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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
  • m.nurlan@gmail.com
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.