Current assets of the State Oil Fund reached $30.4 billion having for the first time exceeded $30 billion level as of June 28, 2011.
In 2001, SOFAZ funds totaled $491.5 million, for 10 years they have grown 62 times and reached $30.4 billion. Increase in the SOFAZ assets is of course result of a successfully implemented oil strategy, within which exploitation of hydrocarbons resources and oil export are increased. Furthermotr , Плюс ко всему высокие цены на нефть на мировых рынках способствуют поступлению в страну больших доходов от реализации нефти.
According to SOFAZ Executive Director Shahmar Movsumov , during 2001-2011, the State Oil Fund of Azerbaijan (SOFAZ) has received $56.5 billion, 53.8 percent ($30.4 billion) of which has been directed towards accumulation.
Coming prospects suggest that SOFAZ funds will grow from year to year. So, all the generations in Azerbaijan, currently living and future, will be able to use the oil wealth of the country, Movsumov believes.
The main purposes of the fund are: accumulation of funds and placement of the fund's assets abroad to minimize the negative impact on the economy, preventing a "Dutch syndrome" to ensure savings for future generations and to maintain the current socio-economic standard in the country.
SOFAR pursues conservative policy in placing assets into securities. Mainly they are placed in securities with high ratings, served by international rating agencies such as Aa3 Moody, AA Standard & Poor and AA Fitch.
SOFAZ carries out a conservative investment strategy that reflects the current situation in global financial markets. "Most of the funds has been invested in securities with high ratings and liquidity. This strategy justified itself during the global financial crisis," said Movsumov.
However, unfavorable situation in world fiscal markets led to cut in income which SOFAZ earns on interests.
Given the changes in financial markets and to invest in more risky and profitable instruments such as equities, real estate, SOFAR is at the last stage of preparing proposals to diversify its investment portfolio.
"We hope that the new diversified investment strategy will be approved later this year. Investing assets in equities will be possible after the adoption of these proposals," said Movsumov.
The State Oil Fund of Azerbaijan Republic (SOFAZ) continued in the first half continued the policy of placing its investment portfolio in short-term instruments. The proportion of funds invested for up to five years hit 96.74 percent of its assets.
The total amount of the investment portfolio is 3$0.348 million, or 99.97 percent of SOFAZ's assets.
The geographic distribution of the fund's assets is - 67.11 percent in European countries, 13.99 percent - North America, 6.11 percent - international financial institutions, 4.46 percent - Asia, 7.6 percent - developing countries and 0.73 percent - the Middle East.
Some 38.68 percent of the fund's investment portfolio was placed in securities for up to one year, 32.24 percent - from one to three years, 25.73 percent - from three to five years and 3.26 percent for over five years and 0.08- stocks.
As of June 30, 39.77 percent of the fund's assets were placed in securities with a rating of AAA, 20.9 percent - AA, 32.51 percent - A, 6.81 percent - BBB, 0.01 percent - other. The fund's assets may not be placed in securities below these investment grades
Currently, 26.39 percent of the fund's assets are invested in the bonds of agencies and international organizations, sovereign debt securities - 17.38 percent, financial bonds - 17.26 percent, corporate bonds - 20 percent, short-term commercial paper - 11.45 percent, guaranteed bonds - 4.89 percent, municipal bonds - 0.09 percent and deposits and money market instruments - 2.46 percent.
The State Oil Fund of Azerbaijan purchased early this July a bond with par value of USD 485 million issued by the Azerbaijan (ACG) Limited - a wholly-owned offshore subsidiary of the State Oil Company of the Azerbaijan Republic holding a 10 percent participating interest in the Azeri-Chirag-Gunashli Production Sharing Agreement.
The purchase of the bond was realized in the framework of the "Main framework (program) of utilization and management of assets of the State Oil Fund of the Republic of Azerbaijan in 2011" approved by the Decree of the President of the Republic of Azerbaijan dated December 28, 2010. According to the program Oil Fund may invest in the securities of oil and gas companies operating in Caspian Sea basin. The issuer or its parent company of these securities should have a long-term investment grade credit rating.
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.
Some 54.52 percent of the investment portfolio accounted for U.S. dollar ($16.544.56 billion), 40.5 percent - euro (8.471.43 billion euro) and 4.98 percent - British pound sterling (939.21 million pound sterling).
SOFAZ does not consider any change in the currency composition of its portfolio. Despite fall in dollar rate worldwide , the Fund prefers careful policy in regard to diversification of portfolio in different currencies.
One of urgent terms to increase rivalry and stable development of the country is the efficient use of the resources which the country possesses.
Budget revenues of the State Oil Fund of the Republic of Azerbaijan (SOFAZ) for the period of January-June, 2011 reached 7.827.2 billion manats, while budget expenditures constituted 2.593.1 billion manat,
Revenue of 7.692.2 bln. manat for the period of January-June, 2011 was received from implementation of oil and gas agreements, including 7.518.1 bln. manat 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 of the results of the first half-year, management of investment portfolio in euro brought more profit than other currencies. It is explained by higher interests for euro compared to other currencies (dollar and pound sterling).
Based on SOFAZ's regulations, the funds may be used for the construction and reconstruction of strategically important infrastructure facilities, as well as solving important national problems.
As per execution of 2011 Fund's budget 2.461.0 bln. manat were transferred to the state budget. The expenditures in the amount of 47.2 mln. manat were directed to financing of improvement of social condition of refugees and internally displaced persons, 64.1 mln. manats and 2.3 mln. manat 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. manat were directed to financing "The state program on the education of Azerbaijan youth abroad in the years 2007-2015". 9.3 mln. manat were directed to financing Baku-Tbilisi-Kars railway.
Over the next five years, the assets of the State Oil Fund of Azerbaijan (SOFAR) could reach $50 billion, Movsumov forecasts.
"If the oil prices and expenses of the Fund remain at current levels, the State Oil Fund can accumulate up to $50 billion. And these funds are not only accumulated in the Fund, but also they are efficiently managed," said Movsumov.
The assets of the State Oil Fund of the Azerbaijan Republic (SOFAZ), with oil prices worth $60, $70 and $80, may reach $50, $65 and $80 billion over the next five years
Given the fact that in the next 15 years, oil revenues amount to about $ 200 billion, then when you save half of these revenues, we will have revenues of $ 100 billion.
Due to increased revenues from management of Fund's assets, in the future, the level of transfers to the Public budget can remain at current levels due to revenues from asset management. With a minimum profitability on assets placed at 5 percent, after 15 years we can reach the level of $6 billion income from asset management per year.