Azerbaijan ranks as one of StatoilHydro's longest-lasting and largest foreign commitments. An economy in transition such as Azerbaijan's, presents the oil and gas sector with particular social challenges in terms of building a sustainable, long-term business.
Together with the national oil company Socar and other international companies, we are working both industrially and socially to build a robust basis for our investments in the country.
We have been present in Azerbaijan since 1992, when, as part of an alliance with BP entered into in 1990, we resolved to invest in the country. We are now the country's second largest foreign investor.
In addition to our involvement in three major projects, Shah Deniz, Azeri-Chirag-Guneshli and Alov-Araz-Sharg, we are a partner in the two most important pipelines exporting oil and natural gas from Azerbaijan - the Baku-Tbilisi-Ceyhan (BTC) and South Caucasus pipelines. These pipelines run in parallel throughout the whole region, from Baku in Azerbaijan through Tbilisi in Georgia to Turkey, where the BTC pipeline goes all the way to Ceyhan on the Mediterranean coast.
Making sure that the whole region benefits from these investments in a balanced and inclusive manner is therefore a clear precondition for and insurance of our long-term success and presence in the country and the region. Since they are interested in developing a stable operating environment, the partners in the operations took a long-term perspective with respect to find good initiatives to support our investments.
The result was the Regional Sustainable Development (RSD) programme, operated by BP on behalf of all the partners, including StatoilHydro. The RSD consists of the following initiatives: the Community Investment Programme (CIP)/Future Communities Programme (FCP) and the Regional Development Initiative (RDI).
Community Investment Programme (CIP)
The CIP was initiated primarily to manage stakeholder involvement and impacts during the construction of the two pipelines, and to create sustainable social and economic development in the local communities along the pipeline routes in Azerbaijan, Georgia and Turkey.
In cooperation with local and international non-governmental organisations (NGOs), the CIP has implemented programmes to create jobs, ensure wider access to improved social infrastructure such as schools and hospitals, and strengthen farming.
The partners spent USD 24 million on this work during the construction phase. In 2007, an additional USD 3.7 million was spent on Economic and Business Education and Training projects in the Baku corridor in Azerbaijan, Small grants for Schools Villages along the WREP in Georgia and eight sustainable rural development projects in Turkey.
Moving from the construction to the operations phase, the Future Communities Programme (FCP) takes over where the CIP left off and continues to focus on community empowerment and mobilisation, while the Regional Development Initiative (RDI) will introduce more innovative mechanisms for socio-economic development in the region.
Regional Development Initiative (RDI)
The RDI is a long-term commitment by the partners to maximising the development impact of our core business and ensuring that the proceeds from these activities are fairly distributed in the region. The RDI addresses basic development challenges such as enterprise development, effective governance and access to energy. The initiative also has an underlying focus on education, capacity building and vocational training.
To maximise the benefits of the RDI, the partners have established close collaboration with development agencies as well as with the governments and communities involved, including the International Finance Corporation (IFC), European Bank for Reconstruction and Development (EBRD), Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) and the UN Development Programme (UNDP).
Together with our partners, we spent USD 12 million on projects in this programme in 2006. This is set to rise to USD 15 million from 2008. In 2007, an additional USD 6.5 million was dedicated to Enterprise Development and Training in Azerbaijan, Corporate Governance and Engineering Design projects in Georgia, and Technical Assistance and Capacity building projects in Turkey.
Additional Investments
In addition to the projects pursued in Azerbaijan with our partners, we have shown active social responsibility on our own account. Important elements in this strategy have included:
- Expertise transfer in cooperation with Socar. Management training and the creation of a technical laboratory in Baku were initiated at an early stage. We built up the lab by transferring equipment from our own facilities in Stavanger and by ensuring appropriate education and training for Socar personnel.
- Our specialists collaborated with Socar to develop a master plan for gas recovery and transport in Azerbaijan. The Norwegian Ministry of Petroleum and Energy was also involved and contributed to the funding. These efforts helped to ensure the development of Shah Deniz and the creation of a gas value chain.
- During the initial phase, the authorities in Baku had extensive contact with relevant Norwegian government bodies, such as Norges Bank (the Norwegian central bank) and the Ministry of Finance. An oil fund was established in December 1999 on the Norwegian model in order to avoid overheating the economy and to safeguard the prosperity of future generations.
- Azerbaijan became the first country in the world to adopt the principles of the Extractive Industries Transparency Initiative (EITI). We have been actively involved in work on the EITI in this country. Thirty-two local NGOs, oil and mining companies active in Azerbaijan and the government have signed a letter of intent concerning implementation of the principles. In December 2007, Azerbaijan released its seventh EITI report in compliance with the EITI principles.
- An agreement with the UNDP was also signed in 2007 to launch the UN Global Compact (GC) initiative in Azerbaijan. The overall goal of the project is to introduce the Global Compact business principles in Azerbaijan, support pre-launch activities to promote the principles, and raise awareness of broader corporate integrity and social responsibility issues. It also aims to contribute to building partnerships between various stakeholders, foster dialogue with the private sector and improve the business environment in the country.
- In order to improve educational opportunities and experience transfer relevant to the oil industry, we are also supporting a partnership between the State Oil Academy of Azerbaijan and the Norwegian University of Science and Technology (NTNU), facilitated by the United Nations Development Programme (UNDP). We are also cooperating with Khazar University and the Diplomatic Academy of Azerbaijan.
- We also give targeted backing to various social and environmental projects in Azerbaijan. Through the Norwegian Refugee Council and the United Nations High Commission for Refugees (UNHCR), we also support Internally Displaced Persons (IDPs), refugees and returnees in connection with the dispute over the Nagorno-Karabakh region, where fighting came to an end in 1994.
