Speech by Ilham Aliyev at the third Ministerial Meeting of Southern Gas Corridor Advisory Council kicked off in Baku
23 february 2017, 10:15
Ladies and gentlemen,
First of all, I would like to welcome all our guests and express my gratitude for participating at the Third Ministerial Meeting of Southern Gas Corridor Advisory Council. Your participation is very important. It shows that governments and organizations you represent attach very big importance to the implementation of the Southern Gas Corridor project.
Today, among our guests we have ministers of the member-countries of the Southern Gas Corridor, high representatives of the governments of the United States and United Kingdom, Vice-President of the European Commission. We have with us representatives of companies and international financial organizations. I would like to especially welcome Mr. Sevcovic, Vice-President of the European Commission, whom I met this year already four times. And this actually shows that European Commission and Azerbaijan are working very closely in order to implement this important project.
I think that we managed to establish a very unique, very special format of international cooperation. Definitely, this experience of cooperation between countries, companies, financial institutions is not only the main reason for successful implementation of the Southern Gas Corridor, but will also play its important role in future because after the completion of this global project, definitely, our cooperation will continue in many other areas.
Talking about international cooperation, of course, I would like to draw your attention to the history of energy policy of Azerbaijan because without that today’s meeting wouldn’t have been possible. After restoration of our independence, Azerbaijan invited major energy companies to work in the country. For the first time the Caspian Sea became the area of international cooperation and huge investments from major oil and gas companies of the world. In 1994, we signed a contract, which then was named the Contract of the 20th Century, to develop huge oil fields in the Azerbaijani sector of the Caspian Sea. That was actually the opening of the Caspian Sea for foreign investment, that was the first important step for our country to transform and to develop.
Today’s Azerbaijan to large extent is a result of that policy because attracting multi-billion foreign investments, developing the oil fields of Azerbaijan created major prerequisites for successful development. We started to re-invest the money, which we receive from oil sales, in infrastructure, human capital, social projects, and managed to diversify the economy of our country. Without investments and without the international cooperation in the middle of the 1990s, none of this achievements would have been possible.
Therefore, we highly value the international cooperation between countries, companies. All investments are duly protected in our country. All the production sharing agreements Azerbaijan signed with international oil companies are ratified by our parliament and then signed as a law by the president. So, there is a hundred percent guarantee that not even one word will be changed in these agreements. And this creates confidence for investors. I think this also played an important role in positioning Azerbaijan as a reliable partner, a partner which values investments and duly protects them.
The Southern Gas Corridor resource base is a huge Shahdeniz gas field. The contract to develop Shahdeniz was signed back in 1996, and that was also a historic moment because before that Azerbaijan was known only as an oil producing country. But Shahdeniz allowed us to present ourselves as a country with huge gas deposits. Today Shahdeniz and other gas fields of Azerbaijan have proven reserves of 2.6 trillion cubic meters. This is a huge deposit, and definitely, production from Shahdeniz in the first stage created the real grounds for building Southern Gas Corridor project.
So these are two important milestones, which led to regional cooperation, and then to international cooperation. As far as regional cooperation is concerned, in our region we already successfully cooperate for many years. Three countries – Azerbaijan, Georgia and Turkey – managed to build the corridors because that was the most important. The Caspian Sea didn’t have a connection with the crude oil pipeline with the Black Sea. So we first built Baku-Supsa oil pipeline to the Georgian shore of the Black Sea. Then a major oil pipeline to connect Azerbaijan, Georgia and Turkey – Baku-Tbilisi-Ceyhan and then Baku-Tbilisi-Erzurum, which is today being expanded and is part of the Southern Gas Corridor.
All that happened as a result of regional cooperation between Azerbaijan, Georgia and Turkey and with the support of international financial institutions, and also with the support of the United States government which considered these projects as strategic. And they are really strategic because these projects started to change the energy map of our region. Thus, Azerbaijan became a reliable supplier of oil to the world markets and today some of European countries have 30-40 percent in their energy balance based on oil received from Azerbaijan.
I’m telling that in order to show that today’s development has a very solid background, the history of active work, the history of mutual trust, cooperation. We are also grateful to the international financial institutions for financing those important projects in the area, which was considered to be of high risk.
Today, the Southern Gas Corridor is a reality and we will review the problems and talk about the challenges. I would also like to mention special importance of cooperation between Azerbaijan and Turkey in the implementation of this project. In 2012 in Istanbul, President Ergodan and myself signed a historical agreement on TANAP, Trans Anatolian Pipeline. Actually, we can consider that day to be the beginning of the implementation of the Southern Gas Corridor because before that there were different projects, different options, a lot of discussions, a lot of conferences, seminars on potential implementation of the gas project. But the signing ceremony in Istanbul was a turning point.
After that, a decision was made to invest into Shahdeniz Stage 2. That decision wouldn’t have been made without the signing of TANAP agreement. After that Trans-Adriatic pipeline was selected as a continuation of TANAP. So, 2012 ceremony in Istanbul was a turning point and was supported by our partners. Today we already see the results of that agreement.
I am very grateful to our partners, representatives of countries, companies, organizations for being today with us. This is the third Advisory Council. This is already a good tradition. And the life proved that this kind of gatherings has a very important meaning because we not only review what has been done, but also, most importantly, plan for the future, coordinate our efforts because without coordination we cannot achieve success. All the four segments of the Southern Gas Corridor are implemented in parallel. Therefore, the most important is to have a very accurate implementation of the project and to protect the time table of the implementation.
Since we met last year in Baku a lot of things has happened. We have had good progress in implementation. According to information I received recently, Shahdeniz 2 project is implemented almost at the level of 90 percent, South Caspian pipeline close to 80 percent, TANAP 65 percent, and Trans-Adriatic Pipeline 34 percent. I think this is a good sign of progress. If we compare it with situation last February when we had the second Ministerial Meeting, we will see a lot of progress. This is a very important sign of successful implementation of the project.
At the same time, since we met last time here in Baku, another big gas project Absheron also started to be implemented. We are planning to start very soon practical work on the field with respect to drilling and Absheron phase 1 project’s potential has already been estimated. So, Absheron will be an additional supply source for Azerbaijan’s gas potential.
This shows that first, our gas potential is not limited only by Shahdeniz, though Shahdeniz is probably one of the biggest gas fields in the world with 1.2 trillion cubic meters. But also this shows the importance of the implementation of Shahdeniz 2 for other projects because without modern transportation infrastructure it would’ve been difficult to attract investments to other gas fields. And I think it is in the benefit of all of us because the more gas is transported through the network, the better will be for governments, for companies and for all of us.
The Southern Gas Corridor is a project, which can be considered the project of the 21st century. I am also glad that the costs of the implementation of TANAP were reduced, according to recent information, from 11.8 billion dollars to 8.5 billion dollars. This is a very important reduction, especially in these days when economic situation in many countries still creates some concern. And this will save a lot of money for the shareholders of TANAP.
We managed to raise funds to implement the project. Especially, I’d like to mention the World Bank, which not only provided substantial funds, but also that was a signal to other financial institutions. We are very grateful also to Asian Development Bank, Asia Infrastructure and Development Bank for providing large volumes of money to support the implementation of Southern Gas Corridor.
It’s particularly important because gas from Azerbaijan will be delivered to Europe, not to Asia. But we see that Asian financial institutions are much ahead of those of European in providing the financial support. We hope that EBRD and EIB will also consider very seriously the provision of financial support, and will not be behind their Asian partners. Otherwise, it will be very difficult to understand.
Azerbaijan also provides substantial financial support to the project through our budget and through the funds of Azerbaijan Oil Fund. Today the financial resources of Azerbaijan allow us to implement any possible project in the neighborhood, and we are doing that very successfully. The Southern Gas Corridor is a project of energy security. As I said many times energy security is part of national security of the countries. It’s a project of energy diversification. Diversification is needed not only for consumers, but also for us, for producers because we need to have a multiple network of delivery. Today we have seven pipelines – three for oil and four for gas, which transport our resources to different destinations. And the eighth one, the Southern Gas Corridor, will soon be also in operation.
When we are talking about energy diversification, of course, we talk about routes. But we also talk about sources. The sources, which are coming from the Azerbaijani sector of the Caspian Sea are the new sources and this is the only new source of natural gas. I mean new source of natural gas to supply the region and to supply the European consumers. Regional cooperation now already international cooperation, I think, mutual trust and mutual support is one of the most important elements in the implementation of this project. Today, at the Third Ministerial Meeting we can already be absolutely sure that no obstacle will prevent us from the implementation of this project. The figures which I presented to you demonstrate that we are already at the final stage of the implementation. Nevertheless, we should by joint efforts, and I am sure today this topic will be thoroughly discussed here, avoid any kind of artificial delays on some segments of the implementation of this project.
And we know that there could be some interference, some external pressure, or kind of pretext, ecological or any other. But with all respect to that we have to take into account the reality. And the reality is that in none of the projects, which Azerbaijan implemented with its partners and we have our strategic partner – BP, which is operator in oil and gas projects, in none of them, we had any ecological problems neither in Azerbaijan, nor on route from Azerbaijan.
I remember when we were building Baku-Tbilisi-Ceyhan there was also a campaign against it. And it was called exactly Baku-Tbilisi-Ceyhan campaign. It was sponsored by those who didn’t want that project to be implemented. And they launched huge activity to discredit Baku-Tbilisi-Ceyhan, calling it kind of ecological disaster, catastrophe for the region. Unfortunately, at that time, some of the financial institutions delayed the process for a while. But Baku-Tbilisi-Ceyhan is in operation for eleven years and since that time there was not even a small episode of some concern. The ecological standards of the projects we implement together with BP and together with other partners are at highest possible level.
Therefore, as soon as we again heard about some ecological concerns with respect to some segments of the Southern Gas Corridor, immediately we remembered what was happening 10 years ago. It’s the same scenario, the same pattern. And I am sure the result will be the same – we will implement the Southern Gas Corridor and we will achieve this success jointly. The only thing what we can lose – we can lose time. Why should we lose time? Time is money. And we need to implement this project on time. As I said before, all the four segments of the project Shahdeniz 2, South Caucasus Pipeline, TANAP and TAP, must be implemented in parallel.
I don’t want to go much into details. I am sure this topic would be broadly discussed, but the importance of the gathering like this is that not only we talk about results and achievements, we talk about problems, challenges, and how to resolve these problems.
I’d like to wish the conference success, and thank you once again for being with us today. Thank you.