During the first 9 months of 2001 the Fund's revenues totaled US$164.9 million and operational expenditures, including staffing costs, totaled US$75,000.

During the last year the Fund's revenues totaled US$221.4 million and expenditures totaled US$858,300.

2003-cü il 17 iyun tarixində London şəhərində keçirilmiş Beynəlxalq Konfransda Azərbaycan Respublikasının Mineral Ehtiyatlarının Hasilatı ilə Məşğul olan Sənaye Sahələrində Şəffaflıq Təşəbbüsünə (bunda sonra - MHŞT) qoşulduğunu nəzərə alaraq və bununla bağlı Azərbaycan Respublikası hökümətinin üzərinə düşən öhdəliklərin həyata keçirilməsini təmin etmək məqsədi ilə:

I. Azərbaycan Respublikasının MHŞT-yə qoşulması ilə bağlı tədbirləri həyata keçirmək məqsədi ilə MHŞT üzrə Komissiya (bundan sonra Komissiya) aşağıdakı tərkibdə yaradılsın:

Komissiyanın sədri:

Şərifov Samir Rauf oğlu - Dövlət Neft Fondunun icraçı direktoru

Komissiyanın üzvləri:

İbrahimov Rafael Tofiq oğlu - Böyük Britaniya və Şimali İrlandiya Birləşmiş Krallığında Azərbaycan Respublikasının fövqəladə və səlahiyyətli səfiri;

Səlimov Rauf Ağaməmməd oğlu- Dövlət Statistika Komitəsinin Sənaye, nəqliyyat və rabitə statistikası şöbəsinin müdiri;

Fətizadə Zaur İntiqam oğlu - Vergilər Nazirliyi yanında İri vergi ödəyiciləri ilə iş üzrə departamentin bəyannamələr idarəsinin xüsusi vergi rejimli müəssisələr ilə iş üzrə şöbəsinin rəisi;

Nəsirov Elşad Mustafa oğlu - Dövlət Neft Şirkətinin Marketinq və iqtisadi əməliyyatlar idarəsinin rəisi;

Qasımov Nizami Yunis oğlu - İqtisadi İnkişaf Nazirliyinin İqtisadi siyasət və proqnozlaşdırma departamentinin fiksal və monetar siyasəti şöbəsinin rəisi;

Musayev Şahbəddin Cabbar oğlu - Ekologiya və Təbii Sərvətlər Nazirliyinin Milli geoloji kəşfiyyat idarəsinin rəisi

Zeynalova Nərgiz Mirəziz qızı - Maliyyə Nazirliyinin milli iqtisadiyyatın maliyyəsi şöbəsinin istehsal sahələrinin və investisiyanın maliyyəsi sektorunun müdiri;

Vəzirov Süleyman Ənvər oğlu - Yanacaq və Energetika Nazirliyinin Baş iqtisadiyyat idarəsi rəisinin müavini;

Şıxəliyev Əşrəf Fərhad oğlu - Xarici İşlər Nazirliyinin İqtisadi əməkdaşlıq və inkişaf idarəsinin şöbə müdiri

II. Komissiyaya tapşırılsın ki:

1) Azərbaycan Respublikasında mineral ehtiyatların istismarı ilə məşğul əlaqədar dövlət orqanlarının daxilolmaları, dövlət şirkətləri və digər dövlət mülkiyyətində olan qurumlar tərəfindən əldə edilən gəlirləri (xarici və milli şirkətlərin ödənişləri hesabına əldə olunan gəlirlər daxil olmaqla) barədə hesabatın təqdim edilməsi formasını və müddətlərini müəyyən etsin, hesabatların toplanmasını təmin etsin.

2)toplanmış məlumatlar əsasında MHŞT-nin iştirakçıları tərəfindən razılaşdırılmış hesabat formatına uyğun olaraq vahid ümumölkə hesabatını tərtib etsin, onun mütəmadi şəkildə mətbuatda dərc edilməsini təmin etsin, hesabatların tərtib edilməsi prosesində Azərbaycanda fəaliyyət göstərən xarici şirkətlərlə və MHŞT-nin əlaqələndirici ofisi olan Birləşmiş Krallığın Beynəlxalq İnkişaf üzrə Nazirliyi ilə müvafiq əlaqələndirməni həyata keçirsin.

3) Komissiyanın fəaliyyəti barədə məlumatların ictimaiyyətə çatdırılması məqsədi ilə Komissiyanın internet saytını yaratsın, digər zəruri tədbirləri həyata keçirsin.

III. Azərbaycan Respublikasının aidiyyatı nazirlikləri, komitə və dövlət şirkətləri mineral ehtiyatlarının istismarından əldə olunan gəlirlər barədə hesabatların hazırlanması ilə əlaqədar Komissiyanın sorğularına tam və vaxtında cavab verilməsi və vəzifələrin yerinə yetirilməsində zəruri kömək göstərsinlər.

IV. Bu sərəncam imzalandığı gündən qüvvəyə minir.

Azərbaycan Respublikasının
Baş Naziri

A. Rasi-zadə

Revenue of 1325.3 billion manats was received from implementation of oil and gas agreements including 653.7 billion manats from the sale of profit oil, 63.1 billion manats from acreage payments, 48.1 billion manats from oil transit fees, 0.6 billion manats from rental fees for the use of state property and 559,8 billion manats as bonus payments, representing 320.7 billion manats in bonus payments transferred to the Oil Fund from the National Bank of Azerbaijan to finance the purchase of shares in AzBTC Co. by the Ministry for Economic Development within the framework of financing SOCAR's participation in Baku-Tbilisi-Ceyhan Main Export Pipeline Project and 239,1 billion manats bonus received from the Lukoil (Russia) oil company for the expansion of the D-222 offshore block extraction area. Revenues from managing assets of the Fund for 9 months period amounted to 134.7 billion manats.

Expenditures of the Fund were directed to:

1.  76.2 billion manats to finance, as per Presidential Decrees ¹ 562, 577, 700 and 2003 budget of the Fund, building of housing and improvement of socio-economic condition of refugees and internally displaced persons who were forced to flee their native lands as a result of Armenia's policy of ethnic cleansing and aggression against Azerbaijan.

2.  574.6 billion manats - financing of AzBTC Co. share in Baku-Tbilisi-Ceyhan pipeline project.

3.  320.0 billion manats- transfer to the State Budget.

4.  2.8 billion manats to finance the Fund's administrative and operating expenses.

The Fund has also paid out profit tax in the amount of 9 billion manats.

The assets of SOFAZ at October 1, 2003 stood at 3,864 billion manats (approx USD 787,1 million) as compared against assets as at January 1, 2003 of 3,387 billion manats (approx USD 692 million). 

3. Main technical advantage: bidders must have skills and experience acquired from the provision of auditing services based on international standards for large financial and investment institutions (funds).

4. Address of audit work implementation: the administrative office of the State Oil Fund of the Republic of Azerbaijan which are located at Sabit Orujov str. 28, Baku, Azerbaijan

5. Implementation period: 6 (six) weeks commencing from the signing of a final contract.

6. A bid package giving full details and other information can be obtained from the administrative office of the State Oil Fund of the Republic of Azerbaijan by calling 90 57 32.

|1| Approval of the Decree followed procedures laid out in the Funds Statutory Regulations and Budgetary Regulations.

• After the signing of the MOU, the Committee and the foreign and local companies will prepare reports containing data on the payments/allocations received by the government of the Republic of Azerbaijan from foreign and local oil and gas production companies and made by the foreign and local companies engaged in extractive industries
• An internationally recognized audit company operating in the Republic of Azerbaijan shall be assigned to review and collate the reports submitted by the government and the foreign and local companies
• Reports will be submitted twice a year (semiannually and annually) and delivered directly to the audit company
• The Parties to the MOU shall establish a Selection Group for the purpose of selecting an audit company through a competitive bidding process. The audit companyâ€^TMs findings will be submitted to all Parties
• The Parties to the MOU will publish a joint press release regarding the EITI Committeeâ€^TMs report and the auditorâ€^TMs report

20 foreign and local extractive (oil and gas) industry companies, including State Oil Company of the Republic of Azerbaijan, Exxon, Statoil, Total, Lukoil, Unocal, Shell, Devon Energy have signed the MOU.

In his opening address and presentation at the ceremony, Samir Sharifov, Chairman of the governmental Committee on EITI, emphasized that by signing the MOU, Azerbaijan was, for the first time anywhere in the world, introducing a practical mechanism for EITI implementation that might be used in other resource-rich countries.

Mr. Laurie Bristow, the UK Ambassador to Azerbaijan, pointed out in his address that the MOU opened the way for the compilation and publishing of the first set of reports on Azerbaijan's oil revenues and emphasized that Azerbaijan might be one of the first countries in the world to implement such an initiative.

Mr. Sabit Bagirov, speaking on behalf of the NGO Coalition for Increasing Transparency in Extractive Industries, noted that the signing of the MOU was a significant step towards transparency in Azerbaijan.

In his address at the ceremony, BP Azerbaijan President Mr. David Woodward, said that the Government of Azerbaijan had taken significant steps to increase transparency.

Mr. Natig Aliyev, President of SOCAR, Mr. Basil Zavoyko, Resident Representative of IMF in Azerbaijan, Mr. Ahmed Cehani, Resident Representative of World Bank and Mr. Raymond Conway, Resident Representative of EBRD in Azerbaijan also addressed those at the ceremony.

Heads of the foreign and local extractive industry companies, delegates from the diplomatic corps and international organizations, parliament and governmental bodies and the NGOs were also represented at the event.

The expenditures of the State Oil Fund for 2004 are directed as follows:

Approval of the Decree followed procedures laid out in the Funds Statutory Regulations and Budgetary Regulations.

Mr. Sharifov indicated that the government of Azerbaijan invites foreign and national companies of the extractive sector to report to the National Committee on EITI on their payments to the government of Azerbaijan. Companies are also invited to publish information on what they paid to the government.

Reports submitted by the companies will be used by the Committee to produce a government report on all payments from the extractive sector companies and make it publicly available.

Reports are to be submitted on a quarterly basis with the first such report to cover the entire 2003.

The meeting participants extensively discussed a draft reporting form prepared by the National Committee on EITI. Discussions covered only oil and gas companies, since other extractive industries are presently idle in Azerbaijan. The meeting participants also agreed to submit the report for 2003 by end of April 2004.

Mr. Sharifov informed the meeting participants that the next meeting on EITI company reporting form will be arranged with the participation of representatives of the non-governmental organizations, “as they have been demonstrating special interest in the process.”

Commonwealth Oil&Gas, Conoco Phillips, Lukoil, Salyan Oil, UNOCAL, ExxonMobil, Turkish Petroleum, Itochu Oil Exploration, British Petroleum and SOCAR were represented at the meeting, though the Committee had sought attendance of all foreign extractive industry companies operating in Azerbaijan. British Embassy Secretary for Energy, Trade & Investment, and the representatives from the national Ministries of Taxes and Fuel and Energy also took part in the meeting.

The National Committee on EITI was established on November 13, 2003 by the Ordinance of the Cabinet of Ministers of Azerbaijan following the instruction of President Ilham Aliyev of Azerbaijan.

The Republic of Azerbaijan joined EITI on June 17, 2003 at the International Conference on EITI in London.

• application to bid;

• information on
  a bidder (full name, legal address, status, bank details, information on
  appropriate work experience, and a notarized copy of the company's
  registration certificate);

• notarized copy
  of license granting the bidder the right to conduct audit activity in the
  Republic of Azerbaijan;

• Information on
  financial activity of bidder for the last year, as well as a current bank
  statement and copy of the balance sheet.

 3. Main technical advantage: bidders must have skills and experience acquired from the provision of auditing services based on international standards for large financial and investment institutions (funds).

4. Address of audit work implementation: the administrative office of the State Oil Fund of the Republic of Azerbaijan which are located at Bulbul avenue, 20, Baku, Azerbaijan.

5. Implementation period: 6 (six) weeks commencing from the signing of a final contract.

6. A bid package giving full details and other information can be obtained from the administrative office of the State Oil Fund of the Republic of Azerbaijan by calling 90 57 32.

 Revenue of AZM1,636.7 billion was received from implementation of oil and gas agreements including AZM869.0 billion from the sale of profit oil, AZM94.6 billion as acreage payments, AZM63.6 billion as oil transit fees, AZM0.6 billion as rental fees for the use of state property and AZM608.9 billion as bonus payments of which 320.7 billion bonus was transferred to the Oil Fund from the National Bank of Azerbaijan to finance the purchase of shares in AzBTC Co. by the Ministry for Economic Development within the framework of financing participation in Baku-Tbilisi-Ceyhan Main Export Pipeline Project, AZM49.1 billion bonus received from US Exxon-Mobil corporation ( in connection with the commencement of drilling on the Zafar Meshel contract area) and AZM239.1 billion received from Russiaâ€^TMs Lukoil company for the expansion of the D-222 offshore block extraction area.

 Revenues from managing assets of the Fund for the reporting year period amounted to AZM183.2 billion. Annual return on the Fundâ€^TMs assets in 2003 constituted 5.08% in the Fundâ€^TMs reporting currency (AZM) and 4.45% in the Fundâ€^TMs base currency (USD).

 Expenditures of the Fund in the amount of AZM99.8 billion were directed to finance, as per 2003 budget of the Fund and Presidential Decrees â„- 562, 577, 700, building of housing and improvement of socio-economic condition of refugees and internally displaced persons who were forced to flee their native lands as a result of Armenia's policy of ethnic cleansing and aggression against Azerbaijan. AZM 576.0 billion was utilized for the financing of AzBTC Co.â€^TMs share in Baku-Tbilisi-Ceyhan pipeline project and AZM500.0 billion was transferred to the State Budget.

The Fund's administrative and operating expenses in 2003 were AZM4.3 billion.

In 2003 the Fund paid out AZM12.0 billion as profit tax.

 The assets of SOFAZ as at January 1, 2004 stood at AZM4,015 billion (approx USD 815 million) as compared against assets as at January 1, 2003 of 3.387 billion (approx USD 692 million).

RAFI Oil was invited by the National EITI Committee to accede to the MOU last month. The company will submit the report on payments to the government of Azerbaijan for the first six months of the year 2006.

Annual Report of the State Oil Fund of the Republic of Azerbaijan for the year of 2004 has just been released.

Envelopes containing proposals from 2 internationally recognized audit companies- Deloitte & Touche and PriceWaterHouseCoopers - operating in the Republic of Azerbaijan and AGN Mak Azerbaijan LTD, the local audit company, which is the member of the Accountant’s Global Network were unsealed on September 29, 2005 at the meeting of the Selection Group to assess the financial and technical proposals of the bidders. Five companies were invited to bid, but Ernst & Young and Moore Stephens declined the invitation. 

The Committee on Extractive Industries Transparency Initiative ("EITI") established by the Government of Azerbaijan to implement its obligations taken at the conference on EITI held in June 2003 in London, today announced the release of the Government’s second EITI report (2004 annual assertion) audited by Deloitte, the independent Aggregator. The release is accompanied by the Aggregator’s opinion based on individual submissions of extractive industry companies participating in the EITI process in Azerbaijan.

The publication of Azerbaijan’s second EITI report follows the signing of a Memorandum of Understanding ("MOU") on November 24, 2004 between the Government of Azerbaijan, foreign and local extractive industry companies and a coalition of some 32 local Non-Governmental Organisations ("NGO’s") for Increasing Transparency in Extractive Industries to implement EITI in Azerbaijan. The MOU set out a clear and independent process for the implementation of EITI in Azerbaijan and since its signing has served as the framework for implementation efforts by all parties.

The full report as well as the Aggregator’s opinion on the document has already been disclosed on the State Oil Fund (SOFAZ) and the EITI Secretariat of the UK Department for International Development (DFID) and the Non-Governmental Organizations (NGOs) Coalition for Increasing Transparency in the Extractive Industries of the Republic of Azerbaijan.

Samir Sharifov, Chairman of the Committee on EITI, stated: “The completion of the second reporting cycle under EITI process in Azerbaijan clearly demonstrates commitment of the Government of Azerbaijan to transparent management of oil revenues and marks another important step in this direction”.

Speaking on behalf of foreign oil companies (FOC) David Woodward, BP’s Associate President in Azerbaijan, said: “The FOCs operating in Azerbaijan’s extractive industries welcome this second EITI report, which marks the continuation of our joint success with the Azerbaijan Government, local oil companies and the NGO Coalition towards full implementation of the EITI in this country. We are encouraged by this consistent demonstration of strong commitment to the EITI by all parties involved and are looking forward to our further cooperation in this area, which we believe is one of the right steps the Azerbaijan Government is taking to ensure that the revenues from oil and gas developments are used to maximum effect.”

Sabit Bagirov speaking on behalf of the NGO coalition said: “It is commendable that 2004 report was presented two weeks prior to the time identified by the parties of the Memorandum and proves the continuation of the Initiative in Azerbaijan. The coalition hopes that report on the first half of 2005 will be presented for public view together with currently discussed by the parties amendments to the Memorandum”.


Report of the Government of the Republic of Azerbaijan (host government) about aggregated receipts from the extractive industries Reporting period 2004 (annual)

The Committee on the Extractive Industries Transparency Initiative of the Republic of Azerbaijan ( Independent Accountants Report) For the year ended 31 December 2004

Revenue of AZM 968,3 billion was received from implementation of oil and gas agreements including AZM 915,2 billion from the sale of profit oil, AZM 42,5 billion as transit fees for transportation of oil via Baku-Supsa export pipeline, AZM 6,2 billion as acreage payments and AZM 4,4 bln. from sale of assets received from foreign companies under oil agreements. The revenues from managing assets of the Fund for the reporting period amounted to AZM 54,7 billion.

Expenditures of the Fund in the amount of AZM 97,0 billion were directed to finance, as per 2005 budget of the Fund, building of housing and improvement of socio-economic condition of refugees and internally displaced persons. AZM 45,4 billion was utilized for the financing of AzBTC Co.’s share in Baku-Tbilisi-Ceyhan pipeline project and AZM 250,0 billion was transferred to the State Budget. The Fund's administrative and operating expenses in three months were AZM 2,6 billion.

The Fund's 6 months extra-budgetary expenditures were AZM 256,9 billion, including asset revaluation expenses of AZM 239,5 billion. The Fund paid out AZM 17,3 bln. as profit tax and AZM 0,1 bln. as other taxes.

The assets of SOFAZ as at June 30, 2005 stood at AZM 5 097,3 billion (approx. USD 1,083 million.)

The Committee on Extractive Industries Transparency Initiative ("EITI") established by the government of Azerbaijan to implement its obligations taken at the conference on EITI held in June 2003 in London, today announced the publication of the Government’s first EITI reports (2003 annual assertion and 2004 first 6-months assertion) audited by Deloitte & Touche, the independent Aggregator. The published documents also include the Aggregator’s opinion based on individual submissions of independent extractive industry companies participating in the EITI process.

This marks the first ever aggregated government transparency report in the world and implementation of the Azerbaijan Government’s commitment to EITI.

The publication of Azerbaijan’s EITI reports follows the signing of a Memorandum of Understanding ("MOU") on November 24, 2004 between the Government of Azerbaijan, foreign and local extractive industry companies and a coalition of some 32 local Non-Governmental Organisations ("NGO’s") for Increasing Transparency in Extractive Industries to implement EITI in Azerbaijan. The MOU set out a clear and independent process for the implementation of EITI in Azerbaijan and since its signing has served as the framework for implementation efforts by all parties. 

 
The full report as well as the Aggregator’s opinion on the document has already been disclosed on the State Oil Fund (SOFAZ) and the EITI Secretariat of the UK Department for International Development (DFID) and the Non-Governmental Organizations (NGOs) Coalition for Increasing Transparency in the Extractive Industries of the Republic of Azerbaijan

Samir Sharifov, Chairman of the Committee on EITI, said: "Publication of the first report on the Government revenues from the extractive sector that was prepared by a reputable international firm on the basis of examination of government’s assertion and extractive sector companies’ individual reports has become another clear demonstration of Azerbaijan’s full support to EITI process not in words but in deeds. It has evidenced continued commitment of the authorities of Azerbaijan to transparent management of revenues accruing from extractive sector and to encouraging active involvement of civil society in this process".

Speaking on behalf of local extractive industry companies Natig Aliyev, President of SOCAR, said "Thanks to successful realization of new oil strategy, SOCAR has obtained the recognition as one of the leading oil producing companies in the world and reliable business partner in joint projects. Our next task is to prove ourselves as a company which conducts its business in compliance with internationally accepted standards of reporting and transparency of financial and commercial operations.

I believe that in our country we have already taken very important steps in this direction and in future in cooperation with the NGOs we will do our best to achieve our goal".

Speaking on behalf of foreign oil companies David Woodward, Associate President of BP, said: ''We welcome the publication of the first reports for Azerbaijan which is a world first for the broader implementation of the UK Government’s EITI initiative. We are satisfied with the independent process implemented by the Aggregator. As these are the first reports of these kind in the world there will, I'm sure, be ways in which we can improve the process further, but this should not detract from the importance of what has been achieved by the Azerbaijan Government working effectively and efficiently with oil companies and civil society''.

Sevgim Rahmanov speaking on behalf of the NGO coalition stated "A significant step forward has been made towards promoting transparency in extractive industries in Azerbaijan by publication of the EITI first report. We look forward to working with both the Government and extractive sector companies for further improvements in the process".

The Committee on the Extractive Industries Transparency Initiative of the Republic of Azerbaijan ( Independent Accountants Report) For the year ended 31 December 2003»

Report of the Government of the Republic of Azerbaijan (host government) about aggregated receipts from the extractive industries Reporting period January- June 2004 (semi-annual)

The Committee on the Extractive Industries Transparency Initiative of the Republic of Azerbaijan ( Independent Accountants Report) For the six months ended 30 June 2004»

Report of the Government of the Republic of Azerbaijan (host government) about aggregated receipts from the extractive industries Reporting period 2003 (annual)

Approval of the Decree followed procedures laid out in the Funds Statutory Regulations and Budgetary Regulations.

• reviewing and refining current asset and risk management guidelines and policies
• building performance measurement capacity and external manager selection and performance evaluation criteria
• selection and implementation of portfolio management software
• legal advisory (or legal support)
• preparation of operations procedures of the Fund, as well as training of Fund’s personnel.

Evaluation of the proposals presented by the bidding audit companies resulted in, pursuant to the Statutory Regulations of the State Oil Fund, the appointment by the President of the Republic of Azerbaijan of the Azerbaijan representative office of Ernst and Young, Azerbaijan as the auditor of the Fund's financial statements for 2004, 2005, 2006

Revenue of AZM 1 506,8 billion was received from implementation of oil and gas agreements including AZM 1 294, 8 billion from the sale of profit oil, AZM 59,7 billion as oil transit fees, AZM 106,0 billion as bonus payments and AZM 43,3 billion as acreage payments. Revenues from sale of assets received from foreign companies under oil agreements reached 3,0 bln. AZM, while the revenues from managing assets of the Fund for the reporting period amounted to AZM 107,5 billion.

Expenditures of the Fund in the amount of AZM 75,0 billion were directed to finance, as per 2004 budget of the Fund, building of housing and improvement of socio-economic condition of refugees and internally displaced persons who were forced to flee their native lands as a result of Armenia's policy of ethnic cleansing and aggression against Azerbaijan. AZM 89,0 billion was utilized for the financing of AzBTC Co.’s share in Baku-Tbilisi-Ceyhan pipeline project and AZM 650,0 billion was transferred to the State Budget.

The Fund's administrative and operating expenses in 2004 were AZM 3,6 billion, asset revaluation expenses AZM 13,2. bln.. In 2004 the Fund paid out AZM39.8 bln. as profit tax and AZM 0,6 bln. as other taxes.

Net return on the Fund’s assets in 2004 constituted 2,14% in the Fund’s reporting currency (AZM) and 2,57 % in the Fund’s base currency (USD).

The assets of SOFAZ as at December 31, 2004 stood at 4, 758 billion (approx USD 970,5 million) as compared against assets as at January 1, 2004 of AZM 4, 015 (approx USD 815 million).

 Chairman of the Committee:

 Movsumov Shahmar Arif oglu - Executive Director of the State Oil Fund 

 Members of the Committee:

 Ibrahimov Rafael Tofig oglu - Extraordinary and Plenipotentiary Ambassador of the Republic of Azerbaijan in the United Kingdom of Great Britain and Northern Ireland 

 Salimov Rauf Agamammad oglu- Director of the department for Industry, Transportation and Communication Statistics of the State Statistics Committee 

 Fatizadeh Zaur Intigam oglu- Head of the Economic Analysis and Registration Planning Department of the Ministry of Taxes 

 Nasirov Elshad Mustafa oglu- Vice-President on Investment and Marketing of the State Oil Company of the Republic of Azerbaijan 

 Gasimov Nizami Yunis oglu- Director of the Fiscal and Monetary Politics Division of the Economic Policy and Forecasting Department of the Ministry of Economic Development 

 Hacikerimov Gazi Ibadulla oglu - Director of the National Geological Prospecting Department of the Ministry of the Ecology and Natural Resources 

 Khalilov Firdovsi Alasgar oglu - Director of the Sector for Financing of Energy and Fuel Complex of the National Economy Financing Department of the Ministry of Finance 

 Muradov Feyzulla Mezahir oglu - Director of the Regional Development Division of the Department of Investment Policy and Reconstruction of Enterprises of the Ministry of Industry and Energy 

 ShikhaliyevAshraf Farhad oglu - Director of the Economic Cooperation and Development Department of the Ministry of Foreign Affairs 

 2. This Ordinance comes into force upon being signing. 

 Artur Rasizadeh             Prime Minister of the Republic of Azerbaijan

Having endorsed the Fund’s 2007 draft budget, including the major directions of its investment policy, and its draft annual operating expenditures, the Supervisory Board recommended the budget for the approval by President of the Republic of Azerbaijan.

Prime Minister Artur Rasizadeh was re-elected as the Supervisory Board’s Chairman-in-office.

Binagadi Oil was invited by the National EITI Committee to accede to the MOU in the summer this year. The company will submit the report on payments to the government of Azerbaijan for the first six months of the year 2006.

   Revenue of AZN 684, 3 mln. was received from implementation of oil and gas agreements, including AZN 670,0 mln. from the sale of profit oil and AZN 10,9 mln. as transit fees, AZN 1,8 mln. as bonus payments, AZN 1, 2 mln. as acreage payments and AZN 0,4 mln. from sale of assets received from foreign companies under PSAs. AZN 5,1 mln. was received from State Oil Company of the Republic of Azerbaijan as the price difference between the contract value and domestic wholesale price of exported oil. The revenues from managing assets of the Fund for the reporting period amounted to AZN 41, 3 mln.

   Expenditures of the Fund in the amount of AZN 46, 8 mln. were directed to finance, as per 2006 budget of the Fund, building of housing and improvement of socio-economic condition of refugees and internally displaced persons. AZN 75,1 mln. was utilized for the financing of AzBTC Co.’s share in Heydar Aliyev Baku-Tbilisi-Ceyhan pipeline project and AZN 455,0 mln. was transferred to the State Budget. AZN 1, 7 mln. was used for financing construction of the Oghuz-Gabala-Baku water supply system and AZN 7,5 mln. was utilized for financing the reconstruction of the Samur-Absheron irrigation system. AZN 20,0 mln. was directed to formation of the statutory capital of the State Investment Company. The Fund’s administrative and operation expenses in nine months were AZN 0, 7 mln.

   The Fund’s extra-budgetary expenditures and payments, including asset revaluation expenses were AZN 29, 6 mln. in the first three quarters of 2006.

   The assets of SOFAZ as at September 30, 2006 grew by 7, 4% compared to the beginning of the year and stood at AZN 1 374, 8 mln. (USD 1 569 mln.)

The conference concluded establishment of the multisakeholder Board to manage EITI at the international level and to oversee the future operation of EITI. The EITI Board will consist of 5 representatives of implementing countries – Azerbaijan, Guinea, Gabon, Kyrgyzstan and Nigeria and 3 of supporting countries- the US, United Kingdom and Germany. Moreover, civil society organizations, extractive industry companies and an investment company will also be the members of the Board.

Azerbaijan’s membership in the EITI Board corroborates the country’s leading role in implementation of EITI as a pilot country, which has already published 4 EITI reports.

 Notifying to guests about EITI implementation to be of great importance for Azerbaijan government, S. Movsumov asserted that Azerbaijan published four EITI reports in collaboration with stakeholders from NGO Coalition for Increasing Transparency in Azerbaijan and local and foreign extractive industry companies. Dr. Tanko defined Azerbaijan’s success on EITI implementation as unique, in response to which Mr. Movsumov assured of Azerbaijan’s readiness in sharing its expertise with other countries.

 The Selection Group was established in accordance with the Memorandum of Understanding signed between the governmental Committee on EITI, foreign and local extractive industry companies (oil and gas) and the NGOs’ Coalition for Increasing Transparency in Extractive Industries to implement EITI in Azerbaijan. The group comprising representatives of the MOU signatories is charged with the task of selecting, on a competitive basis, an audit firm to collate reports to be submitted by the government and extractive sector companies. State Oil Fund provides logistical assistance to the Selection Group and its activities as per MOU.

 On grounds of its previous experience the Selection Group approved to send invitations to 5 internationally recognized audit companies - Ernst &Young, Deloitte & Touche, PriceWaterHouseCoopers , KPMG and Moore Stephens, operating in the Republic of Azerbaijan.

The Selection Group assessed the financial and technical proposals of the bidders on September 22, 2006. Five internationally recognized audit companies- Deloitte, PriceWaterHouseCoopers, Ernst & Young, KPMG and Moore Stephens - operating in the Republic of Azerbaijan were invited to bid. 

Outcome of phase I of the Institutional Capacity Building Project, which was implemented by Overture Financial Services and financed by TDA according to the grant agreement, signed on May 19, 2004 between SOFAZ and this US agency was discussed at the meeting. The parts had a preliminary agreement on futher grant for implementation of phase II of the project.

Mr. Movsumov underlined that phase I was productive for SOFAZ. Mr. Stein assessed the implementation of the project as one of the bests that TDA financed in Azerbaijan.

The planned scope of phase II of the project to be implemented by Overture Financial Services includes assistance with selection and implementation of the ledger accounting system, portfolio management/accounting system, portfolio performance engine, manager of manager overlay module and risk management solution.

An audit company will be selected to collate the 2006 semi-annual reports submitted by the Azerbaijan government and oil and gas companies in accordance with the EITI implementation mechanism in Azerbaijan. 

Reviewing the draft report by the EITI International Advisory Group, which is to be submitted to the 3rd international EITI Conference to be held in Oslo, the meeting participants discussed the issues of validation of EITI implementation, establishment of the multisakeholder Board supported by EITI Secretariat to manage EITI at the international level, structure and place of the Secretariat. Senior representatives of the US government, Department of International Department of the United Kingdom, Ministries of Foreign Affairs of Norway, Netherlands and France, Ministry of Solid Minerals Development of Nigeria, World Bank, IMF, Chevron, BP, Petrobras, Anglo-American and local and international non-governmental institutions such as Open Society Institute, Global Witness and others took part at the workshop.

The Oslo Conference will consummate the establishment of the EITI Board, which will consist of 5 representatives of implementing countries, 3 of supporting countries, 5 of civil society organizations, 5 companies or company associations and 1 investment company. Being a pilot country in impelementation of EITI Azerbaijan is to be elected as a member of the Board.

The Board will be established to oversee the future operation of EITI. The Board will have responsibility for the overall development, strategic direction, and credibility of EITI, and will make recommendations on these issues for agreement by the EITI Conference, through a written report to the Conference. The Board will also oversee and direct the work of the EITI Secretariat.

Revenue of AZN 423, 7 mln. was received from implementation of oil and gas agreements, including AZN 414,3 mln. from the sale of profit oil and AZN 7,2 mln. as transit fees, AZN 0,9 mln. as bonus payments, AZN 1, 2 mln. as acreage payments and AZN 0,1 mln. from sale of assets received from foreign companies under oil agreements. The revenues from managing assets of the Fund for the reporting period amounted to AZN 25, 7 mln.

Expenditures of the Fund in the amount of AZN 32, 5 mln. were directed to finance, as per 2006 budget of the Fund, building of housing and improvement of socio-economic condition of refugees and internally displaced persons. AZN 54,4 mln. was utilized for the financing of AzBTC Co.’s share in Heydar Aliyev Baku-Tbilisi-Ceyhan pipeline project and AZN 226 mln. was transferred to the State Budget. AZN 0, 6 mln. and AZN 0,5 mln. was accordingly used for financing construction of the Oghuz-Gabala-Baku water supply system and financing the reconstruction of the Samur-Absheron irrigation system. The Fund’s administrative and operation expenses in six months were AZN 0, 4 mln. 

The Fund’s extra-budgetary expenditures and payments, including asset revaluation expenses were AZN 1,3 mln. in the first two quarters of 2006.

The assets of SOFAZ as at June 30, 2006 grew by 10, 4% compared to the beginning of the year and stood at AZN 1 414, 2 mln. (approx. USD 1 579 mln.)

The Supervisory Board approved the SOFAZ Annual Report and Auditor's (Ernst & Young) Report for the year 2005 as submitted by the Executive Director of the Fund. While endorsing the Oil Fund's 2005 budget execution the Supervisory Board recommended it for the approval by President of the Republic of Azerbaijan as per the Budget Regulations of the Fund. 

Prime Minister Artur Rasizadeh was re-elected the Supervisory Board’s Chairman-in-office.

After the opening session the IAG members (see:list) convened under the Chairman, Mr. Peter Eigen started discussions, which included current status of the EITI implementation in different countries and future management of EITI.

IAG members took the preparation up for the third internaitonal EITI Conference to be held in October, 2006 in Oslo. Senior representatives of the IAG member countries including, the US, the UK, Norway, France, Nigeria, and also the representatives of World Bank, IMF, BP, Anglo American, Chevron and non-governmental organizations, including Open Society Institute and Global Witness participated at the meeting.

On the next day (April 6, 2006) the international conference “EITI: Pilot countries’ experience” took place in Baku. Chairman of the National Committee on EITI, the Executive Director of the State Oil Fund of the Republic of Azerbaijan Mr. Samir Sharifov chaired the two-panel conference. He underlined that the Conference was arranged for helping EITI implementation in the resource-rich countries of the world. The Committee Chairman made a presentation on “Piloting EITI: Case of Azerbaijan” (see: presentation) and informed the meeting participants that the Azerbaijan government had publicized the EITI reports 3 times and the fourth report was underway.

Sir John Bourn UK Auditor General & Dr Laurie Bristow British Ambassador to Azerbaijan, Valeh Aleskerov, Vice- Speaker of the Parliament of Azerbaijan and Chairman of the Parliamentary Committee on Energy and Minerals, Graham Baxter, Vice – President of the BP Group, Shain Mustafayev, Vice-President of SOCAR and Sabit Bagirov, Coordinator of the NGO Coalition of Azerbaijan delivered speech on the first panel.

Members of the second panel, which titled “International perspectives of EITI implementation” were Mr. Michael Levitsky, World Bank Senior Economist, Mr. Stephen Krasner (see), Director for Policy Planning of the US State Department, USA, Ms. Karin Lissakers, Personal Adviser to George Soros and Open Society Institute, Mr. Raymond Conway, EBRD Resident Representative (see), Ms. Alison Cochrane, EITI Secretariat representative (see).

The representatives of NGOs from the US, Great Britain, Norway, Russia, Egypt, Nigeria, Peru, Camerun, Georgia, Kazakstan, Turkmenia and Kyrgyz Republic took part at the conference.

Note: The EITI London Conference March 17, 2005 established an IAG to guide the further work of the International EITI Secretariat on defining and refining proposals on the future of the EITI. IAG consists of senior representatives from countries implementing EITI, companies, NGOs, and donors. It is supported by a Secretariat based in the Department for International Development.

 Revenue of AZN 567,3 mln. was received from implementation of oil and gas agreements including AZN 542,6 mln. from the sale of profit oil, AZN 15,6 mln. as transit fees, AZN 0,9 mln. as bonus payments, AZN 8,2 mln. as acreage payments and AZN 1,5 mln. from sale of assets received from foreign companies under oil agreements. The revenues from managing assets of the Fund for the reporting period amounted to AZN 27, 9 mln.. In addition, AZN 63,3 mln. was transferred to the Fund by the Ministry of Finance from the special stabilization account it has created to accumulate higher oil price tax surplus.

 Expenditures of the Fund in the amount of AZN 40,4 mln. were directed to finance, as per 2005 budget of the Fund, building of housing and improvement of socio-economic condition of refugees and internally displaced persons. AZN 41,0 mln. was utilized for the financing of AzBTC Co.’s share in Baku-Tbilisi-Ceyhan pipeline project and AZN 150,0 mln. was transferred to the State Budget. The Fund's administrative and operating expenses in 2005 were AZN 1,6 mln.

 The Fund's extra-budgetary expenditures and payments in 2005 were AZN 91, 9 mln.), including asset revaluation expenses of AZN 88, 4 mln). The Fund paid out AZN 3, 5 mln. as profit tax.

 Net return on the Fund’s assets in 2005 constituted -5.69% in the Fund’s reporting currency (AZM) and 2.79 % in the Fund’s base currency (USD).

 The assets of SOFAZ as at January 1, 2006 stood at AZN 1 280, 4 mln.(approx. USD 1,394 million.)

Sh. Movsumov informed the guests about the Fund's activity, as well as the projects financed by the Fund and management of its assets. He briefed about SOFAZ's leading role in implementation of the Extractive Industries Transparency Initiative (EITI) and Azerbaijan's representation at the international EITI Board.

D. Sullivan extended his congratulations to SOFAZ Executive Director on the Fund's winning of the prestigious 2007 UN Public Service Award in the category of "Improving transparency, accountability and responsiveness in the Public Service" and appreciated the Fund's commitment to transparency. 

As a result of successful implementation of the National Oil Strategy, export of hydrocarbon reserves is expanding each year, and thus, contribute to the increase of the state financial reserves. Current increase of the Fund's assets up to 2 billion US dollars level against 270 million US dollars start up balance in 2001, shall be regarded as successful realization of the oil strategy, created by national leader Heydar Aliyev.

As a result of the measures undertaken by the President Ilham Aliyev the role of the State Oil Fund in development of the national economy, tackling of social and economic problems, as well as financing of the strategic state programs and projects grows gradually every year. Thus, during 2001-2007 the Fund spent 2,5billion US dollars to finance social and economic projects and programs, as well as made transfers to the state budget.  

Revenue of AZN 802 mln. was received from implementation of oil and gas agreements, including AZN 748,7 mln. from the sale of profit oil, AZN 0,8 mln. as acreage payments, AZN 35,1 mln. as bonus payments, and AZN 0,9 mln. from sale of assets received from foreign companies. SOFAZ received AZN 16,5 mln. as the price difference between the contract value and domestic wholesale price of exported oil.

The revenues from managing assets of the Fund for the reporting period amounted to AZN 30,7 mln.

As per 2007 budget of the Fund, the expenditures in the amount of AZN 73,9 mln. were directed to financing of building of housing and improvement of social condition of refugees and internally displaced persons, AZN 19,4 mln. and AZN 29,9 mln. were accordingly used for financing the reconstruction of the Samur-Absheron irrigation system and financing construction of the Oghuz-Gabala-Baku water supply system. AZN 224,5 mln. were transferred to the state budget and AZN 87,6 mln. were directed to regulating some issues on the State Oil Company's share in the projects on joint using Azeri, Chirag and Guneshli oilfields. The Fund's administrative and operation expenses in six months of 2007 were AZN 1,6 mln.

The Fund's extra-budgetary expenditures in January-June 2007 were AZN 16,5 mln. due to asset revaluation expenses.

The assets of SOFAZ as at July 1st 2007 grew by 29,9 % compared to the beginning of the year and stood at AZN 1646,7 mln. (USD 1924,2 mln.). 

The 2nd meeting of the Extractive Industries Transparency Initiative (EITI) Board was held on April 11, 2007 in Berlin, Germany. Shahmar Movsumov, Chairman of the EITI National Committee, member of the Board and the Executive Director of the State Oil Fund of the Republic of Azerbaijan participated at the meeting.

The Board members asserted quick expansion of the EITI implementation process worldwide and discussed the activities carried out towards making EITI a global standard. The Board decided on the procedures of delisting of non-performing countries before the next EITI Board meeting to be held in September, 2007 in Oslo, Norway.

Sh. Movsumov presented the draft UN resolution supporting EITI, which Azerbaijan government considered to forward to the UN General Assembly. Discussing the draft resolution the Board members hailed Azerbaijan's initiative once again.

The multisakeholder Board to manage EITI at the international level and to oversee the future operation of EITI was established at the 3rd EITI international conference held in October 16, 2006 in Oslo, Norway. Being a pilot country in implementation of EITI Azerbaijan was selected as a Board member. Sh. Movsumov advised the EITI Board members during the Board's first meeting on December 7, 2006 at the UN Headquarters in New York that Azerbaijan government would consider forwarding a resolution to the UN General Assembly supporting EITI. 

Click to download full version of the audited report. 
 

The Selection Group was established in accordance with the Memorandum of Understanding signed between the governmental Committee on EITI, foreign and local extractive industry companies (oil and gas) and the NGOs' Coalition for Increasing Transparency in Extractive Industries to implement EITI in Azerbaijan. The group comprising representatives of the MOU signatories is charged with the task of selecting, on a competitive basis, an audit firm to collate reports to be submitted by the government and extractive sector companies. State Oil Fund provides logistical assistance to the Selection Group and its activities as per MOU.

The Selection Group reached a decision to send invitations to 5 internationally recognized audit companies - Ernst &Young, Deloitte, PricewaterhouseCoopers, Moore Stephens and KPMG operating in the Republic of Azerbaijan.

The Ordinance also envisages the previous Ordinance on approval of the SOFAZ Supervisory Board signed by the President December 27, 2001  to lose its force.

The United Nations Public Service Awards is the most prestigious international recognition of excellence in public service. Established in 2003 it rewards the creative achievements and contributions of public service institutions to a more effective and responsive public administration in countries worldwide. The UN General Assembly, in its Resolution dated March 7, 2003 designated 23 June as Public Service Day. 

The State Oil Fund is a first governmental agency that is awarded the UN Public Service Award among the governmental institutions of the Eastern Europe and CIS countries. 

Established in accordance with the oil strategy of the national leader of Azerbaijan Heydar Aliyev, the State Oil Fund has played a significant role for provision of transparency in management of oil revenues during 7 years of its activity. The Fund's way towards this prestigious award started with statement of  Ilham Aliyev, President of Azerbaijan about joining the Extractive Industries Transparency Initiative (EITI). Today Azerbaijan is a leading country in EITI implementation and recognized as a first country implementing the Initiative worldwide. As a result of its all-round actvity SOFAZ joined a competition with governmental agencies of most of the world countries and won the UN Public Service Award for EITI. 

The supporting documents, including reference letters from prominent figures of the world - leaders of the super powers, top level representatives of the international organizations submitted by SOFAZ were considered during the assessment process. 

The State Oil Fund is a winner of the competition involving almost all countries of the world.  The award is a prove to the State Oil Fund's transparency and recognition of this fact in international level.

Guido Bertucci, Director of the Division for Public Administration and Development Management of the UN Department of Economic and Social Affairs has sent a letter to SOFAZ. The letter reads out: "I am pleased to congratulate your organization on winning the  2007 United Nations Public service Award in the category of "Improving transparency, accountability and responsiveness in the Public Service" for "Extractive Industries Transparency Initiative". Your outstanding achievement has demonstrated excellence in serving the public interest and I am sure it has made a significant contribution to the improvement of public administration in your country. It should be an inspiration and encouramement for others working for the public service." 

As the UN Public Service Award becomes more prestigious every year, almost all countries of the world has joined the comptetition for 2007 award.  The winners from Europe, Northern America and the Pacific, Latin America, Africa, Asia and Western Asia will be awarded in three categories: improving transparency, accountability, and responsiveness in the Public Service, improving the delivery of services and fostering participation in policy-making decisions through innovative mechanisms (e. g. utilizing ICT, participatory budgeting, participatory/ social auditing and monitoring, and others). The governmental entities from 14 countries of the world - Azerbaijan, Austira, Switzerland, Canada, Australia, Singapore, India, Kenya, Morocco, Republic of Korea, United Arab Amirates, Lebanon, Chile, South Africa - are the 2007 award winners.   

The Awards Ceremony for the 2007 United Nations Public Service Awards will be celebrated at the United Nations Office in Vienna, Austria, during the 7th Global Forum on Reinventing Government which will be held from 26 to 29 June 2007. The UN Secretary General is expected to present UN Awards Trophy to the winners personally. 12 heads of state are to attend the ceremony.

The Selection Group assessed the financial and technical proposals of the bidders on May 21, 2007. Five internationally recognized audit companies- Deloitte, PriceWaterHouseCoopers, Ernst & Young, Moore Stephens and KPMG - operating in the Republic of Azerbaijan were invited to bid.  

 Moore Stephens was founded in London in 1907. Working in 93 countries worldwide the Moore Stephens International network is now one of the leading international accounting and consulting networks.

The decision to seek improvement of software infrastructure was taken with the growing operational scalability of the Fund and the need to place more emphasis on scalable systems, automation of manual processes, management and monitoring of the existing investments. 

In addition to local and international public tender announcements, invitations were sent to internationally known software companies providing technology, portfolio management and processing services to the financial industry. 

New York based Overture Financial Services LLC, which implements USTDA funded Institutional capacity building project for SOFAZ, assisted the Fund during the tender process. 

The Fund received 8 proposals for Portfolio Management/Portfolio Accounting System and 9 proposals for General Ledger (Main Accounting System). The evaluation criteria included 9 parameters both technical and financial.

The implementation of both systems will start after signing the relevant agreements and expected to be completed in 9 month. 

Thomson Financial Limited is one of the leading global providers of investment management, bank treasury software products and technology solutions to the worldwide financial community.  Thomson Financial is part of The Thomson Corporation, a provider of value-added information, software tools and applications to more than 20 million users in the fields of law, tax, accounting, financial services, higher education, reference information, corporate training and assessment, scientific research and healthcare. With annual revenues of US$ 8.7 billion, The Thomson Corporation lists its common shares on the New York and Toronto stock exchanges.

SWIFTAlliance Entry, SWIFTAlliance Starter Set, SWIFTNet Link were upgraded to 6.0 version and the existing PKI certificates transfered to Hardware Security Module within the second stage of the migration into SWIFTNet.

The operations assume great importance for SOFAZ's successful work with SWIFTNet and will help smooth use of Relationship Management Application in 2008 within second stage of the migration process.

SOFAZ applied SWIFTAlliance Starter Set program in June 2006 as part of the preparation stage of the Fund's migration into Public Key Infrastructure.

The Moscow based Alliance Factors is an authorized service partner of SWIFT in the region.

 The United Kingdom, Norway and Azerbaijan governments made a joint statement during the 15th session of the UN High-level Committee on South-South Cooperation. 

 The joint statement informs on the Extractive Industries Transparency Initiative (EITI) and its successful implementation in Azerbaijan. The statement especially underlines the fact of the State Oil Fund of the Republic of Azerbaijan (SOFAZ) won the 2007 UN Public Service Award. 

 "It gives us great pleasure to inform that the State Oil Fund of Azerbaijan, which leads the implementation of the Initiative in Azerbaijan, won the prestigious 2007 UN Public Service Award in the category of "Improving transparency, accountability and responsiveness in the Public Service". Out of many nominated candidates for this Award, the State Oil Fund was selected, which in our view, clearly demonstrates the success of Initiative." 

  The statement emphasises the importance of regional cooperation. "We can take the example of the cooperation between Azerbaijan and Kazakhstan, where Azerbaijan shared its EITI experiences with Kazakhstan. We hope to witness more of these kind of regional cooperation initiatives."

At the opening speech Jon Ramberg noted that Azerbaijan was among the first to join the EITI, in 2003, as a pilot country, and it was among the first to appoint a leader for the effort, to establish a multi-stakeholder committee, to draft and approve work plan and to publish audited and reconciled EITI reports. "Azerbaijani authorities see that they need the EITI - urgently - as one of several means to avoid the many dangers in a fast-growing economy as is now the case in Azerbaijan." 

Lawrence Bristow, the UK Ambassador in Azerbaijan said  in his speech that Azerbaijan was the first oil producing country in the world to produce reports under the initiative, and earlier this year completed its fifth set of EITI reports. "Azerbaijan is set to be the first participating country to go through the validation process," - ambassador emphasized - Emphasizing that the initiative was taking on a truly international flavour he said: "Azerbaijan and other participating countries have shown that it is possible to produce meaningful reports under the initiative and that these can contribute to better management of oil and gas revenues. The time has now come to look to the future of EITI." 

Making speech at the Conference Ms. Anita Utseth, Deputy Minister of Petroleum and Energy of Royal Norwegian assessed the experience of Azerbaijan, the leading country in EITI implementation, as very important. Underlining the SOFAZ's winning of the prestigious 2007 UN Public Service Award in the category of "Improving transparency, accountability and responsiveness in the Public Service" as a significant event, she said that other countries must be interested in learning the experience of Azerbaijan, pilot country in implementation of EITI. 

Shahmar. Movsumov made a presentationon " Implementation of EITI in Azerbaijan". Informing the audience about implementation of EITI in Azerbaijan he underlined that the Initiative already became a current process in the country. The Chairman of the EITI Committee noted that by implementing EITI the government of Azerbaijan achieved full accountability and transparency in oil and gas revenues. Emphasizing the importance of transparency for investment enviroment Mr.Movsumov said: "EITI also assists in strengthening accountability and good governance, as well as promoting greater economic and political stability."

Suleyman Gasimov, the Vice-President of SOCAR informed on his company's participation in EITI implementation process. 

Sverre Olden Mala, the representative of Statoil in Azerbaijan said that the establishment of State Oil Fund was important contribution to increased transparency and sustainable development. He noted that SOFAZ won the 2007 UN Public Service Award, due to the successful implementationof EITI. 

Clare Bebbington, Communications and External Affairs Director of BP noted that Azerbaijan was invited to become a member of the multi-stakeholder board that will manage EITI globally. "I would also like to take this opportunity to congratulate the State Oil Fund for the UN Public Service Award - becoming the first government agency to be accorded this honour among Eastern Europe and CIS countries." 

Sabit Baghirov, the member of the non-governmental organizations' Coalition for Increasing Transparency in Extractive Industries made a presentation about the role of civil society in EITI implementation. 

Jonas Moberg, Head of EITI Secretariat, the representatives of the NGOs of Georgia, Kyrgyzstan and Kazakhstan made speech at the conference.

The letter to the Azerbaijan President from Tony Blair, the Prime-minister of the United Kingdom of Great Britain and Northern Ireland read at the ceremony emphasized that the radical changes in Azerbaijan were very important for supporting global energy safety, and spending the revenues from these achievements ingeniously and transparently would serve to prosperous and sustainable future of Azerbaijan people. Regarding the implementation of Extractive Industries Transparency Initiative, lead by SOFAZ, the letter says:  "I am glad that Azerbaijan continues its leading role in EITI".

 David Sampson, the US Deputy Secretary of Commerce, who is in Baku to attend the conference, also underscored SOFAZ's activity as transparent. Speaking at the business lunch arranged by the American-Azerbaijan Chamber of Commerce on June 4, 2007 he said: "Transparent management of energy revenues through establishment of the State Oil Fund and efforts in implementation of EITI are positive steps taken by the government of Azerbaijan".

Informing the guests about the Fund's activity Sh. Movsumov said that ensuring transparency since its establishment in 1999 SOFAZ has been building a trust about proper management of oil revenues. He briefed the delegation about the Fund's assets management and the important projects financed by SOFAZ.

Sir Bischoff extended his congratulations to the SOFAZ Executive Director on the Fund's winning of the prestigious 2007 UN Public Service Award in the category of "Improving transparency, accountability and responsiveness in the Public Service". He assessed the release of regular reports by the Fund on its financial activity as valuable and important for ensuring transparency.

Sh. Movsumov informed the guests about the Fund's activity and implementation of the Extractive Industries Transparency Initiative in Azerbaijan. 

Ms. Anita Utseth emphasized that the works done by Azerbaijan for implementation of EITI was very important for the whole process. 

The similarities and differences between oil funds of Azerbaijan and Norway and other issues of mutual interest were discussed at the meeting.

The G8 call on implementing countries and companies participating in EITI to implement the Initiative and comply with their disclosure commitments. "Equally, we encourage further countries to participate in EITI as appropriate". Welcoming the fact that an independent validation-process has been initiated to monitor the national implementation measures the forum encourages prompt application and further development of the validation methodology.

The G8 is one of the most important international forums for dealing with global issues. Adoption of the declaration on EITI at the forum of Heads of State and Government of Germany, France, the United Kingdom, Italy, Japan, the United States, Canada and Russia indicates the initiative becoming anti-corruption norm globally. Azerbaijan, leading country in EITI implementation process that already disclosed 5 EITI reports, has committed to be first in validation process as well.  

One more document is to be adopted this year globally. The UN Resolution drafted by the government of Azerbaijan supporting EITI implementation throughout the world is expected to be submitted to the UN General Assembly this fall.

 Mr. Movsumov said during the meeting that leading the EITI implementation process worldwide, Azerbaijan commited to be a first country in EITI validation process as well.

 Mr. Moberg extended his congratulations to SOFAZ Executive Director on the Fund's winning the prestigious 2007 UN Public Service Award in the category of "Improving transparency, accountability and responsiveness in the Public Service.

 The parts discussed preparation works to be done for the next EITI Board meeting, which is expected to be held in September 2007.

The Fund's accounting policy and guidelines were amended at the meeting as per the presentation of SOFAZ Executive Director. 

Prime Minister Artur Rasizadeh was re-elected as the Supervisory Board's Chairman-in-office.

SOFAZ's activity, including the issues about its assets' management and the projects financed by the Fund was discussed at the meeting. Mr. Movsumov informed the guests about the role of SOFAZ in macroeconomic stability of the country and implementation of the important social and infrastructure projects. He briefed the delegation on the Fund's assets investment in foreign financial markets and management strategy. Azerbaijan's worldwide leading role in implementation of the Extractive Industries Transparency Initiative also was discussed at the meeting. 

Chairman of the Luxemburg's State Export Insurance Company, the representatives of Luxembourg Grand-Duchy Trade Chamber, Fond Industry Association and about ten businessmen of the country participated at the meeting.

The National Committee on EITI, 21 foreign and local extractive industry (oil and gas) companies and non-governmental organizations signed MOU on November 24, 2004. Inpex of Japan, Binagadi Oil and RAFI Oil joined MOU later by signing the Instrument of Accession. 

All extractive sector companies operating in the country now are the stakeholders of EITI implementation process in Azerbaijan.

As per the amendments, the Fund's 2007 budget is to include an additional expenditure  items of AZN 50 000,0 related to financing Baku-Tbilisi-Kars railway and AZN 88 500,0 related to  regulating some issues on the State Oil Company's   share in the projects on joint using Azeri, Chirag and Guneshli oilfields. The amount of expenditures of the Fund are increased to AZN 1 115 566, 9 instead of the previous AZN 977 066, 9.

As per the Decree, the revenues of the Fund were executed with AZM 985 938, 7 or 15, 4 % surplus, and expenditures in the amount of AZM 981 375, 9 or 4, 4% less than budgeted expenditures.

The cost of General Ledger agreement is USD 182,675. The implementation of the system is expected to be completed in 6 month. 

Thomson Financial Limited is one of the leading global providers of investment management, bank treasury software products and technology solutions to the worldwide financial community.

The cost of the Portfolio Management/Portfolio Accounting agreement is USD 692,927. The implementation of the system is expected to be completed in 6 month. 

Thomson Financial Limited is one of the leading global providers of investment management, bank treasury software products and technology solutions to the worldwide financial community.

The United Nations Public Service Awards is the most prestigious international recognition of excellence in public service. Established in 2003 it rewards the creative achievements and contributions of public service institutions to a more effective and responsive public administration in countries worldwide. The UN General Assembly, in its Resolution dated March 7, 2003 designated 23 June as Public Service Day. 

The State Oil Fund is a first governmental agency that is awarded the UN Public Service Award among the governmental institutions of the Eastern Europe and CIS countries. 

Shahmar Movsumov, SOFAZ Executive Director says that the award presented to his institution is a success of Azerbaijan entirely. 

"The State Oil Fund got the UN Public Service Award, which is a most prestigious public administration prize. This is not only the SOFAZ's success, but also is a sign of superiority achieved by Azerbaijan's statehood and public service. It is a holiday, remarkable day for all of us. This is a highest success of the public service development in Azerbaijan, within the reforms course determined by our President Mr. Ilham Aliyev. I congratulate every citizen of Azerbaijan and wish other governmental institutions of our country to join this competition for winning the UN Public Service Award".  

Asha-Rose Migiro, the UN Deputy Secretary General considers the State Oil Fund's winning the UN award is an important event for Azerbaijan: 

"First of all I would like to take this opportunity to congratulate Azerbaijan for winning this award. It's very important because Azerbaijan is a first within the context of CIS. I hope the government will continue to be accountable and will give better services to people. We hope that other countries in the region will emulate the good example of Azerbaijan". 

Established in accordance with the oil strategy of the national leader of Azerbaijan Heydar Aliyev, the State Oil Fund has played a significant role for provision of transparency in management of oil revenues during 7 years of its activity. The Fund's way towards this prestigious award started with statement of Ilham Aliyev, President of Azerbaijan about joining the Extractive Industries Transparency Initiative (EITI). Today Azerbaijan is a leading country in EITI implementation and recognized as a first country implementing the Initiative worldwide. As a result of its all-round actvity SOFAZ joined a competition with governmental agencies of most of the world countries and won the UN Public Service Award for EITI. 

According to Mr. Hans Winkler, the State Secretary of Austria for Foreign Affairs, "this event shows how much progress Azerbaijan has made". 

"Let me from my heart to congratulate you. I know it's well deserved. I hope that the European Union will continue to get closer to Azerbaijan and we will continue to cooperate. This shows that you are on the right way. "

The State Oil Fund plays a guiding role in implementation of EITI in Azerbaijan and this was a base for SOFAZ's winning of the UN Public Service Award. Huguette Labelle, Chair of the Board of Transparency International sites Azerbaijan as a leader in implementation of EITI worldwide.  

"First I would like to congratulate Azerbaijan for having been the first signatory on the Extractive Industries Transparency Initiative. Azerbaijan is ahead everybody else having submitted not only one report, but also second report. This is so important, because it pushes other countries, who are rich in oil and gas and mining, hopefully to do the same thing. And this leadership role of Azerbaijan is very important. For us, we keep applauding and using the example of Azerbaijan as we go around the world to say it can be done, it has been done". 

The supporting documents, including reference letters from prominent figures of the world - leaders of the super powers, top level representatives of the international organizations submitted by SOFAZ were considered during the assessment process. 

The State Oil Fund is a winner of the competition involving almost all countries of the world. The award is a prove to the State Oil Fund's transparency and recognition of this fact in international level. 

Jocelyne Bourgon, Chair of the UN Committee of Experts on Public Administration and Ambassador of the Canadian Permanent Mission to the UN sees Azerbaijan as an example to its neighbours for its experience as the UN Public Service Award winner. 

"My congratulations. This is a very important award given by the United Nations to the countries, which have accomplished remarkable progress, in the case of your country, in transparency and accountability. To my knowledge Azerbaijan is a first country in Eastern Europe received such an honor. I hope that means that your country will have some desire to share its best practices with the neighbours." 

Nino Burcanadze, the speaker of the Parliament of Georgia, the closer neighbour of Azerbaijan considers this award as an important for democracy and transparency in the region and assess this fact as the base of future success: 

"I am really happy to have such a closer and friendly relationship with your country and your leadership. I think that reforms that your President is doing in your country are important not only for Azerbaijan, but only for whole region. I want to congratulate you with this very important success, because energy resources is most complicated direction, where transparency is really problem. As you achieved such a serious result, it means that you are on the right track. I wish you all the best in your efforts to build transparent, democratic and successful country." 

As the UN Public Service Award becomes more prestigious every year, almost all countries of the world has joined the comptetition for 2007 award. The winners from Europe, Northern America and the Pacific, Latin America, Africa, Asia and Western Asia will be awarded in three categories: improving transparency, accountability, and responsiveness in the Public Service, improving the delivery of services and fostering participation in policy-making decisions through innovative mechanisms (e. g. utilizing ICT, participatory budgeting, participatory/ social auditing and monitoring, and others). 

Timofey Matvenko, Chairman of the Public Service Agency of Ukraine calls his country's governmental institutions to get exerience from State Oil Fund on Azerbaijan, the winner of the UN Public Service Award for improving transparency in public service. 

"I would like to congratulate Azerbaijan people for this success. You are leaders, you are champions. You was awarded with the internationally recognized high-level prize. I hope that Ukraine will be among those countries that Azerbaijan shares its experience with. I wish Azerbaijan success in applying its practice in Ukraine".  

According to Bahram Khalilov, Chairman of the Commission under the President on Public Service Issues the UN prize got by the Oil Fund is a highest award of public service.

"I am proud to know that State Oil Fund of Azerbaijan is a first governmental agency in Eastern Europe and post-soviet area, which receives this award. I congratulate the State Oil Fund and the people of Azerbaijan for getting this important prize". 

The governmental entities from 14 countries of the world - Azerbaijan, Austira, Switzerland, Canada, Australia, Singapore, India, Kenya, Morocco, Republic of Korea, United Arab Amirates, Lebanon, Chile, South Africa - are the 2007 award winners. 

More than 2000 thousand political decision-makers/senior level officers, ministerial level politicians, also Heads of State participated in the 4-day Global Forum in Vienna.

Supachai Panitchpakdi, Secretary-General of United Nations Conference on Trade and Development (UNCTAD), Jonas Moberg, the Head of the EITI Secretariat and Mark Moody-Stuart, the Chairman of Anglo American  made remarks at the panel chaired by Peter Eigen, the Chairman of the EITI. 

Elchin Amirbayov, the Permanent Representative of the Republic of Azerbaijan to the United Nations Office and other international organizations at Geneva, as well as about 1,000 top executives of participating companies, heads of international labour, civil society and United Nations agencies, government officials attended  the Summit.

Topics:

1.        Achievements that took Azerbaijan's Oil Fund to the winning of the UN Public Service Award

2.        What did Azerbaijan gain from implementation of EITI?

3.        The importance of ensuring transparency in management of oil revenues in the Azerbaijan citizens' life

Awards:

1^st place -  250 AZN

2^nd place - 150 AZN

3^rd place - 100 AZN

The winners will be awarded the certificates issued by SOFAZ as well.

Terms of the competition:

The participant of the competition should have minimum two years of experience in preparation of research stories and represent well-known media. The research stories on the above mentioned topics prepared by the journalists, who joined the competition, must be published on local or international media from July 16, 2007 to October 15, 2007. The participants of the competition are required to submit the following documents by October 31, 2007 every working day from 10:00 a.m to 18:00 p.m to the Public Relations Office of SOFAZ:

1.        Filled and printed out  APPLICATION FORM available at  www.oilfund.az

2.        Copy of the certificate issued by media organization

3.        Copy of the issue of the competition material published media

The article should bear following sentence on top of it: "This material is prepared for the best research story competition for the purpose of increasing public awareness in Azerbaijan"

The results of the competition will be announced after October 31, 2007.

Board of judges:

Jahangir Mammadli - Dean of the journalism department of BSU, the chairman

                                        of the Public Television Broadcasting Company

Ibrahim Mammadli - Chairman of Zardabi Press Centre, member of Press

                                        Council

Sabit Baghirov          - President of Economical and Political Research Centre,

                                        member of the Coalition for Improving Transparency in

                                        Extractive Industries

Adil Mammadov      - Head of the EITI Secretariat

The facts on the topics can be obtained from the Public Relations Office of SOFAZ.

Contact:

Tel: 498 6534 (direct)

       498 7753 (internal 132)

The bonus on the aforesaid agreement was envisaged to be paid in accordance with 2006 budget of the Fund. However, due to the delay of gas production from Shah Deniz the bonus payment took place recently. 

The participants of Shah Deniz project are BP Exploration (Azerbaijan) Ltd,  Statoil Azerbaijan A.S, AzShah Deniz Ltd, TOTAL E&P Ltd, LUKOIL OVERSEAS Shah Deniz Ltd, NICO and TPAO companies.

The Committee on Extractive Industries Transparency Initiative ("EITI") established by the Government of Azerbaijan to implement its obligations taken at the conference on EITI held in June 2003 in London, on 18 December, 2007 announced the release of the Government's seventh EITI report (Jan-June 2007 assertion) audited by Moore Stephens, the independent Aggregator. The release is accompanied by the Aggregator's opinion based on individual submissions of extractive industry companies participating in the EITI process in Azerbaijan. 

The release of the Government's seventh EITI report together with the Aggregator's opinion follows presentation of the documents to the MOU parties on 18 December, 2007 and discussion on the outcomes of the reporting cycle. 

The publication of Azerbaijan's seventh EITI report follows the signing of a Memorandum of Understanding ("MOU") on November 24, 2004 between the Government of Azerbaijan, foreign and local extractive industry companies and a Coalition of some 95 local Non-Governmental Organizations ("NGO's") and 13 physical persons for Increasing Transparency in Extractive Industries to implement EITI in Azerbaijan. The MOU set out a clear and independent process for the implementation of EITI in Azerbaijan and since its signing has served as the framework for implementation efforts by all parties. 

According to the Aggregator "...Assertion of the Committee on the EITI of the Republic of Azerbaijan, that the schedule of payments/allocations received during the six months ended 30 June 2007 is prepared in accordance with the aforementioned requirements, is fairly stated in all material respects". 

The full report as well as the Aggregator's opinion on the document has already been disclosed on web sites of the State Oil Fund (SOFAZ), the International EITI Secretariat and the Non-Governmental Organizations (NGOs) Coalition for Increasing Transparency in the Extractive Industries of the Republic of Azerbaijan. 

Report of the Government of the Republic of Azerbaijan (host government) about aggregated receipts from the extractive industries Reporting period January- June 2007 (semi-annual) 

The Committee on the Extractive Industries Transparency Initiative of the Republic of Azerbaijan (Independent Accountants Report) For the 6 months ended 30 June 2007

After the evaluation of the proposals presented by the bidding audit companies, pursuant to the Statutory Regulations of the State Oil Fund, Deloitte&Touches LLP was appointed as the auditor of the Fund's financial statements for 2007-2009 by the President of the Republic of Azerbaijan. 

An audit company will be selected to collate the 2007 semi-annual reports submitted by the Azerbaijan government and oil and gas companies in accordance with the EITI implementation mechanism in Azerbaijan. 

The Selection Group assessed the financial and technical proposals of the bidders on September 21, 2007. Five internationally recognized audit companies- Deloitte, PricewaterhouseCoopers, Ernst & Young, Moore Stephens and KPMG - operating in the Republic of Azerbaijan were invited to bid. 

Moore Stephens was founded in London in 1907. Working in 93 countries worldwide the Moore Stephens International network is now one of the leading international accounting and consulting networks.

 

Future activities of the Board and issues of the implementation of EITI by the different countries were discussed at the meeting. As a result 15 countries, including Azerbaijan were nominated as candidate countries. Once EITI implementation process of Azerbaijan is validated,Azerbaijan will be the first compliant EITI country.

During meeting Erik Solheim, Norwegian Minister of International Development announced that Norway will be the first Western country to fully implement the transparency principles of the Extractive Industries Transparency Initiative (EITI). Thus EITI has become the Initiative implemented both by developing and developed countries.

An international EITI secretariat established in Oslo with the support of the Norwegian authorities was officially opened on 26 September.

The bonus in accordance with the aforesaid agreement was envisaged in the Fund's 2007 budget.

The participants of D-222 project are LUKOIL OVERSEAS Ltd and State Oil Company of Azerbaijan Republic.

Informing the guests about the Fund's activity Sh. Movsumov said that ensuring transparency since its establishment in 1999 SOFAZ has been building a trust about proper management of oil revenues. Mr. Movsumov briefed the guests on the role of SOFAZ in macroeconomic stability of the country and implementation of the important social and infrastructure projects, Fund's investments in foreign financial markets and management strategy.

Executive Director gave detailed answers to the questions covering SOFAZ's activity and EITI Implementation in Azerbaijan.

Influential European media representatives from "Financial Times Deutschland", "Sunday Times", "Le Monde Diplomatique", "Magyar Nemzet", "The Irish Times", "La7", "Verslo Zinios", "Luxemburger Wort", "De Volkskrant", "Polskie Radio", "Semanario Economico", "La Vanguardia", "Energy Intelligence Group", "Die Zeit", "TV2" participated at the meeting.

SOFAZ Executive Director made public the Fund's revenue and expenditure statement for the period of January-September, 2007:

Budget revenues of the State Oil Fund of the Republic of Azerbaijan (SOFAZ) for the period of January-September, 2007 reached 1 333, 6 million manats (AZN), while budget expenditures constituted AZN 757, 2 mln.

The assets of SOFAZ as at October 1st 2007 grew by 45, 5 % compared to the beginning of the year and stood at AZN 1843,8 mln. (USD 2166,5 mln.).

Revenue of AZN 1 279, 3 mln. was received from implementation of oil and gas agreements, including AZN 1 216, 7 mln. from the sale of profit oil, AZN 0,8 mln. as acreage payments, AZN 39, 4 mln. as bonus payments, and AZN 1, 0 mln. from sale of assets received from foreign companies. SOFAZ received AZN 21, 4 mln. as the price difference between the contract value and domestic wholesale price of exported oil.

The revenues from managing assets of the Fund for the reporting period amounted to AZN 51, 5 mln. and revenues due to asset revaluation stood at AZN 2,8 mln.

As per 2007 budget of the Fund, the expenditures in the amount of AZN 108,7 mln. were directed to financing of improvement of social condition of refugees and internally displaced persons, AZN 34, 1 mln. and AZN 55, 7 mln. were accordingly used for financing the reconstruction of the Samur-Absheron irrigation system and financing construction of the Oghuz-Gabala-Baku water supply system. AZN 0,2 mln. were directed to financing Baku-Tbilisi-Kars railway, AZN 468, 8 mln. were transferred to the state budget and AZN 87,6 mln. were directed to repayment of the State Oil Company's share in the projects on joint using Azeri, Chirag and Guneshli oilfields. The Fund's administrative and operational expenses in nine months of 2007 were AZN 2, 1 mln.

The best research story competition for journalists for the purpose of increasing public awareness in Azerbaijan on the transparent management of the oil revenues, implementation of EITI in Azerbaijan and other activities of SOFAZ announced by The State Oil Fund of the Republic of Azerbaijan has ended. 

The competition, started on July 15 2007, lasted for 3 months. On November 30, 2007 the winners were announced. Winners are Galib Bayramov of 525-ci Gazet newspaper (1^st place) for the article "The irreproachability of the black gold - Transparency", Xalid Kazimov of Uch Nogta newspaper (2^nd place) for the article "Is transparency being followed in management of the oil revenues?", Yunis Orujov of Azerbaijan Television and Radio Broadcasting Closed Joint-Stock Company - AzTV (3^rd place) for the article "Achievements that took Azerbaijan's Oil Fund to the winning of the UN Public Service Award - Azerbaijan is a pilot country in implementation of EITI" and Punhan Efendiyev of Uch Nogta newspaper (3^rd place) for the article "SOFAZ's activity is distinguished by its transparency". 

SOFAZ handed out money awards to the winners.

The participants of Shah Deniz project are BP Exploration (Azerbaijan) Ltd,  Statoil Azerbaijan A.S, AzShah Deniz Ltd, TOTAL E&P Ltd, LUKOIL OVERSEAS Shah Deniz Ltd, NICO and TPAO companies.

Sh. Movsumov briefed about the Fund's activity,  as well as the projects financed by the Fund and management of its assets.   

The economic reforms, importance of oil sector in Azerbaijan, influence of huge oil revenues to our country, development of Azerbaijan's non-oil sector and other issues were discussed at the meeting.

The Board approved the Fund's 2008 budget revenues at AZN 3 609 361, 0 thousand, its expenditures at AZN 1 680 853, 6 thousand and the Fund's operating expenditures at AZN 9 751, 6 thousand. Having endorsed the Fund's 2008 draft budget, including the major directions of its investment policy, and its draft annual operating expenditures, the Supervisory Board recommended the budget for the approval by President of the Republic of Azerbaijan. 

The amendment to be made to the regulation of the Supervisory Board was approved at the meeting. It was decided to select the chairman of the Supervisory Board at the first meeting of every next year in accordance with this amendment. 

Prime Minister Artur Rasizadeh was re-elected as the Supervisory Board's Chairman-in-office.

Sh. Movsumov briefed about the Fund's activity,  as well as the projects financed by the Fund and management of its assets. He talked about SOFAZ's leading role in implementation of the Extractive Industries Transparency Initiative (EITI), Azerbaijan's representation at the international EITI Board and the Resolution supporing EITI drafted by the government of Azerbaijan for submission to the UN General Assembly. 

Carolyn Browne extended her congratulations to SOFAZ Executive Director on the Fund's winning of the prestigious 2007 UN Public Service Award. She also emphasized the leading role of Azerbaijan in implementing and development of EITI.   

The economic reforms, importance of oil sector in Azerbaijan, influence of huge oil revenues to our country, development of Azerbaijan's non-oil sector and other issues were discussed at the meeting.

The participants of Zykh and Govsany project are RUSSNEFT Apsheron Invesments Limited and State Oil Company of  Azerbaijan Republic.

Sh. Movsumov briefed about the Fund's activity,  as well as the projects financed by the Fund and management of its assets. He talked about SOFAZ's leading role in implementation of the Extractive Industries Transparency Initiative (EITI), Azerbaijan's representation at the international EITI Board and the Resolution drafted by the government of Azerbaijan for submission to the UN General Assembly. 

L. Kwang-chul extended his congratulations to SOFAZ Executive Director on the Fund's winning of the prestigious 2007 UN Public Service Award in the category of "Improving transparency, accountability and responsiveness in the Public Service" and appreciated the Fund's commitment to transparency. He also noted the willingness and readiness of financial institutions in Korea to cooperation with State Oil Fund of the Republic of Azerbaijan.

As per the Decree, the amount of expenditures of the Fund on financing some projects concerning solution of the social and settlement problems of the refugees and internally displaced persons are increased to AZN 154 161,0 thousand instead of the previous AZN 124 161,0 thousand. The amount of expenditures for financing of "Baku-Tbilisi-Kars railway" project and for financing construction of the Oguz-Qabala-Baku water supply system are decreased accordingly from AZN 50 000,0 thousand to AZN 30 000,0 thousand and from AZN 183 620,0 thousand to AZN 173 620,0 thousand.

Sh. Movsumov briefed about the Fund's activity,  as well as the projects financed by the Fund and management of its assets. He talked about SOFAZ's leading role in implementation of the Extractive Industries Transparency Initiative (EITI), Azerbaijan's representation at the international EITI Board and the Resolution drafted by the government of Azerbaijan for submission to the UN General Assembly. 

The current economical relations between Azerbaijan and Jordan and development perspectives of these relations  were discussed at the meeting. A. Woriekat emphasized that Azerbaijan is a main partner of Jordan in the region.

The State Oil Fund of Azerbaijan (SOFAZ) is responsible for this within the country and uses funds for the interest of the public. In 2007 the Fund was awarded the UN Prize for deposits invested in the development of the State service. The Fund became the first state agency in East Europe and CIS countries to be awarded the prize. 

The National Committee was established in Azerbaijan in 2003 to implement international initiatives to increase the transparency in the extractive industry. The Azerbaijani Government signed a memorandum on mutual understanding in clarity in funds received from oil and gas companies and income from the extractive industry with local and foreign companies, as well as with a coalition of Citizen Community organizations on 24 November 2004. 

Attending the briefing was the Executive Director of SOFAZ, Shahmar Movsumov who said that Baku needs to obtain the support from the Extractive Industries Transparency Initiative (EITI) to provide clarity in the extractive industry of UN and therefore propose to approve the resolution of the General Assembly. 

During the interview with the UN radio, Movsumov said that, thanks to the EITI, everybody is sure that the oil and gas income go to the State Treasury. The Government is focusing its attention on using the funds for the development of social-economy.

06.12.07 TREND

Approval of the Budget followed the procedures laid out in the Funds Statutory Regulations and Budgetary Regulations.

Signing the agreement USTDA approved the selection by SOFAZ of Overture Financial Services, LLC as the company to perform the technical assistance on phase 2 of the project on institutional capacity building for SOFAZ.

The scope of phase II includes assistance with selection and implementation of the ledger accounting system, portfolio management/accounting system, and portfolio performance engine and risk management solution.

Phase I of the Institutional Capacity Building Project, which was implemented by Overture Financial Services and financed by TDA according to the grant agreement, signed on May 19, 2004 between SOFAZ and this US agency was completed in August, 2006.

SOFAZ Executive Director made public the Fund’s revenue and expenditure statement for 2006:

Budget revenues of the State Oil Fund of the Republic of Azerbaijan (SOFAZ) for the period of January-December, 2006 reached 985,9 million manats (AZN), while budget expenditures constituted AZN 981,3 mln.

Revenue of AZN 930, 0 mln. was received from implementation of oil and gas agreements, including AZN 896,3 mln. from the sale of profit oil, AZN 12,7 mln. as transit fees, AZN 1,8 mln. as bonus payments, AZN 7,6 mln. as acreage payments and AZN 0,6 mln. from sale of assets received from foreign companies under PSAs and AZN 11,0 mln. was received from State Oil Company of the Republic of Azerbaijan as the price difference between the contract value and domestic wholesale price of exported oil. The revenues from managing assets of the Fund for the reporting period amounted to AZN 55,9 mln.

As per 2006 budget of the Fund, the expenditures in the amount of AZN 110, 0 mln. were directed to financing of building of housing and improvement of social condition of refugees and internally displaced persons. AZN 75, 4 mln. was utilized for financing of AzBTC Co.’s share in Heydar Aliyev Baku-Tbilisi-Ceyhan pipeline project and AZN 585,0 mln. was transferred to the State Budget. AZN 82,7 mln. was used for financing construction of the Oghuz-Gabala-Baku water supply system and AZN 37, 0 mln. was utilized for financing the reconstruction of the Samur-Absheron irrigation system. AZN 90,0 mln. was directed to formation of the statutory capital of the State Investment Company. The Fund’s administrative and operation expenses in 2006 were AZN 1,2 mln.

The Fund's extra-budgetary expenditures and payments in 2006 were AZN 17, 6 mln., including asset revaluation expenses of AZN 17, 5 mln. and AZN 0,1 mln. as other expenditures.

Net return on the Fund’s assets in 2006 constituted 2.9% in the Fund’s reporting currency (AZM) and 8.5% in the Fund’s base currency (USD).

The assets of SOFAZ as at January 2007 stood at AZN 1 267, 4 mln. (USD 1 454,5 mln.)

Shahmar Movsumov advised the members of the Committee on latest achievements with EITI implementation, including selection of Azerbaijan as a member of the EITI Board at the 3rd EITI Conference held in October 2006 in Oslo, establishment of the EITI Secretariat, and first EITI Board meeting held at the UN Headquarters in New York on December, 2006. He said that participating at the Board meeting he had notified on Azerbaijan government’s intention of forwarding a resolution to the UN General Assembly supporting EITI. The Committee Chairman mentioned that the new companies were joined in EITI implementation process in Azerbaijan, which was successfully progressing as a result of cooperation between the government, civil society and extractive companies and highly appreciated by foreign states and international organizations. He said Azerbaijan has pledged to be a first country in EITI validation process as well, which is necessary for determination of the countries implementing EITI in the way as its principles require. He said more than 20 countries have been joined EITI, while only few of them were implementing the Initiative.

Approval of the Decree followed the procedures laid out in the Funds Statutory Regulations and Budgetary Regulations.

The Committee on Extractive Industries Transparency Initiative ("EITI") established by the Government of Azerbaijan to implement its obligations taken at the conference on EITI held in June 2003 in London, on 12 December, 2008 announced the release of the Government's ninth EITI report (Jan-June 2008 assertion) audited by Moore Stephens, the independent Aggregator. The release is accompanied by the Aggregator's opinion based on individual submissions of extractive industry companies participating in the EITI process in Azerbaijan. 

The release of the Government's ninth EITI report together with the Aggregator's opinion follows presentation of the documents to the MOU parties on 12 December, 2008 and discussion on the outcomes of the reporting cycle. 

The publication of Azerbaijan's ninth EITI report follows the signing of a Memorandum of Understanding ("MOU") on November 24, 2004 between the Government of Azerbaijan, foreign and local extractive industry companies and a Coalition of some 115 Non-Governmental Organizations ("NGO's") and 15 physical persons for Increasing Transparency in Extractive Industries to implement EITI in Azerbaijan. The MOU set out a clear and independent process for the implementation of EITI in Azerbaijan and since its signing has served as the framework for implementation efforts by all parties. 

According to the Aggregator "... Assertion of the Committee on the EITI of the Republic of Azerbaijan that the schedule of payments/allocations received during the six months ended 30 June 2008 is prepared in accordance with the aforementioned requirements, is fairly stated in all material respects ". 

The full report as well as the Aggregator's opinion on the document has already been disclosed on web sites of the State Oil Fund (SOFAZ), the International EITI Secretariat and the Non-Governmental Organizations (NGOs) Coalition for Increasing Transparency in the Extractive Industries of the Republic of Azerbaijan. 

At the same time during the meeting participants were informed on the most recent processes on validation, validator's work schedule, also the validation forms and documents were introduced to participants. 

Report of the Government of the Republic of Azerbaijan (host government) about aggregated receipts from the extractive industries. Reporting period January - June 2008 (semi-annual) 

The Committee on the Extractive Industries Transparency Initiative of the Republic of Azerbaijan (Independent Accountants Report) For the 6 months ended 30 June 2008

The Selection Group assessed the financial and technical proposals of the bidders on August 19, 2008. Four internationally recognized audit companies- Deloitte, PriceWaterHouseCoopers, Ernst & Young and Moore Stephens - operating in the Republic of Azerbaijan were invited to bid. 

Moore Stephens was founded in London in 1907. Working in 93 countries worldwide the Moore Stephens International network is now one of the leading international accounting and consulting networks.

Increasing SOFAZ's assets is the result of successful implementation of National Oil Strategy, created by national leader Heydar Aliyev. As a result of implementation of this strategy export of hydrocarbon reserves is expanding and Fund's assets increased from 2,5 billion at the beginning of 2008 up to 10 billion US dollars. Increase of reserves of Azerbaijan should be regarded as strengthening of the economic power of the country, as well as, accelerating of development of the country in all spheres.

An audit company will be selected to collate the 2008 semi-annual reports submitted by the Azerbaijan government and oil and gas companies in accordance with the EITI implementation mechanism in Azerbaijan.

Revenue of 4866,5 mln. manats was received from implementation of oil and gas agreements, including 4804,6 mln. manats from the sale of profit oil, 0,8 mln. manats as acreage payments, 0,4 million manats as bonus payments, 60,4 mln. manats from Azerbaijan's State participation share in the Heydar Aliyev Baku-Tbilisi-Ceyhan (BTC) Main Export Pipeline and 0,3  mln. from sale of assets received from foreign companies.

The revenues from managing assets of the Fund for the reporting period amounted to 27,4 mln. manats.

As per 2008 budget of the Fund, the expenditures in the amount of 26,7  mln. manats were directed to financing of improvement of social condition of refugees and internally displaced persons, 27,3 mln. manats and 75,6 mln. manats were accordingly used for financing the reconstruction of the Samur-Absheron irrigation system and financing construction of the Oghuz-Gabala-Baku water supply system. 2,5 mln. manats were directed to financing Baku-Tbilisi-Kars railway and 0,2 mln. manats to financing  "The state program on the education of Azerbaijan youth abroad in the years 2007-2015". 1270,0  mln. manats were transferred to the state budget. The Fund's administrative and operational expenses in this period were 2,1 mln. manats.  

The Fund paid profit tax of 19,2 mln. manats. The Fund's extra-budgetary expenditure due to asset revaluation stood at 74,7 mln. manats. 

The assets of SOFAZ as at July 1, 2008 has grown by 162,3 % compared to the beginning of the year and stood at  5 488,0 mln. manats (USD 6762,1 mln.).

Issues on the Fund's activity, management of its assets and investment in foreign capital markets, SOFAZ's leading role in implementation of the Extractive Industries Transparency Initiative (EITI), the current status of the United Nations General Assembly Resolution on EITI submitted by the Government of Azerbaijan were discussed at the meeting. 

The economic reforms, importance of oil sector in Azerbaijan, influence of huge oil revenues to our country, development of Azerbaijan's non-oil sector and other issues were discussed at the meeting.

As per the Decree, the revenues of the Fund were executed with 1 886 164, 8 thousand manats or 21,2 % surplus, and expenditures in the amount of 1 061 203,5 thousand manats or 4, 9% less than budgeted expenditures.

The Supervisory Board approved the SOFAZ's 2007 annual report and Auditor's (Deloitte & Touche) Report as submitted by the Executive Director of the Fund. While endorsing the Oil Fund's 2007 budget execution and amendments to the Fund's 2008 budget the Supervisory Board recommended both documents for the approval by the President of the Republic of Azerbaijan. 

Prime Minister Artur Rasizadeh was re-elected as the Supervisory Board's Chairman-in-office for the year of 2008.

In accordance with the Decree, taking into account that Azerbaijan will receive extra revenues from implementation of oil and gas agreements under the circumstances of high price of crude oil and in connection with amendments to the 2008 state budget, it is necessary to make amendments to the Fund's 2008 budget. 

As per the Decree, the amount of revenues of the Fund from sale of the Republic of Azerbaijan's share of hydrocarbons is increased to 9 819 516,0 thousand manats instead of the previous 3 473 109, 6 thousand manats, the amount of revenue items of the Fund on dividends from realizing of oil and gas projects (from BTC) and on management of SOFAZ's assets is increased accordingly to 104 806,0 thousand manats instead of the previous 13 423,2 thousand manats and to 148 898,1 thousand manats instead of the previous 121 928,2 thousand manats. As per the amendments, the Fund's 2008 budget is to include an additional revenue item of 70 623,1 thousand manats related to payment on export price of crude oil transferring to the State Oil Fund. The amount of expenditures of the Fund on transfers to the budget increased to 3 800 000,0 thousand manats  instead of the previous 1 100 000,0 thousand manats. The amount of revenues of the Fund are increased to 10 144 743,2 thousand manats instead of the previous 3 609 361,0 thousand manats and expenditures to 4 380 853,6  thousand manats instead of the previous 1 680 853,6 thousand manats.

Admission of new candidate members to the EITI, validation process, activities of international EITI secretariat in 2007 and work plan for 2008 were discussed at the meeting.

Sh. Movsumov briefed on Azerbaijan's successful oil strategy, the Fund's activities, as well as projects financed by the Fund. He talked about SOFAZ's leading role in implementation of the Extractive Industries Transparency Initiative (EITI) and Azerbaijan's activities at the international EITI Board. 

The participants displayed interest in the successful oil strategy of Azerbaijan and asked many questions.

The National Committee on EITI, 21 foreign and local extractive industry (oil and gas) companies and non-governmental organizations signed MOU on November 24, 2004. Inpex of Japan, Binagadi Oil, RAFI Oil and NICO joined MOU later by signing the Instrument of Accession. 

All extractive sector companies operating in the country now are the stakeholders of EITI implementation process in Azerbaijan.

Sh. Movsumov briefed about the Fund's activity, as well as the projects financed by the Fund and management of its assets. He talked about SOFAZ's leading role in implementation of the Extractive Industries Transparency Initiative (EITI), Azerbaijan's representation at the international EITI Board and the Resolution drafted by the government of Azerbaijan for submission to the UN General Assembly and answered the questions of the guests. 

Dr. H.Ch. Naron extended his congratulations to SOFAZ Executive Director on the Fund's winning of the prestigious 2007 UN Public Service Award and taking the 7^th place on the scoreboard for the 32 sovereign wealth funds of 28 countries developed by Peterson Institute for International Economics. He appreciated the Fund's achievements.

Proposals on the changes to the Memorandum of Understanding on implementation of the Extractive Industries Transparency Initiative in Azerbaijan made by the Coalition for Improving Transparency in Extractive Industries were discussed during the meeting. 

Mr. Movsumov praised the cooperation between the National Committee on EITI and NGO Coalition and expressed his hope in continuity of this process. 

The Azerbaijan government's pledge to continue its policy on implemention of EITI commitments also was prompted during the discussions.

Mr. Movsumov briefed about the Fund's activities,  as well as the projects financed by the Fund and the management of its assets. He talked about SOFAZ's leading role in implementation of the Extractive Industries Transparency Initiative (EITI), Azerbaijan's representation at the international EITI Board and the Resolution drafted by the government of Azerbaijan for submission to the UN General Assembly. 

A. Guidetti extended his congratulations to Mr. Movsumov on the Fund's winning of the prestigious 2007 UN Public Service Award in the category of "Improving transparency, accountability and responsiveness in the Public Service" and appreciated the Fund's commitment to transparency. He also noted the willingness and readiness of financial institutions in Switzerland to cooperate with the State Oil Fund of the Republic of Azerbaijan.

The Chairman mentioned that all extractive sector companies operating in the country now are the stakeholders of EITI implementation process in Azerbaijan. He also stressed out that, EITI implementation in Azerbaijan is successfully progressing as a result of cooperation between the government, civil society and extractive companies and it has been commended by international community and international organizations. 

Also proposals on the changes to the Memorandum of Understanding on implementation of the Extractive Industries Transparency Initiative in Azerbaijan made by the Coalition for Improving Transparency in Extractive Industries were discussed during the meeting.

SOFAZ Executive Director made public the Fund's revenue and expenditure statement for 2007: 

Budget revenues of the State Oil Fund of the Republic of Azerbaijan (SOFAZ) for the period of January-December, 2007 reached 1 872,3 million manats (AZN), while budget expenditures constituted AZN 1 061,2 mln. 2007 budget revenues and expenditures of the Fund were executed accordingly 120,3% and 95,1%. 

Revenue of AZN 1 800,0 mln. was received from implementation of oil and gas agreements, including AZN 1675,0 mln. from the sale of profit oil, AZN 5,6 mln. as acreage payments, AZN 58,1 mln. as bonus payments, and AZN 1,3 mln. from sale of assets received from foreign companies. SOFAZ received AZN 60,0 mln. as the price difference between the contract value and domestic wholesale price of exported oil.  

The revenues from managing assets of the Fund for the reporting period amounted to AZN 72,3 mln. 

The Fund's extra-budgetary revenue due to asset revaluation stood at AZN 13,9 mln. 

As per 2007 budget of the Fund, the expenditures in the amount of AZN 154,1  mln. were directed to financing of improvement of social condition of refugees and internally displaced persons, AZN 76,9 mln. and AZN 132,9 mln. were accordingly used for financing the reconstruction of the Samur-Absheron irrigation system and financing construction of the Oghuz-Gabala-Baku water supply system. AZN 20,7 mln. were directed to financing Baku-Tbilisi-Kars railway, AZN 585,0 mln. were transferred to the state budget and AZN 87,6 mln.  were directed to  repayment of the State Oil Company's   share in the projects on joint exploration and development of Azeri, Chirag and Guneshli oilfields. The Fund's administrative and operational expenses in 2007 were AZN 4 mln. 

Net return on the Fund's assets in 2007 constituted 5.04 % in the Fund's reporting currency (AZN) and 8.28% in the Fund's base currency (USD). 

The assets of SOFAZ as at January 1, 2008 has grown by USD 1021 mln. and stood at AZN 2092,4 mln. (USD 2475,4 mln.)

 The Selection Group assessed the financial and technical proposals of the bidders on March 30, 2008. Five internationally recognized audit companies- Deloitte, PriceWaterHouseCoopers, Ernst & Young, Moore Stephens and KPMG - operating in the Republic of Azerbaijan were invited to bid.  

 Moore Stephens was founded in London in 1907. Working in 93 countries worldwide the Moore Stephens International network is now one of the leading international accounting and consulting networks.

Shahmar Movsumov, Executive Director of the State Oil Fund of the Republic of Azerbaijan made a presentation at the conference. 

Sh. Movsumov talked about SOFAZ's activities and Fund's experience on sovereign wealth management.

The payment to audit company will be reimbursed by extractive industry companies.

The purpose of the visit of the delegation is to learn Azerbaijan's experience on the areas such as monetary and credit policy, bank system of the country, Oil Fund's activity and discussion of economic relations between Azerbaijan and Kazakhstan.

Sh. Movsumov briefed about the Fund's activity, as well as the projects financed by the Fund and management of its assets.

The economic reforms, importance of oil sector in Azerbaijan, influence of huge oil revenues to our country, development of Azerbaijan's non-oil sector and other issues were discussed at the meeting.

The preparation for Validation process, selection of validator among 7 companies approved by International EITI Board, proposals on the changes to the Memorandum of Understanding on implementation of the Extractive Industries Transparency Initiative in Azerbaijan made by the Coalition for Improving Transparency in Extractive Industries were discussed at the meeting. 

As a result of the meeting it was decided to establish a new working group for the coordination of the Validation process.

Sh. Movsumov briefed about the Fund's activity, as well as the projects financed by the Fund and management of its assets. He talked about SOFAZ's leading role in implementation of the Extractive Industries Transparency Initiative (EITI), Azerbaijan's representation at the international EITI Board. He noted that on February 13, 2008 Resolution drafted by the government of Azerbaijan was submitted to the UN Secretariat and the discussions on it have already been started. The Executive Director answered the questions of the guests. 

The current economical relations between Azerbaijan and USA and development perspectives of these relations were discussed at the meeting. Mr. R. Jeffery III extended his congratulations to SOFAZ Executive Director on the Fund's winning of the prestigious 2007 UN Public Service Award and appreciated the Fund's achievements.

SOFAZ Executive Director made public the Fund's revenue and expenditure statement for the period of January-March, 2008: 

Budget revenues of the State Oil Fund of the Republic of Azerbaijan (SOFAZ) for the period of January-March, 2008 reached 1116,4 million manats, while budget expenditures constituted 438,4 mln. manats. 

Revenue of 1094,0 mln. manats  was received from implementation of oil and gas agreements, including 1079,2 mln. manats from the sale of profit oil, 0,8 mln. manats as acreage payments, 14,0 mln. manats from Azerbaijan's State participation share in the Heydar Aliyev Baku-Tbilisi-Ceyhan (BTC) Main Export Pipeline and 0,04  mln. from sale of assets received from foreign companies.
 
The revenues from managing assets of the Fund for the reporting period amounted to 22,4 mln. manats. The Fund's extra-budgetary revenue due to asset revaluation stood at 20,2 mln. manats. 

As per 2008 budget of the Fund, the expenditures in the amount of 7,3  mln. manats were directed to financing of improvement of social condition of refugees and internally displaced persons, 11,4 mln. manats and 29,0 mln. manats were accordingly used for financing the reconstruction of the Samur-Absheron irrigation system and financing construction of the Oghuz-Gabala-Baku water supply system. 390,0 mln. manats were transferred to the state budget. The Fund's administrative and operational expenses in this period were 0,7 mln. manats.  

The Fund paid profit tax of 15,6 mln. manats. 

The assets of SOFAZ as at April 1, 2008 has grown by USD 860,4 mln. and stood at  2 775,0  mln. manats (USD 3 335,8 mln.).

The Heydar Aliyev Baku-Tbilisi-Ceyhan (BTC) Main Export Pipeline, starting to function in 2006, already receives the first dividends next year which again proves the success of the project and being the best option in providing the transportation of the Azerbaijan's hydrocarbons to the world market.

The dividend payment was envisaged in the Fund's 2008 budget.

The participants of Heydar Aliyev BTC Main Export Pipeline project are AzBTC Co, Hess, BP, ConocoPhillips, Eni, İnpex, İtochu, Statoil, Total, TPAO and Unocal companies.

Sh. Movsumov briefed about the Fund's activity, as well as the projects financed by the Fund and management of its assets. He talked about SOFAZ's leading role in implementation of the Extractive Industries Transparency Initiative (EITI), Azerbaijan's representation at the international EITI Board and the Resolution drafted by the government of Azerbaijan for submission to the UN General Assembly and answered the questions of the guests.

Senator R. Lugar extended his congratulations to SOFAZ Executive Director on the Fund's winning of the prestigious 2007 UN Public Service Award and appreciated the Fund's achievements.

Issues on EITI Implementation process, SOFAZ's leading role in implementation of the Extractive Industries Transparency Initiative (EITI), validation process, the current status of the EITI Resolution submitted by the Government of Azerbaijan and future relations between SOFAZ and Norwegian Government Pension Fund were discussed at the meeting.

The Committee on Extractive Industries Transparency Initiative ("EITI") established by the Government of Azerbaijan to implement its obligations taken at the conference on EITI held in June 2003 in London, on 3 June, 2008 announced the release of the Government's eighth EITI report (Jan-Dec 2007 assertion) audited by Moore Stephens, the independent Aggregator. The release is accompanied by the Aggregator's opinion based on individual submissions of extractive industry companies participating in the EITI process in Azerbaijan. 

The release of the Government's eighth EITI report together with the Aggregator's opinion follows presentation of the documents to the MOU parties on 3 June, 2008 and discussion on the outcomes of the reporting cycle. 

The publication of Azerbaijan's eighth EITI report follows the signing of a Memorandum of Understanding ("MOU") on November 24, 2004 between the Government of Azerbaijan, foreign and local extractive industry companies and a Coalition of some 115 Non-Governmental Organizations ("NGO's") and 15 physical persons for Increasing Transparency in Extractive Industries to implement EITI in Azerbaijan. The MOU set out a clear and independent process for the implementation of EITI in Azerbaijan and since its signing has served as the framework for implementation efforts by all parties. 

According to the Aggregator "...Assertion of the Committee on the EITI of the Republic of Azerbaijan, that the schedule of payments/allocations received during the 12 months ended 31 December 2007 is prepared in accordance with the aforementioned requirements, is fairly stated in all material respects". 

The full report as well as the Aggregator's opinion on the document has already been disclosed on web sites of the State Oil Fund (SOFAZ), the International EITI Secretariat and the Non-Governmental Organizations (NGOs) Coalition for Increasing Transparency in the Extractive Industries of the Republic of Azerbaijan. 

Report of the Government of the Republic of Azerbaijan (host government) about aggregated receipts from the extractive industries Reporting period January- December 2007 (annual) 

The Committee on the Extractive Industries Transparency Initiative of the Republic of Azerbaijan ( Independent Accountants Repor t) For the 12 months ended 31 December 2007

Online subscription to the Fund's news is also possible. 

Information on Asset management, International Relations, the projects financed by the Fund and Personnel Policy are placed on the Activity section.

The web site serves up the auto-enquiry for the press to ensure accountability between SOFAZ and society and to build closer contacts with journalists.

Issues on EITI Implementation process were discussed at the meeting. It was noted that 23 countries, included Azerbaijan had already received candidate status. To become Compliant Country the country should go through a validation process. 

It was also emphasized that Azerbaijan is the first country which officially launched the Validation process and it was praised by other Board members. 

Mr. Movsumov also made an informative presentation on the current status of the EITI Resolution submitted by the Government of Azerbaijan.

The full report as well as the Aggregator's opinion on the document has already been disclosed on web sites of the State Oil Fund (SOFAZ) (www.oilfund.az), the International EITI Secretariat (www.eiti.org) and the Non-Governmental Organizations (NGOs) Coalition for Increasing Transparency in the Extractive Industries of the Republic of Azerbaijan (www.eiti-az.org).

The Linaburg-Maduell Transparency Index was developed at the Sovereign Wealth Fund Institute (http://www.swfinstitute.org) by Carl Linaburg and Michael Maduell.  The Linaburg-Maduell transparency index is a method of rating transparency in respect to sovereign wealth funds (SWF). This index is based on ten essential principles and each principle adds one point of transparency to the index rating. 

SOFAZ and the sovereign wealth funds of Chile, UAE (Mubadala), Singapore (Temasek), Ireland (NPRF), USA (Alaska), Norway (GPF), New Zealand took first place with 10 points among 45 SWF.      

ANNOUNCES AN OPEN TENDER

concerning procurement on

Intelligent and Integrated Building Concept Driven

Consultancy and Professional Services Work

for Design and Supervision

in a New Class-A Office Building Construction Project 

The State Oil Fund of the Republic of Azerbaijan ("SOFAZ") a state owned legal entity has been established in accordance with the Decree No.240 of the President of the Republic of Azerbaijan in December 1999. For additional information about SOFAZ visit the web-address: . 

SOFAZ in accordance with the Law of Azerbaijan Republic "On State Procurements" announces an open tender to procure a Consultancy and Professional Services Work for Design and Supervision in order to implement Intelligent and Integrated Building Concept in a New Class-A Office Building Construction Project, including but not limited to:

• Intelligent information network infrastructure
• Intelligent security network infrastructure
• Intelligent integrated building and facility management network infrastructure
• Serviced offices conceptual design guidelines
• Operational procedures and manuals
• Training
• System testing and commissioning

Implementation of the works must be executed within 30 months construction project.

Opening of tender proposal bids will take place at 11:00 AM local Baku time on January 11, 2010 at SOFAZ, at the address: 24 Neftchilar Avenue, Baku. 

The interested companies must submit the following documents to SOFAZ:

• A written request to participate at the tender;
• A tender proposal (together with tender proposal guarantee (bank guarantee) in amount of 3% of total cost of tender proposal);
• Full name, juridical status, charter, country of registration and requisites;
• Data on professional criteria of the contractor;
• Bank application on the financial state of the applicant for last one (1) year. 

The required documents from bidders shall be submitted by fax, e-mail or mail no later than 18:00, December 25, 2009, tender proposal closed in double envelope and sealed till 18:00, January 8, 2010 to SOFAZ at the address: 24 Neftchilar Avenue, Baku AZ1004, AZERBAIJAN. 

In assessing the tender proposals preference will be given to the following criteria: at least 5 years of experience in the IT consultancy services and in the field of the subject matter of the present tender and having an implemented minimum 3-5 similar projects worldwide (preferable in Europe and US). 

Request for Proposal (the "RFP") is compiled in both the Azeri and English. 

Authorized representatives of the bidders can take part in the tender procedure. 

Questions and inquiries regarding the RFP shall be e-mailed to RFP@oilfund.az or faxed to (+994 12) 498 17 60 to the attention of Mr. Gachay Mirzayev, Coordinator of the tender. 

Contact number: (+994 12) 498 77 53 (ext. 176)

The Board approved the Fund's 2010 budget revenues at 5 963 126.7 thousand manats, its expenditures at 5 428 431.2 thousand manats and the Fund's operating expenditures at 33 431.2 thousand manats. The Supervisory Board recommended the Fund's 2010 draft budget, including the major directions of its investment policy, and its draft annual operating expenditures for the approval by President of the Republic of Azerbaijan.

Revenue of 5 191.6 mln. manats was received from implementation of oil and gas agreements, including 5 107.2 mln. manats from the sale of profit oil and gas, 6.8 mln. manats as transit payments, 75.6 mln. manats from State share in the Heydar Aliyev Baku-Tbilisi-Ceyhan (BTC) Main Export Pipeline, 1.1 mln. manats as acreage payments, 0.8 million manats as bonus payments and 0.1 mln. manats from sale of assets received from foreign companies. 

The revenues from managing assets of the Fund for the reporting period amounted to 273.6  mln. manats. 

The Fund's extra-budgetary revenues related to the revaluation of foreign exchange totalled 218.4 million manats. 

As per 2009 budget of the  Fund, 3 685.0 mln. manats were transferred to the state budget. The expenditures in the amount of  69.6 mln. manats were directed to financing of improvement of social condition of refugees and internally displaced persons, 92.4 mln. manats and 94.1 mln. manats were accordingly used for financing the reconstruction of the Samur-Absheron irrigation system and financing construction of the Oghuz-Gabala-Baku water supply system. 4.1 mln. manats were directed to financing Baku-Tbilisi-Kars railway and 3.2 mln. manats to financing "The state program on the education of Azerbaijan youth abroad in the years 2007-2015". The Fund's administrative and operational expenses in this period were 5.7 mln. manats. 

The assets of SOFAZ as at October 1, 2009 has grown by 19.24 % compared to the beginning of the year and stood at 10 716.2 mln. manats (USD 13 337.5 mln.).

 The Board of the EITI (Extractive Industries Transparency Initiative) held its 10^th meeting in Baku, Azerbaijan on 14-15 October 2009. During the meeting the Board designated Liberia as EITI Compliant, stating: 

The Board congratulates the Government of Liberia and all the other stakeholders on the impressive progress made implementing the EITI.

EITI Chairman Peter Eigen noted: "Liberia is the first African country to be designated EITI Compliant. It is the first country to have included the forestry sector in its reporting. It has also undertaken extensive dissemination work to building community engagement in the EITI process. The success of Liberia in reaching EITI Compliance demonstrates what governments, companies and civil society can achieve when working together and political will is firmly behind the process".

The Board also reviewed recent developments in Azerbaijan, including an agreement by the Government, companies and civil society organisations to formalise a multi-stakeholder group and to agree a new workplan. The EITI Chairman noted: "Azerbaijan was the first country to be designated EITI Compliant, and stakeholders are continuing to work together to form a robust platform that will promote revenue transparency. We will continue to follow progress in Liberia and Azerbaijan as they develop and strengthen their EITI processes to improve the management of their significant natural resources.

The EITI Board also reviewed progress in other implementing countries. Cameroon, Côte d'Ivoire, Gabon, Ghana, Kazakhstan and Kyrgyzstan, Mongolia, Nigeria, Republic of the Congo and Timor Leste have all formally initiated the Validation process.

As per the Decree, the amount of expenditures of the Fund on financing some projects concerning solution of the social and settlement problems of the refugees and internally displaced persons are increased to 90 000.0 thousand manats instead of the previous 80 000.0 thousand manats, the amount of expenditures for financing the reconstruction of the Samur-Absheron irrigation system and financing construction of the Oguz-Qabala-Baku water supply system are increased accordingly to 130 000.0 thousand manats instead of the previous 110 000.0 thousand manats and to 120 000.0 thousand manats instead of the previous 100 000.0 thousand manats. The amount of expenditures for financing of "Baku-Tbilisi-Kars railway" project are decreased from 80 000.0 thousand manats to 30 000,0 thousand manats.

Mr. Movsumov briefed the guests on the Fund's activity, management of its assets, major projects financed by the Fund. He talked about SOFAZ's leading role in implementation of the Extractive Industries Transparency Initiative (EITI).

Mr. Poneman appreciated Fund's achievements in implementation of EITI and SOFAZ's transparency in its activities.

The current economic relations between Azerbaijan and US, development perspectives of these relations, activity of Sovereign Wealth Funds, development of Azerbaijan's non-oil sector and other issues were discussed at the meeting.

Signing the agreement USTDA approved the selection by SOFAZ of Overture Financial Services, LLC as the company to perform the technical assistance on phase 3 of the project on institutional capacity building for SOFAZ. 

The scope of phase III includes assistance with selection and implementation of Risk Management and Measurement system and providing trainings.

International Forum of Sovereign Wealth Funds (IFSWF) will convene its inaugural meeting in Baku, Azerbaijan on October 8-9, 2009, hosted by the State Oil Fund of the Republic Azerbaijan (SOFAZ) and the Government of the Republic of Azerbaijan. 

The meeting of senior representatives of Sovereign Wealth Funds (SWF) from more than 20 countries across the world will review developments in the global economy and financial markets, and agree on a work agenda going forward. IFSWF will issue a brief communiqué and hold a press conference at the conclusion of the Baku meeting. 

For media accreditation and other press arrangements for the Baku meeting, please contact Miss Jamala Aliyeva, Press Secretary of SOFAZ by phone number +994 12 498 65 34 or e-mail to jamala.aliyeva@oilfund.az, not later than 2^nd October, 2009. 

Background information 

The International Forum of Sovereign Wealth Funds (IFSWF) was established by the International Working Group of Sovereign Wealth Funds (IWG), which met in Kuwait City on April 5-6, 2009 (see "Kuwait Declaration"). IFSWF is a voluntary group of Sovereign Wealth Funds (SWFs), which will meet, exchange views on issues of common interest, and facilitate an understanding of the Santiago Principles and SWF activities.

The document on Formalization of Multi-Stakeholder Group for EITI Implementation in Azerbaijan was discussed at the meeting and mentioned the possibility of signing this document. 

The Chairman informed that EITI International Board meeting will be held on 14-15 October, 2009 in Baku. Mr. Movsumov invited the members of the EITI Committee actively participate at the round table which will be held during the Board meeting. 

Participants of the meeting also agreed to attract new extractive sector companies operating in the country to the EITI implementation process in Azerbaijan.

A meeting of EITI stakeholders - National Committee on EITI, local and foreign extractive industry companies, and Coalition of Non-governmental organizations was held on August 26, 2009. 

NGOs Coalition's Opinion on 10^th EITI report (Jan-Dec 2008 assertion) audited by Deloitte and Touche, the independent Aggregator was discussed at the meeting. 

Audit Company gave additional information about the issues raised in NGOs Coalition's Opinion and answered questions. 

As the result of discussions several improvements and recommendations for the next EITI reports were agreed among stakeholders. 

The document on Formalization of Multi-Stakeholder Group for EITI Implementation in Azerbaijan was discussed at the meeting and the general agreement with some exceptions was reached. It is expected that the document will be signed after final consultations with relevant constituencies. 

Report of the Government of the Republic of Azerbaijan (host government) about aggregated receipts from the extractive industries Reporting period January- December 2008 (annual)  The Committee on the Extractive Industries Transparency Initiative of the Republic of Azerbaijan ( Independent Accountants Repor t) For the 12 months ended 31 December 2008

 SOFAZ Executive Director made public the Fund's revenue and expenditure statement for the period of January-June, 2009: 

Budget revenues of the State Oil Fund of the Republic of Azerbaijan (SOFAZ) for the period of January-June, 2009 reached 3 156.3 million manats, while budget expenditures constituted 2 685.7 mln. manats. 

Revenue of 2 989.3 mln. manats was received from implementation of oil and gas agreements, including 2 907.6 mln. manats from the sale of profit oil and gas, 5 mln. manats as transit payments, 75.5 mln. manats from State share in the Heydar Aliyev Baku-Tbilisi-Ceyhan (BTC) Main Export Pipeline, 1.1 mln. manats as acreage payments and 0.1 mln. manats from sale of assets received from foreign companies. 

The revenues from managing assets of the Fund for the reporting period amounted to 167.0 mln. manats. 

The Fund's extra-budgetary revenues related to the revaluation of foreign exchange totalled 100.5 million manats. 

As per 2009 budget of the Fund, 2 530.0 mln. manats were transferred to the state budget. The expenditures in the amount of 20.2 mln. manats were directed to financing of improvement of social condition of refugees and internally displaced persons, 61.9 mln. manats and 68.5 mln. manats were accordingly used for financing the reconstruction of the Samur-Absheron irrigation system and financing construction of the Oghuz-Gabala-Baku water supply system. 1.1 mln. manats were directed to financing Baku-Tbilisi-Kars railway and 1.3 mln. manats to financing "The state program on the education of Azerbaijan youth abroad in the years 2007-2015". The Fund's administrative and operational expenses in this period were 2.7 mln. manats. 

The assets of SOFAZ as at July 1, 2009 has grown by 6.35 % compared to the beginning of the year and stood at 9 557.7 mln. manats (USD 11 886.4 mln.).

Mr. Movsumov briefed the guests on the Fund's activity, management of its assets, major projects financed by the Fund. He talked about SOFAZ's leading role in implementation of the Extractive Industries Transparency Initiative (EITI) and Azerbaijan's representation at the international EITI Board. 

Mr. A.I. Luder appreciated Fund's achievements in implementation of EITI and SOFAZ's transparency in its activity. 

The current economic relations between Azerbaijan and UK, development perspectives of these relations, activity of Sovereign Wealth Funds, the economic reforms, development of Azerbaijan's non-oil sector and other issues were discussed at the meeting. 

Executive Director gave detailed answers to the questions covering SOFAZ's activity.

The Selection Group assessed the financial and technical proposals of the bidders on July 15, 2009. Four internationally recognized audit companies- Deloitte, PriceWaterHouseCoopers, Ernst & Young and Moore Stephens - operating in the Republic of Azerbaijan were invited to bid.

As per the Decree, the revenues of the Fund were executed with 11 864 648,1  thousand manats or 17 % surplus, and expenditures in the amount of 4 291 751,4 thousand manats or 2 % less than budgeted expenditures.

An audit company will be selected to collate the 2009 semi-annual reports submitted by the Azerbaijan government and oil and gas companies in accordance with the EITI implementation mechanism in Azerbaijan.

The full report as well as the Aggregator's opinion on the document has already been disclosed on web sites of the State Oil Fund (SOFAZ) (www.oilfund.az) , the International EITI Secretariat (www.eiti.org) and the Non-Governmental Organizations (NGOs) Coalition for Increasing Transparency in the Extractive Industries of the Republic of Azerbaijan (www.eiti-az.org).

Awards:

1^st place - 1000 manat

2^nd place - 800 manat

3^rd place - 500 manat  

Terms of the competition: 

Subject of the article may cover any of the Fund's activities.

The participant of the competition should have minimum two years of experience in journalism and must be contributor to local or foreign media. The participants of the competition are required to submit the following documents by December 1, 2009 to the Public Relations Office of SOFAZ: 

1.        Filled and printed out  APPLICATION FORM available at  www.oilfund.az

2.        Document confirming the journalist as contributor to the media

3.        Copy of the issue of the article as published in local or international media from June 15, 2009 to November 20, 2009 

The article should bear following sentence on top of it: "This material is prepared for the best analytic article competition announced by the State Oil Fund of the Republic of Azerbaijan in celebration of the 10^th Anniversary of the Fund for the purpose of increasing public awareness on SOFAZ in Azerbaijan" 

The results of the competition will be announced after December 1, 2009. 

Board of experts: 

Jahangir Mammadli -     Head of the journalism department of Baku State University, the chairman of

                                   the Public Television Broadcasting Company

Sabit Baghirov        -      President of Economical and Political Research Centre, member of the Coalition

                                   for Improving Transparency in Extractive Industries

Rahim Huseyzadeh -      Executive Secretary of Press Council of the Republic of  Azerbaijan, Honoured

                                   Journalist of Azerbaijan 

Any information on the Oil Fund can be obtained from the Public Relations Office of SOFAZ. 

Contact:

Tel: 498 6534 (direct)

       498 7753 (internal 132)

e-mail: jamala.aliyeva@oilfund.az

The Supervisory Board approved the SOFAZ's 2008 annual report and Auditor's (Deloitte & Touche) Report as submitted by the Executive Director of the Fund. The Supervisory Board recommended the document on execution of the Fund's 2008 budget for the approval by the President of the Republic of Azerbaijan. 

Prime Minister Artur Rasi-zadeh was re-elected as the Supervisory Board's Chairman-in-office.

Mr. Movsumov briefed the guests on the Fund's activity, management of its assets. He talked about SOFAZ's leading role in implementation of the Extractive Industries Transparency Initiative (EITI) and Azerbaijan's representation at the international EITI Board. 

Mr. A.Alam appreciated Fund's achievements in implementation of EITI and SOFAZ's transparency in its activity.  

The current circumstances in financial markets, World Bank's programs, future cooperation between SOFAZ and World Bank, the economic reforms, development of Azerbaijan's non-oil sector and other issues were discussed at the meeting.

The investment opportunities in the country, current circumstances in financial markets, the economic reforms, development of Azerbaijan's non-oil sector and other issues were discussed at the meeting.

SOFAZ, a state owned legal entity, has been established in accordance with the Decree of the President of the Republic of Azerbaijan in December 1999. As of April 30^th, 2009, the assets in the portfolio stood at approximately USD 11 billion. 

SOFAZ is seeking to implement a risk measurement system for its investment portfolios. The creation and implementation of the system should be done within six months from the date of signing the agreement. 

The tender is open to financial technology companies that offer a functionally rich and high-performance risk measurement system with at least 5 years of experience in developing and distributing institutional risk measurement systems and having an international institutional client base and minimum annual revenues or shareholder equity of USD 5 million. 

SOFAZ will send by e-mail or certified mail a formal Request for Proposal (the "RFP") in both the Azeri and English languages along with the accompanying bidding documents to those companies that have expressed interest. 

The interested companies shall send to SOFAZ by fax, e-mail or mail no later than July 3^rd, 2009 the following documents: 

• 1. Expression of interest (letter of participation),
• 2. Properly asserted copies of legal documents confirming the bidder's legal status (charter, certificate of state registration or extract from the registry, etc.), and
• 3. The last audited financial statement.
• 4. Document authorizing the responsible person to act as signatory 

SOFAZ has set July 17^th, 2009 5:00 PM local Baku time as the deadline for submission of tender proposals in response to the RFP. Bids shall be sent to SOFAZ principal address at 20 BulBul Avenue, Baku AZ1014, Azerbaijan. 

Opening of tender proposal bids will take place at 11:00 AM local Baku time on July 20^th, 2009 at the administrative building of SOFAZ. Companies participating in the tender may send an authorized representative to the opening of tender proposals. 

The tender proposals will be evaluated in two stages: 

• Stage1 will be based on technical criteria such as functionality, services, reporting, and technology as specified in the RFP.
• Stage 2 will be based on pricing along with the criteria described above. 

Questions and inquiries regarding the RFP shall be emailed to RMS@oilfund.az or faxed to +994 (12) 490 57 32 to the attention of Mr. Samir Aghayev, Coordinator of the tender.
Information about SOFAZ can be obtained from SOFAZ official website at

Mr. Movsumov briefed the guests on the Fund's activity, management of its assets, major projects financed by the Fund. 

The current economic relations between Azerbaijan and Turkey, development perspectives of these relations, extension of business co-operations on development of security markets between two countries and other issues were discussed at the meeting.

The purpose of this seminar is:

• To enhance awareness of Azeri mass media about SOFAZ;
• To achieve better information dissemination about SOFAZ;
• To learn proposals of mass media on development of SOFAZ's public relations;
• To cooperate with mass media on providing information to the population about SOFAZ. 

At the seminar journalists can get comprehensive information about SOFAZ, as well as about sovereign wealth funds, financial markets. The seminar will cover the following subjects: 

• General information about SOFAZ;
• The organizational structure of SOFAZ and Fund's management mechanism;
• SOFAZ's budget as part of consolidated state budget ;
• SOFAZ's role in protecting macroeconomic stability;
• SOFAZ's activity in asset management, Fund's investment policy;
• Azerbaijan and Extractive Industries Transparency Initiative (EITI);
• SOFAZ's achievements ("UN Public Service Award"). 

The participants of the seminar are required to submit the following documents by May 10, 2009 to the Public Relations Division of SOFAZ or send this information by e-mail to jamala.aliyeva@oilfund.az: 

• Official application of participants assigned by media organisation;
• Copy of the certificate issued by media organization. 

More information about seminar can be obtained from the Public Relations Division of SOFAZ or from SOFAZ's official website www.oilfund.az. 

Contact: 

Tel: 498 6534 (direct)

       498 7753 (internal 132)

The IWG announced the establishment of the International Forum of Sovereign Wealth Funds. The Forum is a voluntary group of SWFs. 

The Forum will conduct its inaugural meeting in Baku, Azerbaijan in October 2009, hosted by the State Oil Fund of the Republic of Azerbaijan and the Government of Azerbaijan.

Revenue of 1 274.5 mln. manats was received from implementation of oil and gas agreements, including 1 272.2 mln. manats from the sale of profit oil, 2.1 mln. manats as transit payments, 0.1 mln. manats from State share in the Heydar Aliyev Baku-Tbilisi-Ceyhan (BTC) Main Export Pipeline and 0.1 mln. from sale of assets received from foreign companies. 

The revenues from managing assets of the Fund for the reporting period amounted to 74.7 mln. manats. 

As per 2009 budget of the Fund, 1 330.0 mln. manats were transferred to the state budget. The expenditures in the amount of 8.4 mln. manats were directed to financing of improvement of social condition of refugees and internally displaced persons, 46.3 mln. manats and 11.3 mln. manats were accordingly used for financing the reconstruction of the Samur-Absheron irrigation system and financing construction of the Oghuz-Gabala-Baku water supply system. 0.4 mln. manats were directed to financing Baku-Tbilisi-Kars railway and 1.1 mln. manats to financing "The state program on the education of Azerbaijan youth abroad in the years 2007-2015". The Fund's administrative and operational expenses in this period were 1.2 mln. manats. 

The Fund's extra-budgetary expenditures related to the revaluation of foreign exchange totalled 215.8 million manats. 

The assets of SOFAZ as at April 1, 2009 stood at 8 721.4 mln. manats (USD 10 863.9 mln.).

Approval of the Budget followed the procedures laid out in the Funds Statutory Regulations and Budgetary Regulations.

During the first day of the Conference, the Board discussed approval of Azerbaijan as the first EITI Compliant country.  

It was mentioned that Azerbaijan has instituted a regular process of disclosing, reconciling and publishing company payments and government receipts; Azerbaijan is the first country to complete validation, the EITI's quality assurance process which verifies compliance with EITI principles and criteria. Taking all these into account the EITI Board designated Azerbaijan as EITI Compliant country. Thereby Azerbaijan became the first EITI Compliant country among 26 candidate countries. 

The Board congratulated the government of Azerbaijan for its commitment and leadership and commended all stakeholders for their collaborative and constructive approach to EITI implementation. The promotion of Azerbaijan from Candidate to Compliant country status marks an important milestone for the EITI. “EITI Award 2009” for Azerbaijan’s commitment to EITI principles and criteria and its achievements in EITI Implementation was awarded to Azerbaijan. 

George Soros, Founder and Chairman of the Open Society Institute and the Soros foundations network, participating at the Conference congratulated Azerbaijan, appreciated Azerbaijan’s achievements and supports to EITI and expressed his hopes that other EITI implementing countries will follow Azerbaijan’s experience. 

At the Conference Azerbaijan was reelected as EITI International Board member for the next two years.

EITI Compliant country status of Azerbaijan has been approved at this Conference. Thereby Azerbaijan became the first EITI Compliant country among 25 candidate countries.

The Selection Group assessed the financial and technical proposals of the bidders on February 9, 2009. Four internationally recognized audit companies- Deloitte, PriceWaterHouseCoopers, Ernst & Young and Moore Stephens - operating in the Republic of Azerbaijan were invited to bid.

The issues on validation process, Azerbaijan’s experience on EITI implementation were discussed at the meeting. 

The Validator, Coffey International Development, is planning to hold interviews with EITI stakeholders during this week. The Validator intends to complete the validation process in Azerbaijan and disclose the final report on this issue by the end of January, 2009.

Budget revenues of the State Oil Fund of the Republic of Azerbaijan (SOFAZ) for the period of January-December, 2008 reached 11 864,7 million manats, while budget expenditures constituted 4 291,8 mln. manats. 2008 budget revenues and expenditures of the Fund were executed accordingly 117% and 98%. 

Revenue of 11 633,5 mln. manats was received from implementation of oil and gas agreements, including 11 527,0 mln. manats from the sale of profit oil, 3,6 mln. manats as acreage payments, 2,8 million manats as bonus payments, 0,2 mln. manats as transit payments, 97,2 mln. manats from Azerbaijan's State participation share in the Heydar Aliyev Baku-Tbilisi-Ceyhan (BTC) Main Export Pipeline and 2,7 mln. from sale of assets received from foreign companies. 

The revenues from managing assets of the Fund for the reporting period amounted to 231,2 mln. manats. 

As per 2008 budget of the Fund, the expenditures in the amount of 145,0 mln. manats were directed to financing of improvement of social condition of refugees and internally displaced persons, 120,6 mln. manats and 211,8 mln. manats were accordingly used for financing the reconstruction of the Samur-Absheron irrigation system and financing construction of the Oghuz-Gabala-Baku water supply system. 5,3 mln. manats were directed to financing Baku-Tbilisi-Kars railway and 2,3 mln. manats to financing "The state program on the education of Azerbaijan youth abroad in the years 2007-2015". 3 800,0 mln. manats were transferred to the state budget. The Fund's administrative and operational expenses in this period were 6,8 mln. manats. 

The Fund paid profit tax and other taxes of 26,0 mln. manats. The Fund's extra-budgetary expenditure due to asset revaluation stood at 652,6 mln. manats. 

Basket of currencies weighted return on the Fund's assets in 2008 constituted 3.79%. 

The assets of SOFAZ as at January 1, 2009 has grown by 4,3 times compared to the beginning of the year and stood at 8 986,7 mln. manats (USD 11 219,2 mln.).

Approval of the Budget followed the procedures laid out in the Funds Statutory Regulations and Budgetary Regulations.

An audit company will be selected to collate the 2008 annual reports submitted by the Azerbaijan government and oil and gas companies in accordance with the EITI implementation mechanism in Azerbaijan. 

The payment to audit company will be reimbursed by extractive industry companies.

Tuesday, January 06, 2009  

Unlike most sovereign wealth funds, the State Oil Fund of Azerbaijan is still growing strongly and looking for more foreign risk. Will the country's experience of the global downturn rob the international capital markets of a new hope? Dominic O'Neill reports from Baku.  

AT THE END of the 19th century, Baku, the capital of Azerbaijan, was one of the world's first oil boom towns. Now it is one of the latest. Baku is fast becoming a Moscow by the Caspian: a greed-is-good mentality, a skyline fringed with cranes, black Mercedes cars, swish cafés and Italian designer clothing stores. 

Such are the signs of an incipient oil boom. However, Azerbaijan's most recent windfall is not all being frittered away on speculative real estate and consumer goods. The State Oil Fund of Azerbaijan is building the infrastructure to take on a bigger role, more capital, and more risk. It is taking the opposite route to most other sovereign wealth funds. 

In the past 12 months, the State Oil Fund (Sofaz), has gone from being a detail to being a force in the country. From January to December 2008, its assets grew from $2.5 billion to more than $11 billion: a quadruple rise of almost a third of the country's GDP. In comparison, Morgan Stanley estimates that sovereign wealth funds' assets globally dropped from $3 trillion to $2.5 trillion during the first 10 months of 2008. 

Even after the oil-price crash of the second half of last year, the rise of Sofaz continues. When, in September, the price of oil was about $100 a barrel, the fund was receiving $2.5 billion a month. Even with oil at about $50, the fund still receives $700 million a month. Two years ago, a higher oil price gave it a fraction of this revenue (the fund only had $1.5 billion at the beginning of 2007, for example). 

Shahmar Movsumov, the fund's executive director, tells Euromoney: "There has been a big scale-up in Azerbaijan's oil production and a rise in the government's share of profits from production-sharing agreements with foreign firms." In particular, drilling is intensifying in the 5-billion-barrel Azeri-Chirag-Gunashli oil field, which is run by a consortium lead by BP. In the second quarter of 2008, the state's share of profits from this field rose from 50% to 80%. These profits flow directly into Sofaz. 

In 2009, Azerbaijan hopes to bring oil exports through the two-year-old Baku-Tbilisi-Ceyhan pipeline up to 1 million barrels a day. Movsumov says that consequently, once a pre-agreed portion has been transferred to the state budget, if oil prices average $50 a barrel, his fund will have about $20 billion by the end of 2009. Assuming an average oil price of $40, Movsumov says the fund will receive about $200 billion in oil receipts over the next 15 years. Most of this will come over the next four years, when Azerbaijan's oil production is expected to peak. 

In past years the fund has saved at least 60% of its annual income. But, the logic goes, even after the oil rush thins to a trickle, an average return of 5% on $100 billion, for example, would still allow an annual transfer to the state budget of $5 billion: $1 billion less than the $6 billion transfer projected for 2009. 

"Because we will be able to build up reserves very quickly, we hope we will be able to provide the government with a non-depletable source of return. This is how we see our role increasing. It is a new endowment for the country," says Movsumov. 

Such are the dreams of Sofaz. 

Rise and fall 

Last year bluntly showed how sovereign wealth funds, like empires, may rise and fall, and go through various stages of development on the way. 

"The first phase tends to be one of caution and capital preservation; then they get bigger and bolder and invest more in riskier assets," says Drosten Fischer, who follows sovereign wealth funds for consultancy Monitor Group. 

Azerbaijan's fund is unusual because it is still in the first of these stages, in part thanks to the political volatility the country went through after its break from the Soviet Union. This delayed the growth of Azerbaijan's oil industry. But Sofaz will soon move into Fischer's second stage. Indeed, the caution of the Oil Fund rewarded it in 2008 with what the executive director expects to be a positive return on capital, although probably lower than the 4.5% return in 2007 (on a currency-basket basis). Most sovereign wealth funds, which have been more risk-hungry, suffered asset drains in 2008 in line with the global markets in which they had invested.

"We have had some hits on our financial corporate debt but because we made huge gains on our government debt, we managed to make a profit in 2008," says Movsumov. In comparison, Norway's sovereign wealth fund, which is also noted for its caution (but unlike Sofaz has an equity portfolio) had a loss of 7.7% in the third quarter of 2008 - its worst result ever. 

Monitor's Fischer says: "In 2008, sovereign wealth funds have been reminded that capital can shrink as well as grow. This has caused more of a movement towards the third and final stage of the general development of sovereign wealth funds: less risky assets, and more investment at home." 

Unable to become much more conservative, however, and still in its first, most rapid stage of expansion, Azerbaijan is taking a different path. As a long-term investor, the fund's managers think the global financial and economic crisis will provide a good opportunity to begin moving away from fixed-income investment. The logic is that in the relatively short term, an ideal climate will arise in which to move more towards under-priced global equity, real estate, and perhaps private equity and alternatives. 

"The Oil Fund was designed to be a buffer for the fiscal side of the government, and that gave us a contingent liability. Now with the significant growth in the fund's assets, this contingent liability is much more remote. This has increased our risk appetite," says Movsumov. 

The first prerequisite for this bolder strategy is a larger force of managers, and improvements in logistical support and infrastructure. These were in any case required because of the growth in oil income. Sofaz was expecting a windfall from increases in oil production and the government's share in profits. But none of the inflows in 2008 was outsourced, and 98% of the fund's capital is still managed internally. The proportion of funds managed by third parties decreased in 2008, giving the managers of Sofaz much more to do even without learning how to pick equities and buy real estate. 

Since 2006, Sofaz has expanded its staff from 40 to 70, and has also sent its employees around the world to be trained in portfolio management, strategic asset allocation and risk management. But it is still recruiting. Movsumov says: "We are trying to find the brightest and most talented people from across the country." 

Transformation 

Sofaz is on the lookout for Azerbaijanis educated in western universities in particular. The executive director, who is appointed by presidential decree, did his bachelor's degree in Moscow. Between 2003 and 2004 he took a master's degree from Harvard during a sabbatical from Azerbaijan's central bank. 

Such influence has helped the transformation of Sofaz, over the past couple of years, in preparation for a dramatically higher pile of reserves, into an institution much like a Wall Street investment house. It is now organized into front, middle and back offices. It has built a Chinese wall to prevent conflicts of interest, and invested in technology, buying the best available software for portfolio management. 

But in terms of its asset allocation, the development of Sofaz away from being little more than an account with the finance ministry or central bank is only just beginning. The fund has monthly investment committees to discuss changes in allocations. So far, the global crisis has prompted the fund to become even more timid. 

"Since summer 2007, we decided to take the most cautious stance possible. We decided to cut our exposure to anything that could be risky," says Movsumov. 

So whereas the biggest proportion of Sofaz's debt at the beginning of 2008 was in investment-grade financial corporates, by the end of the year, it held most in government agencies such as Fannie Mae in the US and Germany's KfW. 

Movsumov tells Euromoney that agencies are underpriced compared with other government issuance such as treasuries. But since mid-2007, Sofaz itself has increased its holdings of sovereign debt. 

Sovereign debt remains the smallest proportion of the investments held by Sofaz. Sofaz has a higher proportion of debt issued by multilateral institutions such as the World Bank than of debt issued directly by sovereigns. At the end of 2008, it held least in US treasuries, which the fund deemed overpriced (indeed, since the second quarter of 2008 most of its entire debt has been from Europe, whereas before most was from the US). 

This preference for European agency debt is a sign of increased caution as well as a continuing instinct for returns amid the general dive for cover. But in many ways it is difficult for Sofaz to get more conservative. Indeed, apart from a negligible proportion of less than 1% managed by its external managers, the State Oil Fund has no equity investments. Nor has it ever invested in any kind of structured products or derivatives, and it cannot partake in currency arbitrage. 

Sofaz allocates 50% of its capital to dollar-denominated securities, and has 40% in euro, 5% in sterling and 5% in other currencies, which must all be of investment-grade sovereigns. It considers the maintenance of that balance to be a sufficient hedge against currency fluctuations over the long term. It has no investments in real estate or in gold, or in other precious metals or gemstones, because of the severe price volatility of these investments. During the first part of 2008, it even reduced its small investment-grade portfolio from Russia and Kazakhstan to zero. It no longer has any emerging market debt - investment-grade or otherwise. 

As one might expect, Sofaz is taking the move into equities, real estate and alternatives with extreme caution, even trepidation. 

Conservative change 

The plan is ultimately to build an equity portfolio of 15%. Even Norway's fund has around half its holding in equities. But there will be no big bang at Sofaz. The fund will start with just 5% in equities, bringing the allocation, perhaps, to 10% the following year and maybe 15% the year after that. 

For new asset classes, the Oil Fund's method is to start by employing reputed third-party managers, which will educate the fund's own staff. It then gradually reduces outsourcing to a minimum. It has done this before, and until the middle of last year it was in discussions with partners to do this again with equity and other asset classes. It stopped the discussions because of the sub-prime crisis. 

"Somewhere in the middle of the recession we will start again," says Movsumov. "We are still in the acute stage of the financial crisis and this will be followed by what I think will be a quite prolonged recession." 

But is this extreme caution in some ways a sign that the dreams of Sofaz will be impossible to achieve? It is difficult for Sofaz, unlike the Qatar, Kuwait, or Abu Dhabi Investment Authorities, to pounce on big prey of whatever species, as soon as it saunters along. For a start, one investment cannot take more than 15% of the fund's assets. Global financial partners of Sofaz know that when it decides to act, it reviews the decision many times before finally implementing the decision - as the postponement of the move into equities shows. 

Sofaz is transparent and accountable. Detailed annual reports are available on its website, and it has regular press conferences. This transparency reflects the principles on which the fund was founded in 2000 by the late president Heydar Aliyev (the father of the current president, Ilham Aliyev). 

"Oil is a major wealth of Azerbaijan that belongs not only to this generation but also to future generations," runs a quote from Heydar Aliyev on the Oil Fund's website. The executive director has to follow these principles too. 

Movsumov says: "We are managing the money of the people of Azerbaijan, not only for the current generation, but for all generations. That makes it important to be very open, so that the population can participate in the management of the fund." 

But does this accountability make it more difficult for the fund to grow and make profitable transactions based on experience and knowledge of international capital markets? Professional managers, it seems, determine investment decisions more rarely at Sofaz than they might in some other funds. A general populace that is more or less ignorant of the workings of international capital has an important input into the fund. This is more democratic in a sense but it holds its own dangers.

As the executive director says to justify the 15% ceiling in equities: "We run a huge political risk if we have negative returns. People are not very sophisticated here. They would prefer not to earn 30% annually rather than to lose 2%." 

Under lock and key 

The openness of Sofaz is partly a mark of the inspiration it received from Norway's sovereign wealth fund. The two share a concern to stabilize the state budget and sterilize oil windfalls by keeping assets in foreign currency, restricting inflation. They also share the ideal of inter-generational equality. 

A high-ranking government delegation from Azerbaijan was sent to Norway while Sofaz was being set up. Like Norway, which has about 5 million people, Azerbaijan's population is much larger than the rich citizen bases of some Gulf states, such as Kuwait. Azerbaijan has about 8 million people compared with Kuwait's citizen population of about 1 million out of a total population of about 3 million. 

But the industrial development of Norway and Azerbaijan are far apart, both in and outside the oil and gas industry. Entrusting billions of dollars to banks and companies of much richer foreign countries is likely to be more politically problematic in a country such as Azerbaijan, which has a GDP per capita of $8,000, than in Norway, which has a GDP per capita of almost $50,000. For the future of Sofaz, it is thus a good thing that, unlike in Norway, the government can only access most of the oil income after an amount has been pre-approved by parliament and by the president as part of the official annual state budget.

"Politicians always find ways to spend money," says Movsumov. "We decided we shouldn't tempt them by sending money into the budget, and then deciding how much to send to the Oil Fund. Rather, we decided to send everything to the Oil Fund, and then decide how much to pay out." 

Nevertheless, budgetary transfers from Sofaz have been increasing proportionally to the income of the fund. They have not exceeded 40% of the fund's income over past years, as the executive director points out. However, the fund's revenue has grown so unexpectedly quickly that every year since 2005 the budget has been amended mid-year to allow a bigger transfer. Last year, the oil price rose so high during the first half that in July the projected annual transfer was increased from a local-currency equivalent of $1.4 billion to an equivalent of $4.7 billion - almost twice as much as the fund's total assets at the beginning of 2008. 

Pulling on the purse strings 

A transfer from Sofaz to the government of $6 billion is projected for 2009. According to the executive director, such transfers are used for capital expenditure, for example, in developing the country's infrastructure. Current expenditure, such as government salaries and pensions, are paid by taxes, he says. 

"We think that the high oil price environment is exactly the right time for those expenditures. You shouldn't expect the private sector to create jobs if there is no basic infrastructure such as water supply, electricity and roads, and that's where the government is spending money," says Movsumov. 

In 2009, 15% of the state's budget is expected to come from oil revenues that do not even come from Sofaz, but mainly from Socar, the state oil company. That means a higher transfer than has been planned from Sofaz might be necessary if oil prices stay relatively low in 2009, as that 15% was based on an oil price of $70. 

The projected transfer from Sofaz is already financing 40% of the state's 2009 budget, and that amount was fixed during an assumed average oil price for 2009 of $70 per barrel. If next year Sofaz did have to make up for a shortfall from Socar, it would already be contending with much lower than expected revenues itself. 

So Movsumov says: "If the oil price doesn't rise again there will be two options: either cut expenditures, or increase the transfer. I frankly think only the first one is viable. No one will allow a higher transfer in this case." 

Nevertheless, if Sofaz is to grow to $100 billion, transfers to the budget will have to be severely reduced if the oil price stays below $40 per barrel for much of the period to 2012. Azerbaijanis' aspirations might persist, leading the government to continue with ambitious projects that were planned during the oil bubble, even as the revenues of Sofaz decline. 

A source in the country says: "Azerbaijan has a lot of gaps in its infrastructure and in its private sector. Its needs are still quite high, especially outside the oil industry." 

Developments for richer generations 

One of the stated aims of Sofaz is to stimulate the development of the non-oil sector. Transfers to the government's budget do this. Sofaz also directly funds 10 domestic socioeconomic projects. In 2009, out of a total domestic expenditure by Sofaz of a local-currency equivalent of about $7 billion, $6 billion is to be passed to the government, while around $1 billion is to finance these projects directly. The projects are in irrigation and water supply. They also include a railway line to Turkey, and houses for Azerbaijan's refugees and internally displaced people. The amount spent on these projects has to be approved by parliament as part of the overall annual budget of the state; yet again, mid-year amendments are possible, and normal. 

If low oil prices prevail, the government might still continue to dip into Sofaz in order to maintain the breakneck economic growth that Azerbaijan has come to expect. For 2009, the government has targeted growth of almost 20%. But there are signals Azerbaijan will soon enter a more difficult period, meaning demands on Sofaz might be higher in the future when oil prices might stay low, and not only because of lower revenues from Socar. 

For a start, with international capital markets still quiescent, Azerbaijan's banking sector will have difficulty rolling over, never mind increasing, the $2 billion it has borrowed from abroad. With reserves of $5.2 billion, the central bank will be able to help these banks renew their debt. But a bigger problem for Azerbaijan's economy might be the real estate bubble. 

International funding (around 25% of total liabilities) has helped asset growth in Azerbaijani banks of up to 100% in recent years. Property prices have rocketed as a population still mistrustful of bank accounts has put their money into houses. According to Eldar Garibov, chairman of Unibank (one of the top three lenders in the country), about 70% of the banking system's loan portfolio is collateralized by real estate. Garibov says the banking system, including his bank, takes maximum loan-to-value ratios of about 60%. 

"Everyone expects the real estate bubble to decrease. Even with a fall of 25% or 30% we will still feel good, and the banking system will still feel good," he says. 

Nevertheless, such issues show the continuing contingent liabilities of the sovereign wealth fund of this relatively poor if rapidly developing country. The international crisis has reminded other sovereign wealth funds of the immediate necessity of economic development at home: even in such relatively rich countries as Kuwait, for example. The inter-generational equality ideal is admirable. But achieving it will be a different matter. 

The Coalition of Azerbaijan Non-Government Organization for Improving Transparency in Extractive Industries presented Opinion on the 12th EITI report (2009, annual) and Independent Accountant's report, Companies Group made a presentation on the units of measurement of associated gas. These issues were discussed at the meeting. 

EITI is a special multilateral and voluntary initiative, supported by a coalition of companies, governments, investors and civil society organizations and global standard for improved transparency in the oil, gas and mining sector. Azerbaijan joined EITI in 2003. Azerbaijan is the first ever country to complete validation process and designated as EITI Compliant Country. Azerbaijan was awarded the "2009 EITI Award" for its commitment to EITI principles and criteria and achievements in EITI Implementation.

The Supervisory Board approved the SOFAZ's 2009 annual report and Auditor's (Deloitte & Touche) Report as submitted by the Executive Director of the Fund. While endorsing the Oil Fund's 2009 budget execution and amendments to the Fund's 2010 budget the Supervisory Board recommended both documents for the approval by the President of the Republic of Azerbaijan. 

Prime Minister Artur Rasi-zadeh was re-elected as the Supervisory Board's Chairman-in-office for the year of 2010.

In accordance with the Decree, taking into account that Azerbaijan will receive extra revenues from implementation of oil and gas agreements under the circumstances of high price of crude oil and in connection with amendments to the 2010 state budget, it is necessary to make amendments to the Fund's 2010 budget. 

As per the Decree, the amount of revenues of the Fund from sale of the Republic of Azerbaijan's share of hydrocarbons is increased to 8 615 782.1 thousand manats instead of the previous 5 564 476.9 thousand manats, the amount of revenues on management of SOFAZ's assets is increased to 250 002.7 thousand manats instead of the previous 241 936.0 thousand manats. As per the amendments, the Fund's 2010 budget is to include an additional revenue item of 9 640.8 thousand manats related to the revenues generated from oil and gas transit over the territory of the Republic of Azerbaijan. The amount of expenditures of the Fund on transfers to the budget increased to 5 915 000.0 thousand manats  instead of the previous 4 915 000.0 thousand manats. The amount of revenues of the Fund are increased to 9 032 139.4 thousand manats instead of the previous 5 963 126.7 thousand manats and expenditures to 6 428 431.2  thousand manats instead of the previous 5 428 431.2 thousand manats.

As per the Decree, the revenues of the Fund were executed with 8 176 692.0   thousand manats, and expenditures in the amount of 5 294 496.6 thousand manats.

Revenue of 6 089.3 mln. manats was received from implementation of oil and gas agreements, including 6 000.1 mln. manats from the sale of profit oil and gas, 83.2 mln. manats from State share in the Heydar Aliyev Baku-Tbilisi-Ceyhan (BTC) Main Export Pipeline, 4.3 mln. manats as transit payments, 0.9 mln. manats from sale of assets received from foreign companies and 0.8 mln. manats as acreage payments. 

The revenues from managing assets of the Fund for the reporting period amounted to 11.9 mln. manats. 

As per 2010 budget of the Fund, 2 455.0 mln. manats were transferred to the state budget. The expenditures in the amount of 34.0 mln. manats were directed to financing of improvement of social condition of refugees and internally displaced persons, 74.8 mln. manats and 53.0 mln. manats were accordingly used for financing the reconstruction of the Samur-Absheron irrigation system and financing construction of the Oghuz-Gabala-Baku water supply system. 1.5 mln. manats were directed to financing Baku-Tbilisi-Kars railway and 2.8 mln. manats to financing "The state program on the education of Azerbaijan youth abroad in the years 2007-2015". The Fund's administrative and operational expenses in this period were 9.1 mln. manats. 

The Fund's extra-budgetary expenditures related to the revaluation of foreign exchange totalled 869.1 million manats. 

The assets of SOFAZ as at July 1, 2010 has grown by 21.6 % compared to the beginning of 2010 (USD 14 900.4 mln.) and stood at USD 18 122.3 mln.

After the evaluation of the proposals presented by the bidding audit companies, pursuant to the Statutory Regulations of the State Oil Fund, Ernst & Young Holdings (CIS) B.V. was appointed as the auditor of the Fund's financial statements for 2010, 2011, 2012 by the President of the Republic of Azerbaijan. 

While endorsing the amendments to the Fund's 2010 budget the Supervisory Board recommended the document for the approval by the President of the Republic of Azerbaijan.

In accordance with the agreed process the Coalition of Azerbaijan Non-Government Organization for Improving Transparency in Extractive Industries presented Opinion on the 13th EITI report (2010, semi-annual) and Independent Accountant's report. 

In addition the Multi-stakeholder Group work plan for 2011 was discussed and agreed at the meeting. 

At the same time it was noted that in order to bring confidence into the EITI implementation process in Azerbaijan at it's initial stages reports were disclosed two times a year (semi-annual and annual). Presently, taking into consideration achievements in EITI implementation in Azerbaijan and the fact that other EITI implementing countries are disclosing reports only once a year, it was decided at the meeting to switch from twice-a-year reporting (where semi-annual and annual reports were prepared) to once-a-year annual EITI reporting.

 Other issues on EITI implementation in Azerbaijan were discussed at the meeting. 

EITI is a special multilateral and voluntary initiative, supported by a coalition of companies, governments, investors and civil society organizations and global standard for improved transparency in the oil, gas and mining sector. Azerbaijan joined EITI in 2003. Azerbaijan is the first ever country to complete validation process and is designated as EITI Compliant Country. Azerbaijan was awarded the "2009 EITI Award" for its commitment to EITI principles and criteria and achievements in EITI Implementation.

The revenues from managing asset of the Fund for the reporting period amounted to 119.5 mln. manats. 

As per 2010 budget of the  Fund, 3 625.0 mln. manats were transferred to the State budget. The expenditures in the amount of  80.0 mln. manats were directed to financing of improvement of social condition of refugees and internally displaced persons, 109.6 mln. manats and 112.1 mln. manats were accordingly used for financing the reconstruction of the Samur-Absheron irrigation system and financing construction of the Oghuz-Gabala-Baku water supply system. 3.8 mln. manats were directed to financing "State Program on Education of Azerbaijani Youth Abroad in the Years 2007-2015" and 2.9 mln. manats to financing Baku-Tbilisi-Kars new railway. The Fund's administrative and operational expenses for the reported period were 11.2 mln. manats. 

The Fund's extra-budgetary expenditures related to the revaluation of foreign exchange totalled 164.9 mln. manats. 

The assets of SOFAZ as at October 1, 2010 has grown by 45.8 % compared to the beginning of the year (USD 14 900.4 mln.) and stood at USD 21 720.8 mln.

At the meeting Azerbaijan Government Committee on EITI announced the release of the Government's thirteenth EITI report (Jan-June 2010 assertion) audited by Moore Stephens, the independent Aggregator. The release is accompanied by the Aggregator's opinion based on individual submissions of extractive industry companies participating in the EITI process in Azerbaijan. 

Other issues on EITI implementation in Azerbaijan were discussed at the meeting. 

The full report as well as the Aggregator's opinion on the document has already been disclosed on web sites of the State Oil Fund (SOFAZ) (www.oilfund.az), the International EITI Secretariat (www.eiti.org) and the Non-Governmental Organizations (NGOs) Coalition for Increasing Transparency in the Extractive Industries of the Republic of Azerbaijan (www.eiti-az.org). 

EITI is a special multilateral and voluntary initiative, supported by a coalition of companies, governments, investors and civil society organizations and global standard for improved transparency in the oil, gas and mining sector. Azerbaijan joined EITI in 2003. Azerbaijan is the first ever country to complete validation process and designated as EITI Compliant Country. Azerbaijan was awarded the "2009 EITI Award" for its commitment to EITI principles and criteria and achievements in EITI Implementation. 

Report of the Government of the Republic of Azerbaijan (host government) about aggregated receipts from the extractive industries. Reporting period January - June 2010 (semi-annual) 

The Committee on the Extractive Industries Transparency Initiative of the Republic of Azerbaijan (Independent Accountants Report) For the 6 months ended 30 June 2010

As per the Decree, the amount of expenditures of the Fund on financing projects concerning solution of the social and settlement problems of the refugees and internally displaced persons is increased to 105 mln. manats instead of the previous 80 mln. manats, the amount of expenditures for financing the reconstruction of the Samur-Absheron irrigation system is increased to 131 mln. manats instead of the previous 110 mln. manats. The amount of expenditures for financing of "Baku-Tbilisi-Kars railway" project is decreased from 80 mln. manats to 34 mln. manats.

Mr. Movsumov briefed the guests on the Azerbaijan's oil history, National Oil Strategy, production sharing agreements, Fund's activity, management of its assets, Sovereign Wealth Funds, major projects financed by the Fund. He talked about SOFAZ's leading role in implementation of the Extractive Industries Transparency Initiative (EITI). 

Executive Director gave detailed answers to the questions covering SOFAZ's activity.

Mr. Movsumov briefed the guests on the Fund's activity, management of its assets, Sovereign Wealth Funds, major projects financed by the Fund. He talked about SOFAZ's leading role in implementation of the Extractive Industries Transparency Initiative (EITI). 

Executive Director gave detailed answers to the questions covering SOFAZ's activity.

Senior officials from 22 SWFs, and  representatives of recipient countries and international organizations participated in this meeting. Issues like progress in application of Santiago principles, the important role SWFs play both in their home countries and countries they invest, impact of current regulation environment and investment regimes on these types of Funds were discussed during this meeting. 

According to Mr. Movsumov within a short period of time since the inception of the Forum, there have been a significant progress in realization of the main missions of the Forum. Forum has become an effective platform for informal exchange of experiences and best industry practices among the SWFs and facilitating dialogue with recipient countries. 

The next meeting of the Forum will be held in Beijing, China in April 2011. The meeting will be hosted by the China Investment Corporation. 

Delegation headed by Shahmar Movsumov also had meetings with the GIC Group President, Lim Siong Guan on May 4 in Singapore and Chairman of the Australian Government Future Fund, David Murray on May 10 in Sydney. The main topics discussed during the meetings were the importance of the creation of these Funds, their goals and objectives, significant role they play  in the economies of their home countries, strategic asset allocation for SWFs, etc. 

The International Forum of Sovereign Wealth Funds (IFSWF) was established by the International Working Group of Sovereign Wealth Funds (IWG), in Kuwait City in April 2009 (see "Kuwait Declaration", and it held its inaugural meeting in Baku, Azerbaijan in October 2009. IFSWF is a voluntary group of Sovereign Wealth Funds, which meets, exchanges views on issues of common interest, and facilitates an understanding of the Santiago Principles and SWF activities.

Four internationally recognized audit companies - Deloitte, PriceWaterHouseCoopers, Ernst & Young and Moore Stephens - operating in the Republic of Azerbaijan were invited to bid.

The National Committee on EITI, 21 foreign and local extractive industry companies and non-governmental organizations signed MOU on November 24, 2004. Inpex of Japan, Binagadi Oil, RAFI Oil, NICO, Apsheron Investment Ltd, GDF SUEZ Exploration Caspian B.V. and Azerbaijan International Mining Company limited joined MOU later by signing the Instrument of Accession.

The National Committee on EITI, 21 foreign and local extractive industry companies and non-governmental organizations signed MOU on November 24, 2004. Inpex of Japan, Binagadi Oil, RAFI Oil, NICO, Apsheron Investment Ltd, GDF SUEZ Exploration Caspian B.V., Azerbaijan International Mining Company limited and Neftechala Operating Company Ltd joined MOU later by signing the Instrument of Accession.

The IFC African, Latin American and Caribbean Fund which has a target size of 1 bln USD and will be managed by a wholly owned subsidiary of IFC, IFC Asset Management Company, LLC ("AMC"), allows sovereign and pension fund investors for the first time to co-invest in a private equity format with IFC in growth opportunities in developing country markets.  

During the first closing the IFC African, Latin American and Caribbean Fund has managed to raise 600 mln. USD of which 100 mln. USD is committed by SOFAZ. 

Partnership with IFC in this venture brings a wealth of operational experience in the developing world and very impressive track records of investment performance in these markets. 

Commenting this news Mr Shahmar Movsumov, Executive Director of SOFAZ said, "This investment is an important milestone in building SOFAZ's long term strategy aimed at preserving and increasing the wealth of the country and it is the first time when we are partnering with other major sovereign wealth funds and international financial organizations." 

SOFAZ was established in accordance with the Decree of Heydar Aliyev, the President of the Republic of Azerbaijan in 1999. The cornerstone of the philosophy behind the Oil Fund is to ensure intergenerational equality with regard to the country's oil wealth.

Azerbaijan has instituted a regular process of disclosing, reconciling and publishing company payments and government receipts and was designated as EITI Compliant country by EITI International Board. At the meeting Azerbaijan Government Committee on EITI announced the release of the Government's twelfth EITI report for the year 2009 audited by Moore Stephens, the independent Aggregator. The release is accompanied by the Aggregator's opinion based on individual submissions of extractive industry companies participating in the EITI process in Azerbaijan. 

For the first time the EITI report included gold and silver mining company's information. 

Additionally, natural and associated gas were indicated separately, and the detailed taxes were pointed out in the 12th report. Thus, this procedure extends information presented in the report. 

Other issues on EITI implementation in Azerbaijan were discussed at the meeting. 

The full report as well as the Aggregator's opinion on the document has already been disclosed on web sites of the State Oil Fund (SOFAZ) (www.oilfund.az ), the International EITI Secretariat (www.eiti.org ) and the Non-Governmental Organizations (NGOs) Coalition for Increasing Transparency in the Extractive Industries of the Republic of Azerbaijan (www.eiti-az.org). 

EITI is a special multilateral and voluntary initiative, supported by a coalition of companies, governments, investors and civil society organizations and global standard for improved transparency in the oil, gas and mining sector. Azerbaijan joined EITI in 2003. Azerbaijan is the first ever country to complete validation process and designated as EITI Compliant Country. Azerbaijan was awarded the "2009 EITI Award" for its commitment to EITI principles and criteria and achievements in EITI Implementation.

Revenue of 2 704.5 mln. manats was received from implementation of oil and gas agreements, including 2 702.2 mln. manats from the sale of profit oil and gas, 2.0 mln. manats as transit payments and 0.3 mln. manats from sale of assets received from foreign companies. 

The revenues from managing assets of the Fund for the reporting period amounted to 50.0 mln. manats. 

As per 2010 budget of the Fund, 1 225.0 mln. manats were transferred to the state budget. The expenditures in the amount of 2.9 mln. manats were directed to financing of improvement of social condition of refugees and internally displaced persons, 23.2 mln. manats and 36.5 mln. manats were accordingly used for financing the reconstruction of the Samur-Absheron irrigation system and financing construction of the Oghuz-Gabala-Baku water supply system. 1.9 mln. manats were directed to financing "The state program on the education of Azerbaijan youth abroad in the years 2007-2015". The Fund's administrative and operational expenses in this period were 2.8 mln. manats. 

The Fund's extra-budgetary expenditures related to the revaluation of foreign exchange totalled 379.0 million manats. 

The assets of SOFAZ as at April 1, 2010 has grown by 9.1% compared to the beginning of 2010 (USD 14 900.4 mln.) and stood at 13 049.7 mln. manats (USD 16 243.3 mln.).

The Risk Measurement System agreement's value is USD 160,000 per annum. Initial term of the agreement is 5 years. The implementation of the system is expected to be completed within 6 months. 

RiskMetrics Solutions Inc. is one of the leading global providers of risk measurement, corporate management and financial analysis solutions.

Iraq and Afghanistan were accepted as Candidate Countries by EITI International Board at the meeting. 

Board members were informed about Norway's first EITI report.  

Other issues on EITI implementation were discussed at the meeting.

AIMC is a gold and silver mining company operating in Azerbaijan. Joining of this company to the EITI is a new phase of EITI implementation in Azerbaijan. It is the first time apart from oil and gas companies other extractive sector company joined to this process. 

The National Committee on EITI, 21 foreign and local extractive industry companies and non-governmental organizations signed MOU on November 24, 2004. Inpex of Japan, Binagadi Oil, RAFI Oil, NICO, Apsheron Investment Ltd and GDF SUEZ Exploration Caspian B.V. joined MOU later by signing the Instrument of Accession. 

All extractive sector companies operating in the country (28 companies) now are the stakeholders of EITI implementation process in Azerbaijan.

Mr. Movsumov briefed the guests on the Fund's activity, management of its assets, Sovereign Wealth Funds, major projects financed by the Fund. He talked about SOFAZ's leading role in implementation of the Extractive Industries Transparency Initiative (EITI).

Executive Director gave detailed answers to the questions covering SOFAZ's activity.

Revenue of 7 870.8 mln. manats was received from implementation of oil and gas agreements, including 7 702.6  mln. manats from the sale of profit oil and gas, 156.8 mln. manats from Azerbaijan's State participation share in the Heydar Aliyev Baku-Tbilisi-Ceyhan (BTC) Main Export Pipeline, 8.9   mln. manats as transit payments, 1.1 mln. manats as acreage payments, 0.8 million manats as bonus payments and 0.6 mln. manats from sale of assets received from foreign companies. 

The revenues from managing assets of the Fund for the reporting period amounted to 305.9 mln. manats. 

The Fund's extra-budgetary revenues related to the revaluation of foreign exchange totalled 97.6 million manats. 

As per 2009 budget of the Fund, 4 915.0 mln. manats were transferred to the state budget. The expenditures in the amount of 89.9 mln. manats were directed to financing of improvement of social condition of refugees and internally displaced persons, 130.0 mln. manats and 120.0 mln. manats were accordingly used for financing the reconstruction of the Samur-Absheron irrigation system and financing construction of the Oghuz-Gabala-Baku water supply system. 22.1 mln. manats were directed to financing Baku-Tbilisi-Kars railway and 7.9 mln. manats to financing "The state program on the education of Azerbaijan youth abroad in the years 2007-2015". The Fund's administrative and operational expenses in this period were 9.6 mln. manats. 

The assets of SOFAZ as at January 1, 2010 has grown by 32.8 % compared to the beginning of 2009 (USD 11 219.2 mln.) and stood at 11 966.5 mln. manats (USD 14 900.4 mln.).

Hands of the figure are described as two "buta" giving to the logo national flavour. 

Area between hands is described as the eye of the Omniscience directed to the great future of the country in which SOFAZ plays important role. 

This eye directed also to the inside of the figure. Circle between the hands is described as the heart symbolizing Fund's transparency.

The Multi-stakeholder Group work plan for 2010 was discussed at the meeting and adopted. 

A number of proposals for the improvement of the process were discussed and approved. 

In accordance with the agreed process the Coalition of Azerbaijan Non-Goverment Organization for Improving Transparency in Extractive Industries presented Opinion on the 11th EITI report (2009, semi-annual) and Independent Accountant's report. 

The twelfth reporting cycle on implementation of EITI in Azerbaijan was launched at the meeting. The Multi-Stakeholder Group decided to send invitations to internationally recognized audit companies in Azerbaijan for the bidding procedure. 

An audit company will be selected to collate the 2009 annual reports submitted by the Azerbaijan government and oil and gas companies in accordance with the EITI implementation mechanism in Azerbaijan.

Mədən Sənayesində Şəffaflığın Artırılması üzrə QHT Koalisiyası MHŞT üzrə 14-cü hesabat (2010-cu il üzrə) - hökumətin hesabatı və Müstəqil Mühasiblərin Rəyi ilə bağlı öz rəyini açıqlamışdır. 

İclasda MHŞT-nin Azərbaycanda tətbiqinə dair digər məsələlər geniş müzakirə olunmuşdur.

MHŞT xüsusi çoxtərəfli və şirkətlər, hökumətlər, sərmayəçilər və vətəndaş cəmiyyəti təşkilatları tərəfindən dəstəklənən könüllü təşəbbüsdür. MHŞT neft, qaz və mədən hasilatı sahəsində şəffaflığın təmin edilməsində qlobal standartdır. Azərbaycan MHŞT prosesinə 2003-cü ildə qoşulmuşdur. Azərbaycan MHŞT-nin qiymətləndirilməsi prosesindən keçən və MHŞT-nin tamhüquqlu üzvü statusunu alan ilk MHŞT ölkəsidir. MHŞT prinsip və meyarlarına tam cavab verən ölkə olması və MHŞT-nin tətbiqi sahəsində əldə etdiyi nailiyyətlərə görə Azərbaycana "2009-cu il MHŞT mükafatı" təqdim edilmişdir.

The National Committee on EITI, 21 foreign and local extractive industry companies and non-governmental organizations signed MOU on November 24, 2004. Inpex of Japan, Binagadi Oil, RAFI Oil, NICO, Apsheron Investment Ltd, GDF SUEZ Exploration Caspian B.V., Azerbaijan International Mining Company limited. Neftechala Operating Company Limited and Shirvan Operating Company Limited joined MOU later by signing the Instrument of Accession.

In addition, "National Exhibition" to be held in Paris on March, 2-3, on EITI Global Conference was discussed at the meeting.

EITI is a special multilateral and voluntary initiative, supported by a coalition of companies, governments, investors and civil society organizations and global standard for improved transparency in the oil, gas and mining sector. Azerbaijan joined EITI in 2003. Azerbaijan is the first ever country to complete validation process and designated as EITI Compliant Country. Azerbaijan was awarded the "2009 EITI Award" for its commitment to EITI principles and criteria and achievements in EITI Implementation.

Norway, Kyrgyzstan, Niger, Yemen, Nigeria, Central African Republic were accepted as EITI Compliant countries according to the EITI validation process. Guatemala and Trinidad and Tobago were accepted as Candidate Countries by EITI International Board at the meeting.

Azerbaijan delegation takes part on EITI National Exhibition. Video and photo materials about Azerbaijan, brochures and booklets on EITI implementation in Azerbaijan, souvenirs were submitted to the conference participants.

EITI is a special multilateral and voluntary initiative, supported by a coalition of companies, governments, investors and civil society organizations and global standard for improved transparency in the oil, gas and mining sector. Azerbaijan joined EITI in 2003. Azerbaijan is the first ever country to complete validation process and is designated as EITI Compliant Country. Azerbaijan was awarded the "2009 EITI Award" for its commitment to EITI principles and criteria and achievements in EITI Implementation.

During the first day of the Conference various issues, including reelection of the EITI Board and achievements on EITI implementation in different countries, were discussed. Azerbaijan was reelected to the EITI International Board and Shahmar Movsumov was elected Board's alternative member.

Executive Director of the State Oil Fund of the Republic of Azerbaijan, Shahmar Movsumov made a speech on progress in EITI implementation in Azerbaijan. Shahmar  Movsumov mentioned that, as a result of implementation of EITI all citizens can get information about every dollar received by the government from the sale of each barrel of oil, each cubic meter of gas.

Revenue of 3 197.6 mln. manats for the period of January-March, 2011 was received from implementation of oil and gas agreements, including 3077.6 mln. manats from the sale of profit oil and gas, 101.7 mln. manats from difference in price from the phase I of Shah Deniz, 16.3 mln. manats from dividends on Azerbaijan's State participation share in the Heydar Aliyev Baku-Tbilisi-Ceyhan (BTC) Main Export Pipeline, 1.7 mln. manats as transit payments and 0.3 mln. manats from sale of assets received from foreign companies.

The revenues from managing assets of the Fund for the reporting period amounted to 62.0 mln. manats.

As per execution of 2011 Fund's budget 1330.0 mln. manats were transferred to the state budget. The expenditures in the amount of 20.1 mln. manats were directed to financing of improvement of social condition of refugees and internally displaced persons, 39.0 mln. manats and 2.3 mln. manats were accordingly used for financing the reconstruction of the Samur-Absheron irrigation system and financing construction of the Oghuz-Gabala-Baku water supply system. 3.3 mln. manats were directed to financing "The state program on the education of Azerbaijan youth abroad in the years 2007-2015". 2.2 mln. manats were directed to financing Baku-Tbilisi-Kars railway.

The Fund's administrative and operational expenses for current period were 2.7 mln. manats.

The Fund's extra-budgetary revenues related to the revaluation of foreign exchange totalled 423.4 million manats.

The assets of SOFAZ as at April 1, 2011 has grown by 13.3 % compared to the beginning of 2011 (USD 22 766.8 mln.) and stood at USD 25 796.9mln.

The State Oil Fund of the Republic of Azerbaijan (SOFAZ) was closely involved in identifying and drafting GAPP, as a member of the International Forum of Sovereign Wealth Funds (IFSWF).

The purpose of GAPP is to identify a framework of generally accepted principles and practices that properly reflect appropriate governance and accountability arrangements as well as the conduct of investment practices by SWFs on a prudent and sound basis.

In accordance with GAPP 24 SOFAZ has published its first self assessment report on its adherence to these Principles and intends to review it on an annual basis.

The International Forum of Sovereign Wealth Funds (IFSWF) was established by the International Working Group of Sovereign Wealth Funds (IWG) on April 5-6, 2009 in Kuwait City, and had its first inaugural meeting in Baku on October 8-9, 2009 . IFSWF is a voluntary group of Sovereign Wealth Funds (SWFs), which will meet, exchange views on issues of common interest, and facilitate an understanding of the Santiago Principles and SWF activities.

For more details:  http://www.oilfund.az/SOFAZ_self-assessment(eng).pdf

The International Forum of Sovereign Wealth Funds (IFSWF) was established by the International Working Group of Sovereign Wealth Funds (IWG) on April 5-6, 2009 in Kuwait City, and had its first inaugural meeting in Baku on October 8-9, 2009 . IFSWF is a voluntary group of Sovereign Wealth Funds (SWFs), which will meet, exchange views on issues of common interest, and facilitate an understanding of the Santiago Principles and SWF activities.  

Various issues on EITI implementation in Azerbaijan were discussed at the meeting. 

EITI is a special multilateral and voluntary initiative, supported by a coalition of companies, governments, investors and civil society organizations and global standard for improved transparency in the oil, gas and mining sector. Azerbaijan joined EITI in 2003. Azerbaijan is the first ever country to complete validation process and is designated as EITI Compliant Country. Azerbaijan was awarded the "2009 EITI Award" for its commitment to EITI principles and criteria and achievements in EITI Implementation.

A delegation headed by His Royal Highness, Crown Prince Haakon of Norway, Executive Director of SOFAZ - Shahmar Movsumov,  ambassadors of foreign countries, representatives of the government of the Republic of Azerbaijan, local and foreign extractive companies operating in Azerbaijan, and non-governmental organizations attended the seminar.

Speeches on the importance of EITI, EITI implementation in Azerbaijan and Norway, achievements and experience of both countries in this field were given. Further discussions and exchange of views  were held on this topic.

EITI is a special multilateral and voluntary initiative, supported by a coalition of companies, governments, investors and civil society organizations and global standard for improved transparency in the oil, gas and mining sector. Azerbaijan joined EITI in 2003. Azerbaijan is the first ever country to complete validation process and is designated as EITI Compliant Country. Azerbaijan was awarded the "2009 EITI Award" for its commitment to EITI principles and criteria and achievements in EITI Implementation. 

At the meeting Azerbaijan Government Committee on EITI announced the release of the Government's EITI report (2010) audited by Moore Stephens, the independent Aggregator. The release is accompanied by the Aggregator's opinion based on individual submissions of extractive industry companies participating in the EITI process in Azerbaijan.

Other issues on EITI implementation in Azerbaijan were discussed at the meeting.

The full report as well as the Aggregator's opinion on the document has already been disclosed on web sites of the State Oil Fund (SOFAZ) (www.oilfund.az), the International EITI Secretariat (www.eiti.org) and the Non-Governmental Organizations (NGOs) Coalition for Increasing Transparency in the Extractive Industries of the Republic of Azerbaijan (www.eiti-az.org).

EITI is a special multilateral and voluntary initiative, supported by a coalition of companies, governments, investors and civil society organizations and global standard for improved transparency in the oil, gas and mining sector. Azerbaijan joined EITI in 2003. Azerbaijan is the first ever country to complete validation process and designated as EITI Compliant Country. Azerbaijan was awarded the "2009 EITI Award" for its commitment to EITI principles and criteria and achievements in EITI Implementation.

The Supervisory Board approved the SOFAZ's 2010 annual report and Auditor's (Ernst & Young) Report as submitted by the Executive Director of the Fund. While endorsing the Oil Fund's 2010 budget execution and amendments to the Fund's 2011 budget the Supervisory Board recommended both documents for the approval by the President of the Republic of Azerbaijan.

Prime Minister Artur Rasi-zadeh was re-elected as the Supervisory Board's Chairman-in-office for the year of 2011.

Increasing SOFAZ's assets is the result of successful implementation of National Oil Strategy, created by national leader Heydar Aliyev. As a result of implementation of this strategy export of hydrocarbon reserves is expanding and Fund's assets increased from 22.8 billion at the beginning of 2011 up to 30 billion US dollars. Increase of reserves of Azerbaijan should be regarded as strengthening of the economic power of the country, as well as, accelerating of development of the country in all spheres.

Proceeds obtained from the sale of the bond were utilized for increasing the share of Azerbaijan (ACG) Limited by 1.6461% in the Agreement on the joint development and production sharing for the Azeri and Chirag fields and the deep water portion of the Gunashli field.

The maturity date of the bond is December 31, 2024 and the coupon rate equals to 6-month LIBOR + 1%.

Agreement on the joint development and production sharing for the Azeri and Chirag fields and the deep water portion of the Gunashli field was signed among the State Oil Company of the Azerbaijan Republic and foreign oil companies on 20 September, 1994. The Azeri-Chirag–Gunashli (ACG field) is the largest oil field in the Azerbaijan sector of the Caspian Sea. ACG field, located approximately 100 km east of Baku, is developed by BP Azerbaijan–the operator of the Azerbaijan International Operating Company (AIOC).

In accordance with the Decree, taking into account that Azerbaijan will receive extra revenues from implementation of oil and gas agreements under the circumstances of high price of crude oil and in connection with amendments to the 2011 state budget, aiming at timely execution of settlement projects of the refugees and internally displaced persons, reconstruction of the Samur-Absheron irrigation system and "Baku-Tbilisi-Kars railway" project, for accelerating the construction of the administrative building of the State Oil Fund, for the payment of membership fees to international organizations - it is necessary to make amendments to the Fund's 2011 budget.

As per the Decree, the amount of revenues of the Fund from sale of the Republic of Azerbaijan's share of hydrocarbons is increased to 12 137 044.0 thousand manats instead of the previous 8 349 564.1 thousand manats, acreage fees by the foreign investors for use of the contract areas in connection with the development of hydrocarbon resources is increased to 1 688.0 thousand manats instead of the previous 498.5 thousand manats, revenues from management of SOFAZ's assets is increased to 396 362.0 thousand manats instead of the previous 340 252.8 thousand manats, dividends from regarding realization of the first phase of Shadeniz-I oil and gas project is decreased from 283 249.2 to 101 666.0 thousand manats, dividends from realizing of oil and gas projects (BTC) is decreased to 131 992.0 thousand manats instead of the previous 148 024.4 thousand manats, revenues generated from oil and gas transit over the territory of the Republic of Azerbaijan is decreased to 8 920.0 thousand manats instead of the previous 10 452.0 thousand manats. As per the amendments, the Fund's 2011 budget is to include an additional revenue item of 17 600.0 thousand manats related to the oil and gas agreements signature or performance bonuses paid by investors to the State Oil Company of the Republic of Azerbaijan or an authorized state body.

As per the Decree, the amount of expenditures of the Fund on financing projects concerning solution of the social and settlement problems of the refugees and internally displaced persons is increased to 140 000.0 thousand manats instead of the previous 110 000.0 thousand manats, transfer to 2011 State Budget of the Republic of Azerbaijan is increased to 9 203 200.0 thousand manats instead of previous 6 480 000.0 thousand manats, expenditures for financing the reconstruction of the Samur-Absheron irrigation system is increased to 200 000.0 thousand manats instead of the previous 110 000.0 thousand manats. The amount of expenditures for financing of "Baku-Tbilisi-Kars railway" project is increased from 80 215.1 thousand manats to 260 800.0 thousand manats, Oil Fund's operating expenditures is increased from 57 494.3 thousand manats to 87 539.3 thousand manats.

The revenues of the budget of the State Oil Fund of the Republic of Azerbaijan for the year 2011 are increased from 9 132 941.0 thousand manats to 12 796 172.0 and the expenditures are increased from 6 886 155.4 thousand manats to 9 939 985.3 thousand manats.

As per the Order, the revenues of the Fund were executed with 13 088 543.4 thousand manats, and expenditures in the amount of 6 386 614.9 thousand manats. 

Revenue of 7692.2 mln. manats for the period of January-June, 2011 was received from implementation of oil and gas agreements, including 7518.1mln. manats from the sale of profit oil and gas, 101.7 mln. manats from difference in price from the phase I of Shah Deniz, 66.8 mln. manats from dividends on Azerbaijan's State participation share in the Heydar Aliyev Baku-Tbilisi-Ceyhan (BTC) Main Export Pipeline, 3.8 mln. manats as transit payments,  1.2 mln. manats as acreage payments and 0.6 mln. manats from sale of assets received from foreign companies.

The revenues from managing assets of the Fund for the reporting period amounted to 135.0 mln. manats.

The Fund's extra-budgetary revenues related to the revaluation of foreign exchange totalled 482.4 million manats.

As per execution of 2011 Fund’s budget 2 461.0 mln. manats were transferred to the state budget. The expenditures in the amount of 47.2 mln. manats were directed to financing of improvement of social condition of refugees and internally displaced persons, 64.1 mln. manats and 2.3 mln. manats were accordingly used for financing the reconstruction of the Samur-Absheron irrigation system and financing construction of the Oghuz-Gabala-Baku water supply system. 4.6 mln. manats were directed to financing "The state program on the education of Azerbaijan youth abroad in the years 2007-2015". 9.3 mln. manats were directed to financing Baku-Tbilisi-Kars railway.

The Fund's administrative and operational expenses for current period were 4.6 mln. manats.

The assets of SOFAZ as at July 1, 2011 has grown by 33.3 % compared to the beginning of 2011 (USD 22 766.8 mln.) and stood at USD 30 357.5mln.

In 2010, the Fund streamlined both the structural and presentation style of annual reporting, started to implement innovations in the design concept of the report. Design theme of the State Oil Fund's 2010 annual report will follow the legacy of Nizami Ganjavi, a great Azerbaijani poet and philosopher. This new reporting concept refined with literary insertions will also serve as the Fund's small but valuable contribution to exposing foreign audiences to the Azerbaijani literature.

The annual report as well as audit report has already been disclosed on SOFAZ's official web site (http://www.oilfund.az/pub/uploads/9BY8jhd3.pdf). 

Website’s section “About the Fund” includes the Fund’s history, goals and philosophy, information about its management and structure, Fund’s achievements and its international relations, terminology used in the financial activity of the Fund.  

“Projects” section contains detailed information on the projects financed by the Fund.

The “Legal Framework” includes Laws, Decrees and Orders related to the activity of the Fund, and information about the State and Fund’s budgets.

Website’s “Reports and Statistics” section contains reports archive consisting of annual reports, quarterly statements, auditor reports regarding the Fund's activity prepared by international reputable Auditor companies and the Extractive Industries Transparency Initiative (EITI) reports, as well as information about the Fund’s budget and Latest figures.

“Press Room” is comprised of Public relations, Information Policy, announcements, speeches and presentations of the Fund's Executive Director, news archive about the activities of the Fund since its establishment to this day, as well as about the implementation of EITI in Azerbaijan, useful links, FAQ, the electronic version of the articles about the Oil Fund published in local and foreign media. “Press Room” also includes Opinion and Suggestions  for the use of public to express their views and opinion about the Oil Fund.

Online subscription to the Fund's news is also available. 

Journalists, as well as public representatives will be able to get answers to all questions as soon as possible by filling the request form in the “Contacts” section. The map reflecting Fund’s address and the information on public transportation for reaching the Fund are available in this section.

The content of the web  site is changed and two new sections: “Asset Management” and “Career Opportunities” are created.

General information on Fund’s assets, Investment policy, information on External managers of the Fund, presentations on Funds investment activity - are all available in the “Asset Management” section.

The main purpose of the creation of “Career Opportunities” section is to facilitate those willing to work in the Fund by providing more detailed information about the vacancies and recruitment rules. Sub-category “Internship for students” includes information about Training program, Requirements for individuals willing to internship and Impressions of the previous interns about their experience in the Oil Fund. Electronic application form is added in this section so that individuals interested in working in the Fund will be able to fill in the information about themselves and send it online directly to  the relevant department.

To keep the viewers informed the website also includes daily updated information about the main foreign currencies, exchange rates, the price of Brent and WTI brand oil and gold on the world market.

Website operates in Azerbaijani and English languages.

Revenue of 11 668.4 mln. manats for the period of January-September, 2011 was received from implementation of oil and gas agreements, including 11 476.3 mln. manats from the sale of profit oil and gas, 101.7 mln. manats from difference in price from the phase I of Shah Deniz, 66.8 mln. manats from dividends on Azerbaijan's State participation share in the Heydar Aliyev Baku-Tbilisi-Ceyhan (BTC) Main Export Pipeline, 5.5 mln. manats as transit payments,  1.2 mln. manats as acreage payments, 15.7 mln. manats as bonus payments  and 1.2 mln. manats from sale of assets received from foreign companies.

The revenues from managing assets of the Fund for the reporting period amounted to 162.9 mln. manats.

As per execution of 2011 Fund’s budget 4 021.0 mln. manats were transferred to the state budget. The expenditures in the amount of 89.2 mln. manats were directed to financing of improvement of social condition of refugees and internally displaced persons, 144.5  mln. manats and 10.5 mln. manats were accordingly used for financing the reconstruction of the Samur-Absheron irrigation system and financing the construction of the Oghuz-Gabala-Baku water supply system. 5.9 mln. manats were directed to financing "The state program on the education of Azerbaijan youth abroad in the years 2007-2015". 85.5 mln. manats were directed to financing Baku-Tbilisi-Kars railway. The Fund's administrative and operational expenses for current period were 10.1 mln. manats.

The Fund's extra-budgetary expenditures related to the revaluation of foreign exchange totalled 258.8 million manats.

The assets of SOFAZ as at October 1, 2011 has grown by 41.6 % compared to the beginning of 2011 (USD 22 766.8 mln.) and stood at USD 32 242.5 mln.

The conference consisted of 4 sessions: “State Oil Fund as the integral part of the National Oil Strategy”, “Investment policy of the State Oil Fund: principles, current trends and future priorities”, “Projects financed by the State Oil Fund: goals and outcomes”, “Implementation of Extractive Industries Transparency Initiative (EITI): achievements and perspectives”.

Senior level government officials, ambassadors of foreign countries, representatives of international organizations, local and foreign extractive companies operating in Azerbaijan, non-governmental organizations and foreign independent consultants attended the conference. 

Awards:

1st place - 1000 manat

2nd place - 700 manat

3rd place - 300 manat

Terms of the competition:

Subject of the article should cover EITI activities in Azerbaijan.

The participant of the competition should have minimum two years of experience in journalism and must be contributor to local media.

The participants of the competition can submit the following documents by February 15, 2012 to the Public Relations Office of SOFAZ from 10 am to 6 pm every working day:

1.       Filled and APPLICATION FORM available at www.oilfund.az;

2.       Document confirming the journalist as contributor to the media;

3.       Copy of the issue of the article as published in local or international media from November 17, 2011 to February 10, 2012;

The article should bear following sentence on top of it: "This material is prepared for the best analytic article competitionfor journalists on topic “EITI and Azerbaijan” announced by the State Oil Fund of the Republic of Azerbaijan”

The results of the competition will be announced after February 15, 2012.

Board of experts:

Feyzulla Muradov – Deputy Director of the Investment and the Reconstruction of Industrial Objects division of the Ministry of Industry and Energy of the Republic of Azerbaijan

Mehriban Vezir - writer and publicist, member of the Coalition for Improving Transparency in Extractive Industries

Nizameddin Quliyev - Head of the press service and public relations division of the State Oil Company of Azerbaijan Republic

Any information on the EITI can be obtained from the Public Relations Office of SOFAZ.

Contact:

Tel:     498 7753 (internal 144)

e-mail: pr@oilfund.az

The Board approved the Fund's 2012 budget revenues at 10 697 030.6 thousand manats, its expenditures at 10 561 304.0 thousand manats and the Fund's operating expenditures at 73 820.00 thousand manats. The Supervisory Board recommended the Fund's 2012 draft budget, including the major directions of its investment policy, and its draft annual operating expenditures for the approval by President of the Republic of Azerbaijan. Additions have been made to the Fund's accounting rules and accounts plan in accordance with the amendments to the "Rules on management of foreign currency assets of the State Oil Fund of the Republic of Azerbaijan" approved by Decree of the President of the Republic, dated October 27, 2011, and considering the inclusion of new asset classes (public equity, real estate and gold) in the Fund's investment portfolio.

2012 EITI Work plan, inclusion of social and customs payments to EITI reports, draft amendments to the Memorandum prepared by the Working Group and other issues on EITI implementation in Azerbaijan were discussed and appropriate decisions were made at the meeting.

EITI is a special multilateral and voluntary initiative, supported by a coalition of companies, governments, investors and civil society organizations and global standard for improved transparency in the oil, gas and mining sector. Azerbaijan joined EITI in 2003. Azerbaijan is the first ever country to complete validation process and designated as EITI Compliant Country. Azerbaijan was awarded the "2009 EITI Award" for its commitment to EITI principles and criteria and achievements in EITI Implementation. 

Ilham Aliyev, the President of the Republic of Azerbaijan signed on December 29, 2011 the Decree approving budget of the State Oil Fund of the Republic of Azerbaijan for the year 2012 including 10 697 030.6 thousand manats in revenues and  10 561 304.0 thousand manats in expenditures as followings:

To define that the incomes of the budget of the State Oil Fund of the Republic of Azerbaijan for the year 2012 are established out of the following revenues:

To define that the expenditures of the budget of the State Oil Fund of the Republic of Azerbaijan for the year 2012 are assigned to the following purposes:

Approval of the Budget followed the procedures laid out in the Funds Statutory Regulations and Budgetary Regulations.

Revenue of 15 451.9 mln. manats was received from implementation of oil and gas agreements, including 15 257.5 mln. manats from the sale of profit oil and gas, 101.7 mln. manats from difference in price from the phase I of Shah Deniz, 66.8 mln. manats from Azerbaijan's State participation share in the Heydar Aliyev Baku-Tbilisi-Ceyhan (BTC) Main Export Pipeline, 7.5 mln. manats as transit payments, 1.3 mln. manats as acreage payments,  15.7 mln. manats as bonus payments and 1.4 mln. manats from sale of assets received from foreign companies.

The revenues from managing assets of the Fund for the reporting period amounted to 176.4 mln. manats.

As per 2011 budget of the Fund, 9 000.0 mln. manats were transferred to the state budget. The expenditures in the amount of 140.0 mln. manats were directed to financing of settlement of the problems of refugees and internally displaced persons, 200.0 mln. manats and 32.6 mln. manats were accordingly used for financing the reconstruction of the Samur-Absheron irrigation system and financing construction of the Oghuz-Gabala-Baku water supply system, 15.0 mln. manats to financing "The state program on the education of Azerbaijan youth abroad in the years 2007-2015" and 161.9 mln. manats were directed to financing Baku-Tbilisi-Kars railway. The Fund's administrative and operational expenses in this period were 57.1 mln. manats.

The Fund's extra-budgetary expenditures related to the revaluation of foreign exchange totaled 749.8 million manats.

The assets of SOFAZ as at January 1, 2012 has grown by 30.9 % compared to the beginning of 2011 (USD 22 766.8 mln.) and stood at USD 29 800.0 mln.

Management of equity portfolio will initially be handled by external managers. Request for Service Proposals (RFP) process will be employed to select external managers and RFP announcement will be posted on SOFAZ’s website (www.oilfund.az). 

For this reason, starting from 1st of February 2012, SOFAZ has begun purchase of gold bars that are in compliance with standards set forth by London Bullion Market Association (LBMA) from the banks which are market-maker members of LBMA. Incorporated in 1987, London Bullion Market Association covers international banks active in gold and silver markets, as well as producers, transportation and refinery companies.

Mauritania and Peru were accepted as Compliant Countries by EITI International Board at the meeting. Thereby 14 countries out of 35 EITIMember are now EITI Compliant (for more details: http://eiti.org/countries).

Other issues on EITI implementation were discussed at the meeting.

EITI is a special multilateral and voluntary initiative, supported by a coalition of companies, governments, investors and civil society organizations and global standard for improved transparency in the oil, gas and mining sector. Azerbaijan joined EITI in 2003. Azerbaijan is the first ever country to complete validation process and is designated as EITI Compliant Country. Azerbaijan was awarded the "2009 EITI Award" for its commitment to EITI principles and criteria and achievements in EITI Implementation.  

EITI is a special multilateral and voluntary initiative, supported by a coalition of companies, governments, investors and civil society organizations and global standard for improved transparency in the oil, gas and mining sector. Azerbaijan joined EITI in 2003. Azerbaijan is the first ever country to complete validation process and designated as EITI Compliant Country. Azerbaijan was awarded the "2009 EITI Award" for its commitment to EITI principles and criteria and achievements in EITI Implementation.

Determination of the concept of material payments and inclusion of these payments in EITI reports were agreed. Preparation of EITI reports in accordance with new rules on EITI implementation and various issues on EITI implementation in Azerbaijan were discussed at the meeting.

EITI is a special multilateral and voluntary initiative, supported by a coalition of companies, governments, investors and civil society organizations and global standard for improved transparency in the oil, gas and mining sector. Azerbaijan joined EITI in 2003. Azerbaijan is the first ever country to complete validation process and designated as EITI Compliant Country. Azerbaijan was awarded the "2009 EITI Award" for its commitment to EITI principles and criteria and achievements in EITI Implementation.