CLEANING UP IN AZERBAIJAN

             
by Judith Robinson

Azerbaijan faces severe environmental problems, like the other New Independent
States (NIS) of the former Soviet Union.  The country s oil wealth and the
likelihood of substantial foreign investment mean that there will be a considerable
market for environmental technology in Azerbaijan in the future.  The task for
American companies who wish to take advantage of a developing market is to
make key contacts now (see box, below right).  A number of U.S. companies are
already addressing environmental concerns as they pursue industrial projects in
Azerbaijan.

The sources of pollution in Azerbaijan are numerous, and air, water, and soil are all
severely contaminated in many places.  Long-term neglect of environmental
concerns by the oil, gas and chemical industries is a major cause of this situation. 
Toxic agricultural pesticides, industrial air pollution, and the dumping of untreated
sewage and industrial wastes into the Caspian Sea are others. 

Oil & Gas
In the petroleum industry, obsolete equipment, inadequate storage techniques, the
venting of natural gas, and deteriorating brine storage ponds contaminating the soil
are just some of the problems generated at more than 50 onshore and offshore
oilfields and nearly 11,000 wells.  Although foreign investors in general have
shown little interest in the environmental sector, progress has been made by
several U.S. oil and gas companies and their Azerbaijani partners.  Pennzoil and
SOCAR, the Azerbaijan State Oil Company, have installed a compressor station at
an offshore platform to capture gas at the Guneshli oilfield.  This gas is then
transported to shore through an underwater pipeline built by McDermott.  As a
result, large volumes of previously wasted natural gas are now being reclaimed.  

In the metals industry, Kaiser Aluminum is working with an aluminum smelter in
Sumgayit to reduce toxic emissions.  The use of advanced technology and
equipment in selected industries helps reduce the waste of costly resources and
prevent further environmental damage.  The increased revenues generated will
ultimately make possible continued progress in remediation at all levels.  

Just Beginning
U.S. companies have already found opportunities in public-sector environmental
projects, as well, such as community water supplies, although financing is less
readily available.  Typically, initial project funding comes from public sources and is
usually quite limited.  For example, Brown & Root efforts to improve Baku's water
supplies, funded under a $45 million World Bank loan, are only the first phase of a
project that will require an estimated $300-500 million. 
In fact, defining the magnitude of Azerbaijan s environmental problems is only just
beginning--a process that should present opportunities for U.S. companies, as well. 
The Azerbaijan International Operating Company, for example, the consortium of
major U.S. and other oil companies developing the country s Caspian Sea oil
reserves, has begun a baseline environmental assessment of its off-shore and
pipeline contract areas to design appropriate environmental prevention and
remediation programs.  The United Nations Development Program has funded a
$300,000 study to develop an environmental management plan for the Azerbaijan
Government and guidelines for Azerbaijan's State Ecological Committee.

Environmental Marketplace
The still fledgling market for environmental technologies and equipment in
Azerbaijan can be expected to develop along the following lines: 
Water Pollution -- Water supply quality is the country s greatest environmental
concern.  The World Bank is underwriting a $90 million project to modernize water
delivery and purification facilities.  Construction of new plants, modernization of old
ones, and other improvements will be required. 
Soil Pollution --  Leakage from pipes transporting oil and oil-contaminated water has
left high concentrations of radiation and heavy metals in the soil.  The rising level
of the Caspian Sea and years of reliance on chemical fertilizers and pesticides are
also major problems.  Technical assistance and measuring equipment will be
needed to determine contamination levels prior to remediation of the soil for
agricultural uses.

Air Pollution -- The heavily industrialized Baku-Sumgayit area is the source of most
of Azerbaijan's air pollution.  Overall decline in industrial activity has alleviated the
situation somewhat, but air pollution will increase again in severity with the
eventual recovery of heavy industry.  

An important opportunity to make contacts is the Third International Caspian Oil
and Gas Exhibition and Conference, to be held in early June in Baku.  Participants
can make contacts in the Azerbaijan oil industry, including AIOC and other
companies.  For contact information see the box on Page 3, or call the Flashfax
and order document #6356.

Judith Robinson covers energy and environment for BISNIS.  
**Produced by the Business Information Service for the Newly
Independent States (BISNIS)