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The Regulation of Energy Trading in Azerbaijan. International Trade Law in the Region of the Caucasus and Central Asia: Between Regional Integration and Globalization 30-31 May 2013, Baku Nurlan Mustafayev

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The regulation of energy trading in azerbaijan
The Regulation of Energy Trading in Azerbaijan

International Trade Law in the Region of the Caucasus and Central Asia: Between Regional

Integration and Globalization

  • 30-31 May 2013, Baku

  • Nurlan Mustafayev

  • Deputy Head of Division for Legal Support of International Project

  • Legal Department of SOCAR

  • [email protected]

Structure of presentation
Structure of Presentation

  • Energy Market Structure in Azerbaijan

  • Regulatory Framework

  • Trading in Oil and Gas

  • Trading in Electricity

  • Trading in Renewable Energy

Energy market structure of azerbaijan the main features
Energy Market Structure of Azerbaijan: The Main Features

  • State monopoly on major industries (oil & gas, electricity, water, utilities, telecommunications, transport etc).

  • The upstream petroleum sector is partially liberalized with participation of IOCs in major projects, PSAs.

  • Vertically integrated state-owned enterprises in energy sector – SOCAR (incl. Azerigas) and Azerenergy OJSC (production, transportation, refining, sales).

  • Limited room for domestic energy trading

  • Most energy trade occurs within and among the state-owned vertically-integrated companies;

  • Price (tariff) regulation of the overall value chain in major industries.

  • External Energy trading (crude oil sales and GSAs with Georgia, Turkey, Russia)

Some international law issues
Some International Law Issues

  • Can WTO be interpreted to cover energy markets or energy trading?

  • Does the Energy Charter Treaty oblige the member states to have a liberilized energy market and energy trading?

Regulatory state authorities
Regulatory State Authorities

  • The Ministry of Industry and Energy - the central executive authority implementing state policy and regulation for the energy sector;

  • Tariff Council establishes the tariff (price) (Incl. energy) in regulated industries, proposes changes to laws relating to pricing; and settles disputes on price regulation and tariff application;

The laws regulating energy trading
The Laws Regulating Energy Trading

  • Charter of Tariff Council, 2005

  • Numerous Resolutions of Tariff Council

  • Rules of Ensuring State Control Over Setting and Applying the Tariffs (Prices), 2005

  • List of Goods (Works and Services), Prices (Tariffs) Regulated By the State, 2005

  • Law on Regulated Prices, 2003

  • Law on Natural Monopolies, 2001

  • Law on Electric-Power Industry, 1998

  • Law on Gas Supply, 1999

Trading in oil gas
Trading in Oil & Gas

  • SOCAR has monopoly in production, transportation, wholesale of crude oil and products

  • Azerigas (SOCAR’s subsidiary) as monopolist gas supplier is engaged in gas transportation, distribution, sale and supply;

  • Tariffs for certain oil and gas trading activities:

  • (a) Wholesale and transportation prices of crude oil

  • (b) Retail and wholesale prices of some oil products and adjustment of excise amounts;

  • (c) Wholesale, refining and transportation tariffs of natural gas;

  • (d) Retail tariffs of natural gas to end-consumers;

  • (e) New natural gas processing tariffs;

Trading in electricity
Trading in Electricity

  • Azerenergy OJSC, a 100% state-owned enterprise, is engaged in the production, transmission, distribution, purchase and sale of electricity in Azerbaijan;

  • There is no wholesale electricity market.

  • A uniform tariff for the population and other tariffs for commercial and industrial enterprises:

  • (a) tariff for purchase from electricity producer;

  • (b) wholesale electricity sale tariff;

  • (c) retail electricity sale tariff; and

  • (d) export and import electricity tariff.

Trading in renewable energy
Trading in Renewable Energy

  • The Agency for Renewable and Alternative Energy Sources under the MIE

  • State programme for the Development of Alternative Energy (wind, solar , geothermal waters, hydraulic and biomass energy)

  • There is no established market for renewable energy

  • The Tariff Council set tariffs for only wind energy and mini hydro power

  • There are no schemes of subsidies aimed to encourage energy efficiency

  • No specific obligations to purchase renewable energy.