Speech by Ilham Aliyev at the official opening ceremony of 27th International Caspian Oil & Gas Exhibition on the sidelines of Baku Energy Week

Dear ladies and gentlemen.

First of all, I would like to express gratitude to the organizers for the restart of the Caspian Oil and Gas Show after two years break due to a pandemic. I am glad that today we have guests from all over the world. I hope discussions during the Oil and Gas Show and the Baku Energy week will strengthen dialogue on such important issues as energy security and diversification of energy resources. Azerbaijan invested in its energy security during the years of independence and provided total demands for the domestic market and also is playing a more and more important role in the energy security of a growing number of countries. This was not the case in the early years of our independence. I would also like to mention that Caspian Oil and Gas Exhibition and Conference, which is already taking place for the 27th time, played a very important role in attracting the attention of global energy players to Azerbaijan, the country at that time newly independent with a lot of difficulties with a big part of its territory under occupation and facing a lot of challenges.

Therefore, the role of the organizers of the Caspian Oil and Gas Show was very important to attract attention and also to attract investments. And from the very first year of holding this conference, Azerbaijan announced its openness to the world. We announced that we want to see the Caspian Sea as an area of cooperation and investment. And the first international investments in the Caspian oil and gas fields were made by our partners and us. But, at that time, as I said, energy security was not fully provided. There have been shortages of electricity, gas supply, and blackouts. So we started to work hard to provide our energy security, and that was done. At the same time, in parallel, we were actively working with international investors and leading energy companies of the world to increase oil production and deliver it to international markets. And at the end of the last century, I think a remarkable event occurred: the first oil pipeline from Azerbaijan to the Georgian Black Sea coast, Supsa, was inaugurated. And that allowed us to start exporting and supplying the needs of many more countries. At the same time, we jointly with our partners worked on gas exploration fields, particularly Shah Deniz, which is one of the biggest gas fields in the world. And in 2007, the Baku-Tbilisi-Erzurum gas pipeline was inaugurated. That was the first time Azerbaijani gas started to be exported to the regional markets of Turkiye and Georgia. A year before that, in 2006, we managed to construct, at that time, it was considered, and still, I think, is a remarkable event - the Baku-Tbilisi-Ceyhan oil pipeline. It connected the Caspian Sea with the Mediterranean Sea and was a new route and a new source of oil to the international market. Since then, Baku-Tbilisi-Ceyhan and all other energy-transportation infrastructure of Azerbaijan have been working without disruption. This demonstrates predictability and reliability and demonstrates that we can implement such huge infrastructure projects difficult from technical and financial points of view. Also, these projects we implemented in a very complicated political environment. So, that was surely an important milestone in the issues related to regional energy security. Of course, it strengthened the regional cooperation between Azerbaijan and its neighbors-Turkiye and Georgia. But our plans were bigger than that, and we wanted to develop Azerbaijan’s huge gas reserves. For that, of course, we needed a new pipeline, the pipeline I would say of the 21st century-the Southern Gas Corridor. And the Southern Gas Corridor`s successful completion on the last day of 2020 demonstrates our common will, demonstrates that we can work as a team, and achieve great success. So integrated pipelines system of 3.500 km crossing many countries, going on the seabed and climbing to high mountains demonstrates our potential and friendship. Therefore the energy projects initiated by Azerbaijan and at an early stage created a framework for regional cooperation now transformed into a global energy project. The Southern Gas Corridor is a project which we can be proud of. At the same time, it allows us to increase production from the huge Shah Deniz gas condensate field, and it happens. It’s only one year and five months since Azerbaijan has used this new modern infrastructure to transport its gas reserves. But already, the expansion of our presence on the European continent with our natural resources is needed for our partners and us. We managed to increase the production and our export. Last year Azerbaijan exported 22 billion cubic meters of natural gas, this year, the projection is 24, and the next year it will be even more. There can be different figures depending on the activity of production and the activation of other fields situated in the Azerbaijani sector of the Caspian Sea because our gas potential is not limited only to Shah Deniz. Other fields are also very promising. Some of them will start production next year. So that will be an important contribution to energy security, especially now, when the demand for Azerbaijani hydrocarbons is more than ever before. And we, as a responsible country, take that into account and try to support countries that face difficulties for different reasons. Now corresponding structures of Azerbaijan are in permanent contact with many countries. When we were working on implementing the Southern Gas Corridor, we established a very close cooperation with countries through the territory of which the pipeline crosses, international financial institutions, and, of course, energy companies and governments of leading countries European Commission. So the annual meeting of the Southern Gas Corridor Advisory Council, which takes place every February in Baku, is a clear example of this teamwork. And when on February 4 this year, we had the annual meeting of the Southern Gas Corridor Advisory Council, we thought that the biggest part of our plans had already been implemented. The Southern Gas Corridor is already in operation. Now we need only to work on how to build new bridges, how to build new connections into connectors, and how to expand our presence in the European gas market. But, of course, now, when we speak on 1 June, the situation is completely different. And the demand for Azerbaijani gas grows rapidly. Of course, we need to consider that, but at the same time, our potential consumers should also understand that it is impossible to extract large volumes of gas within one year. For that, we need contracts. We need to start and speed up negotiations. We need, of course, to work with our traditional partners, investors, and energy companies to increase production. And also we need to expand the existing facilities. We did not plan for that in the coming years because the Southern Gas Corridor is an integrated pipeline system consisting of three pipelines. The last segment of it the Trans-Adriatic Pipeline’s capacity is 10 billion cubic meters.

So, now we think about the expansion because there is a demand for that. And that, of course, will take time, a lot of financial resources, and close coordination, cooperation and active dialogue with all countries involved. And we are ready for that. Minister of Energy of Azerbaijan and SOCAR already got all my instructions, and they are in the process of active negotiations. By the way, Baku Energy Week will be an excellent opportunity because we have guests and high-ranking officials from many countries to address these important issues. At the same time, of course, we need to continue our active dialogue with members of the Southern Gas Corridor team, including governments. Of course, I would like to express gratitude to the governments of Turkiye, Georgia, Bulgaria, Greece, Albania, and Italy, participants of the Southern Gas Corridor for their active cooperation. Taking into account that there are now new challenges and new demands, of course, we are already in negotiations with other potential consumers. But for that, of course, only our efforts will not be sufficient. There must be investments in infrastructure in Europe, building new interconnectors and, of course, agreeing on the terms because, as we all know, in the gas business, you first sell the gas, sign the contract and then start to invest and extract. But all I say is to give an outlook from our point of view. But, at the same time, we will do everything we can to speed up the process that has already started. I would like to express also gratitude to the governments of the US and UK, our great supporters throughout our energy policy and performance. With their great support, we managed to achieve these results. I would like also to express gratitude to international financial institutions, World Bank, EBRD, Asian Development Bank, EIB, and Asian Infrastructure and Investment Bank. I hope all those banks that financed Southern Gas Corridor will also provide financial support to implement our new plans, particularly the expansion of TAP. We can also think about the expansion of TANAP because, as I said already, the demand for Azerbaijani gas is growing. The potential is here; political will is here. Therefore, we should not waste time. We should bring the capacity of our infrastructure to the potential level of transportation of natural gas.

Therefore, not only will TAP need rapid expansion, but also the South Caucasus pipeline and TANAP. So we are working on that. I would like to mention that fruitful cooperation between Azerbaijan and the European Commission also played a significant role in implementing the Southern Gas Corridor project and will play an essential role in implementing our plans. We are in permanent contact with the European Commission on that. As a result of discussions that took place at the beginning of February this year in Baku between the Energy Commissioner of the EU and our Minister of Energy, we established energy dialogue between the EU and Azerbaijan. The agenda is comprehensive, of course, traditional issues like oil, gas, electricity, renewables, hydrogen, and energy efficiency. So, I think that this broad range of issues and their active cooperation on these issues will allow us to have more gas for export. Because next plan on our agenda, which is already in the implementation process, is renewables. Azerbaijan, I think, demonstrates excellent performance. First, because we have already proved ourselves as a reliable country, as a country that respects its obligations, I want to say that from 1994 when the first contract-PSA contract- was signed with foreign companies until today, not a single word was changed in the contracts. And that is also a demonstration of our positions; we respect our obligations and also want our partners to respect their obligations. Therefore, credibility was an important factor. Second, of course, stability, political and economic stability in Azerbaijan. And, of course, excellent performance, building the infrastructure for oil, gas, for electric lines. By the way, Azerbaijan is exporting not only oil and gas but also electricity, with huge potential and experience. All these factors play an essential role in attracting major energy companies to invest in renewables. And this year already, we have had two groundbreaking ceremonies with leading energy companies, ACWA Power and Masdar, and now the construction of two - one wind and one solar - power plants with a total capacity of 470 megawatts is already underway. And next year, these two power plants will be commissioned. And this is only the beginning. Because we are already in an active phase of negotiations with many leading energy companies on renewables. We have massive potential in the Caspian Sea, which has already been evaluated. According to the information I was given, the capacity and potential of the Azerbaijani sector of the Caspian Sea are 150,000 megawatts. This is a considerable volume. At the same time, great potential is now in the territories that have been liberated due to the second Karabakh war, particularly in Kalbadjar and Lachin and other areas. And we estimate this potential to be around 9,000 to 10,000 megawatts, only wind and sun. But if we add hydro, which also has great potential, that can be another 1,000 megawatts or more. And all that now is seriously addressed by our government. And the more we have international investments in renewables, the more natural gas we will save for export. This is natural. So a combination of all these factors and, of course, including the energy efficiency and reduction of losses in our transportation system will add to the increase of gas exports from Azerbaijan. This is our target. I am sure we will achieve these goals because, so far, everything we planned, not only in the oil and gas business, everything our government planned and achieved with maximum efficiency.

Traditional Caspian Oil and Gas Exhibition and Conference and now Baku Energy Week, of course, will address all these important issues, oil supplies, and how to increase oil supplies. Because now, Azerbaijan is also providing important transit facilities for other countries. And this potential also can be used to the maximum degree. Unfortunately, it was not used to the maximum degree. Unfortunately, the potential of Azerbaijan as an important transit country was underestimated by potential suppliers. Still, I think they have changed their minds because everybody understands that diversification is one of the crucial factors of energy security.

And we worked on diversification from the first day of our energy strategy. Therefore, we have diversified export routes, three oil pipelines to different directions, four gas pipelines to different directions, and electric lines. We export electricity to four neighboring countries and plan to export electricity to Europe. For that, we also want to activate the Zangazur corridor, which could be an important transportation route, not only for cargo but also for electricity. We are working on that and have already started practical investment. So, diversification for all is essential. Therefore, I think, now those who underestimated the potential of Azerbaijan as a reliable transit country, now will change their mind, and we see initial hints of that, and we are ready. We are ready to help everyone who needs help. We are ready because we have a political will. Our policy is always aimed at building bridges and strengthening cooperation. And we have the infrastructure. We have a brand-new seaport. We have railroads connecting us with all destinations, highways, and international airports. After we complete three international airports’ construction, one already has been completed, in the liberated territories will be nine, and a geographical location.

So, Azerbaijan's transit potential should also be considered while planning our future plans concerning oil and gas cooperation.

What I am saying is, of course, necessary for our international partners. I’d also like to underline the importance of a strategic partnership between SOCAR and BP. BP is our strategic partner and a leading investor in oil and gas. And I'm very glad that BP also shows interest in renewables. And now, SOCAR and BP are discussing the construction of a solar power station in the liberated Jabrayil district. The capacity will be more than 200 megawatts. I hope soon we will have good results. And also the future plans, because future plans which I said will not be possible to implement without cooperation with our traditional energy partners.

Of course, we are ready to cooperate with every company, with every country, which also wants to be with us at this important time when the geopolitical situation in the world is entirely different from what it was several months ago. But at the same time, all that I'm saying now is important for our internal development and energy factor, energy diplomacy, and project to strengthen our economic potential. They allow us to re-channel the funds we accumulate from oil and gas sales to the non-energy sector of our economy. In parallel with very, I would say, bold economic reforms. And we see the results. I can give several figures for this year. This year, our GDP grew by 7.2%, in the non-oil sector by more than 11%, and in the non-oil industry by more than 15%. So, these are all the reflections of reforms and also re-channeling of the funds which we accumulated. In other words, diversification is not only for energy supply but also for our economy. We are achieving that, and today’s business climate in Azerbaijan, I think, is absolutely a good example of how it should be. Today, Azerbaijan is a very attractive country for foreign investments. Because as I said before, first, we have significant experience in oil and gas. We value our partnership with traditional companies. We never violated any word in the contract which we signed. We enjoy rapid development, and reconstruction in Karabakh and Zangazur will add economic potential. Of course, very low foreign debt, which is only 12.5% of GDP, also creates a good economic environment.

We can attract more loans. We don't do it because we don't need them. We want to reduce foreign debt to GDP down to 10%. That was my instructions to our government. But in the meantime, when we see, or if we see that, there are projects of global importance, and the projects are important for Azerbaijan, of course, we will ask our traditional partners, leading financial institutions, to help us. We already have a great experience in Southern Gas Corridor and other projects.

So, I think that I should conclude now. Probably, I talked too much, but that's probably because we had a two-year break. And we missed this great event, which, as already was said, is the leading international energy event in the region. And I like, once again, to express gratitude to our guests for being with us and wish Baku Energy Week success. Thank you.