IAEE Energy Forum / First Quarter 2019

Implications of Global Developments within the Energy Industry in the Caspian and Central Asia Region

Report of the 3rd IAEE Eurasian Conference, 18-20 October 2018 Introduction expansion in Azerbaijan. Oil & gas sector has a leading role in Azerbaijan’s economy, and the State Oil The third IAEE Eurasian Conference on the topic Company of Azerbaijan Republic (SOCAR) and BP are “Implications of global developments within the two main players in the country’s oil & gas sector. energy industry in the Caspian and Central Asia SOCAR has diverse activities in Azerbaijan, covering Region” was held on 18-20 October 2018, in Baku, exploration and exploitation of oil & gas fields, Azerbaijan. It was part of IAEE’s Eurasian conferences st production, processing, transportation and sale of oil, series. The 1 IAEE Eurasian Conference on the topic gas and gas condensate, production of petrochemical of the “Energy Economics Emerging from the Caspian goods, natural gas import & export and overseas Region: Challenges and Opportunities” was held nd sale, as well as the domestic sale of natural gas to on 28-31 August 2016 in Baku, Azerbaijan. The 2 residential and non-residential consumers. SOCAR IAEE Eurasian Conference on the topic of “Energy in also has multilateral regional and international Eurasia: Economic Perspectives on Challenges, Risks business activities, including petrol stations in Ukraine, and Opportunities” was held on 13-14 October 2017, in Switzerland, international trade of oil and oil products, Zagreb, Croatia. ownership and operation of the largest petrol stations The objectives of these conferences were to address chain and the gas distribution networks in Georgia. energy-related challenges in the Eurasian region with BP Azerbaijan Georgia Turkey Region (AGTR) is part the participation of business, government, academic of BP plc, a British multinational oil & gas company. institutions and international organizations. BP AGTR has been operating in the Caspian region The organization of the third Eurasia conference, since 1992. Over the past 25 years, in partnership with again in Baku, had an important significance. the Government of Azerbaijan and our co-venturers, Azerbaijan was the major and only place in the former BP-operated world-class projects, namely Azeri-Chirag- Soviet Union where dedicated education on upstream, Gunashli, Shah Deniz, Baku-Tbilisi-Ceyhan and South midstream and downstream operations oil & gas, Caucasus Pipeline. These projects have contributed was delivered, and relevant scientific researches and to the development of the Caspian Sea region as a engineering activities were conducted. Azerbaijani modern energy center. experts and scientists implemented the key academic The appeals for the support of the event were and research activities on oil & gas in Russia and immediately accepted by SOCAR and BP in a positive Central Asia, as well as in overseas countries. manner. SOCAR was the Platinum Sponsor, and BP was Now, with its convenient geographical position, the Gold Sponsor for the conference. Azerbaijan plays an essential role in energy supplies Azerbaijan Energy Engineering & Consulting LLC to Europe and in regional energy security efforts (AEEC) provided silver sponsorship for the event. With during its 27 years of independence. Azerbaijan, 25 years of operation, AEEC is a leading local private where big energy companies of BP, SOCAR and Exxon company providing engineering and consultancy are operating, has been hosting traditional Caspian services in Azerbaijan covering all aspects of the energy International Oil & Gas Exhibitions and Conferences sector including oil & gas, electricity and renewable and other similar high-level events that incorporate top energy. The Baku representative of Schneider Electric, energy industry managers and specialists in a single and local private company AzEcoConsulting provided platform. The necessity of today’s reality is therefore to bronze sponsorship for the conference. protect the existing scientific potential and academic Moreover, SOCAR Turkey served as an Activity traditions in the oil & gas industry, and to integrate the Sponsor in the event, and funded the participation of accumulated knowledge to overseas specialists and five selected students of Boğaziçi University of Turkey. partners. In this context, the 3rd IAEE Eurasia conference Conference Venue was an excellent platform to present and discuss in a broader audience with public, academic and business The conference was held at the new campus of circles the issues on studying key challenges of energy SOCAR’s Baku Higher Oil School. The organization of economy, the analysis of contemporary global industry the event at the Baku Higher Oil School was supported trends and the study and implementation of best by the Ministry of Energy and SOCAR. international practice. The organization of the event at Baku Higher Oil School seems important in terms of IAEE”s future Event sponsorship expansion in the region. Baku Higher Oil School is currently one of the leading academic institution The publicity had high interest in the conference, not just in Azerbaijan but also globally. Since its which overlapped with the activities on IAEE’s

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establishment, the Oil School has been expanding its Having special significance for the Central Asian geography of cooperation, accomplishing academic and Southern Caucasus and overall former Soviet success, supporting scientific researches along with Union countries, the second plenary session on the education, and regularly hosting high-level academic topic “Energy Markets and Regulation” was moderated events. All these efforts have contributed to its global by Prof. Dr. Vilayat Valiyev, Director of the Institute recognition. The Oil School also serves as a hub for for Scientific Research and Institute on Economic energy industry professionals, energy companies, Reforms under Ministry of Economy of the Republic academic and research institutions, and a center for of Azerbaijan and Vice President of IAEE for Regional laboratory and practical studies. Affairs. The speakers of this session delivered presentations on different regional and contextual Welcoming Session, Presidential aspects of energy markets and regulation, namely: Address and Keynote Remarks Mr. Boyko Nitzov, Team Leader for Gas Infrastructure Development within the Gas Department, Agency for The representative of Baku Higher Oil School the Cooperation of Energy Regulators, talked mainly welcomed the participants on behalf of the school, about operation principles, regulatory criteria and followed by the presidential address by Christophe standards of the gas market in the European Union; Bonnery, the Director of Economics and Foresight at Mr. David Narmania, Commissioner of the Georgian ENEDIS and President-elect of IAEE. National Energy and Water Supply Regulatory The Government of Azerbaijan paid high attention to Commission, delivered a presentation on the formation the event. Mr. Samir Valiyev, Deputy Minister of Energy, and regulation of the energy market in Georgia; Mr. Mr. Niyazi Safarov, Deputy Minister of Economy, and Hikmat Hasanov, Head of Strategic Planning and Dr. Nurali Yusifbayli, Deputy Chairman of the State Innovations Department of the State Agency for Agency for Alternative and Renewable Energy Agency of Regulation of Energy Issues under the Ministry of the Ministry of Energy of Azerbaijan Republic welcomed Energy of Azerbaijan Republic discussed the potential the participants on behalf of the Government of application of technical regulation standards in the Azerbaijan, and expressed their wishes for a successful Azerbaijan energy sector; Mr. Kenan Mamishov, Deputy conference. Mr. Ramiz Aliyev, Head of the Strategic Head of the Analysis and Regulation Department of the Development Department of SOCAR and Mr. Bakhtiyar Tariff (price) Council Secretariat of Azerbaijan Republic Aslanbeyli, Vice President Communications & External talked about the key features and challenges of tariff Affairs, Strategy and Region, BP Azerbaijan-Georgia- regulation in Azerbaijan. It was stressed that the former Turkey Region also delivered opening remarks. Prof. Soviet Union countries still lack a comprehensive Dr. Vilayat Valiyev, Director of Institute for Scientific energy market, and the regulatory environment is Research and Institute on Economic Reforms under the therefore weak from an institutional and legislative Ministry of Economy of the Republic of Azerbaijan and point. Despite the formation of relevant market Vice President of IAEE for Regional Affairs expressed infrastructure and regulatory environment, Georgia his gratitude to all event supporters on behalf of the needs to undertake more steps in this area. The panel Conference Organizing Committee. session speakers also shared their thoughts on existing barriers impeding the establishment of regional energy Plenary Sessions markets. The first plenary session on the topic “Global The third plenary session on the topic “Electricity Challenges to Energy Security in Eurasia: Supply & Supply Sustainability” was moderated by Prof. Dr. Demand Curse” was moderated by Prof. Dr. Gürkan Nurali Yusifbayli, Deputy Chairman of the State Kumbaroğlu, Director of the Energy Policy Research Agency on Alternate and Renewable Energy Sources Center at Boğaziçi University, Founding President of of the Ministry of Energy of Azerbaijan Republic. Turkish Association for Energy Economics, and Past Recalling the two big power system blackouts that President of IAEE. The speakers for this session were happened in Azerbaijan on July 2 and 4 this year, Christophe Bonnery, Pres-dent Elect of IAEE, Mr. Ramiz the topic was particularly important for the public Aliyev, Head of Strategic Development Department of generation & transmission company Azerenerji, the SOCAR, Mr. Colin Allan, ACG (Azeri-Chirag-Gunashly) public distribution company Azerishiq and other Planning and Commercial Manager of Henderson, BP energy sector public and private agencies. Given this Azerbaijan-Georgia-Turkey, and Mr. Elmir Musayev, matter, the speakers, Mr. Christophe Bonnery, Prof. Dr. Southern Gas Corridor CJSC. The session covered the Gürkan Kumbaroğlu, Prof. Dr. Ionut Purica (Professor presentations and discussions on the challenges to the at Hyperion University, Corresponding Member of the energy industry in Eurasia region, SOCAR’s and BP’s Academy of Romanian Scientists, former President activities to overcome these challenges, and the role of (State Secretary) of the Romanian Nuclear Agency) and the Southern Gas Corridor project in these processes. Dr. Osman Bulent Tor (Managing Partner and Director, The most intriguing part of the discussions was the EPRA - Engineering Procurement Research Analysis) supply and demand curse and relevant expectations touched upon the various facets of the sustainability caused by volatile market prices. The speakers and safe operation of the power system during their addressed these matters from the perspective of their presentations. It was highlighted that it is vital to specific activities. conduct system diagnosis and monitoring in automatic

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mode in order to ensure system sustainability. Concurrent sessions Furthermore, the panel session participants proposed the arrangement of a half-day or full-day workshop by IAEE organized two concurrent sessions on the IAEE on electricity system sustainability. topics “Energy Markets, Supply Security & Trading” and The 4th plenary session on the topic “Energy “Efficiency in the Electricity Sector”. The participants Efficiency in Eurasia: Conventional Energy, Renewables of concurrent sessions from Chile, Pakistan, Turkey, and District Heating” was moderated by Mr. Ilham Azerbaijan and Kyrgyz Republic delivered presentations Mirzaliyev, Deputy Chairman of Azeristilitejhizat on the proceedings of studies on electricity markets, JSC, the state-owned district heating company in power plant operational efficiency improvement from Azerbaijan. The speakers shared the experience on an economic perspective, potential regional energy renewable energy and green technologies in different trading, energy supply security, smart metering in regional countries – Prof. Dr. Siyavush Azakov (Baku electricity grids, solar power technology improvements, Higher Oil School) talked about the studies of SOCAR and oil & gas exploration. and Baku Higher Oil School in the field of renewable Session for students and Baku energy; Mr. Gursu Baskan (Schneider Electric) shared Schneider Electric’s experience in energy efficiency and Higher Oil School Tour environmental conservation standards; Mr. Arman IAEE also organized a dedicated session for students Kashkinbekov (Vice Chairman, International Center within the framework of the conference. The IAEE for Green Technologies and Investment Projects; President-elect C. Bonnery delivered a presentation CEO, Association of Renewable Energy of Kazakhstan) on IAEE covering information on members, affiliates briefed the participants on the status of green and upcoming events. He and IAEE’s member from technologies and renewable energy use in Kazakhstan Azerbaijan Fariz Mammadov answered the questions and implemented projects, including strategic targets raised by the students on IAEE’s regional and local of Kazakhstan on renewable energy; Mr. Sahib Khalilov activities and potential benefits for students and (Head of the Department for Assessing Alternate researches. Baku Higher Oi School then organized and Renewable Energy Sources and Environment, a campus tour for the participants of the 3rd IAEE State Agency on Alternate and Renewable Energy Eurasian conference. Its staff showed and informed the Sources) delivered a presentation on the development participants on the School facilities including tutorial, of alternative and renewable energy sources in sport, laboratory and research facilities. Azerbaijan, key activities and strategic targets. The panel session participants stressed that the Central Conference follow-up activities Asia and South Caucasus regions have huge potential for joint use of alternative and renewable energy and The organization of the conference at Baku Higher for energy efficiency. Oil School will significantly contribute to potential Another plenary session that had regional future academic and research collaboration between significance was the last plenary session on the this school and IAEE. The School has already sent a topic “Oil & Gas: Economics, Innovation and Industry formal letter to express their interest in organizing the Development”. The moderator Mr. Fuad Panahov IAEE’s next Eurasia conference at the school in 2020. (Deputy Director of Sumgayit Chemical Industrial On the other hand, it is important both for Park) noted that the discussion of oil & gas use and Azerbaijan and for the region to define and put in industrial development had high importance for the place relevant contemporary alternate approaches in region and Azerbaijan. The speaker Mr. Farid Jafarov addressing a number of outstanding issues, namely: (Chief Executive Officer of SOCAR Polymer) provided energy security and electricity supply sustainability; information on the recently built SOCAR Polymer institutional reforms in energy sectors; formation Plant, natural gas use in the plant and applied new of energy markets and regulatory environment technologies. Dr. Erol Metin (Independent Consultant, including tariff improvement; and energy efficiency SEM (Sustainability, Energy & Management) Consulting) and renewable energy use. It is therefore important talked about the impacts of oil & gas price fluctuations to build an enabling platform to incorporate public, to industries and innovations, while Dr. Javid Valiyev academic and business entities in order to provide (Head of the Department for Foreign Policy Affairs practical support and to build up capacities for exports, Analysis, Strategic Studies Center under auspices of through IAEE’s dedicated specialized workshops using the President of Azerbaijan Republic) emphasized that its professional members and resources. similarly in all sectors, global technological evolutions Moreover, it would be beneficial to launch trigger core changes in the energy sector. Fuad collaboration with regional countries on publishing Panahov discussed gas consumption by the residents scholarly articles in IAEE’s highly recognized journals of Sumgayit Chemical Industrial Park and the relevant and possibly, publishing special editions of IAEE’s strategic targets. The panel session participants Energy Journal for regional countries. highlighted the necessity of due consideration of Last but not the least, the establishment of IAEE’s technological innovations in the light of volatile prices, affiliate in Azerbaijan (to be named Azerbaijan and regularly monitoring of industrial evolution trends. Association for Energy Economics) was launched, and the relevant activities are ongoing.

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