, which is a long-term energy project of Europe, will yield positive results for our countries. I would like to thank you again for being here with us today. I would like to take this opportunity to invite you to the fifth meeting of the Advisory Council next year. I think that three important segments of the Southern Gas Corridor will already be engaged by then and our gas will obtain access to markets.