Investing in Local Supplier Development

13 June 2006

BP on behalf of its project partners, recently launched the first step in an important new initiative, which will give greater access to finance to Azerbaijan's local oil and gas industry supplier and service enterprises. 
AzMETCO – a local Joint-Stock Company of “Complex Adjustment and Automation”, becomes the first enterprise to receive a loan under a new Supply Chain Finance Facility pilot project set up by BP, on behalf of its project partners, and the International Finance Corporation (IFC). 

Since 1998, AzMETCO has been providing metrological assurance for metering equipment at the Sangachal, Sumgayit, Siyazan, Shirvanovka and Supsa terminals of the Northern Route and Western Route oil export pipelines under a contact with the operator. In addition, last December BP awarded AzMETCO a new four year contract for provision of prover calibration services along the Northern Route, Western Route, Baku-Tbilisi-Ceyhan and South Caucasus pipelines. 

The Supply Chain Finance Facility (SFF) is a joint credit facility aimed at supporting development of Azerbaijan’s local oil and gas industry supplier and service enterprises through resources provided by BP and its partners, the IFC and a local financial institution selected by the IFC. 

The project is in line with BP’s and its partners’ target to double their total spend with locally-owned companies by 2010 raising it to over $500 million a year. 

The SFF is designed to be implemented in several phases. The first phase of the credit component of the project has already been launched as a pilot programme and will be managed by the IFC. 

This pilot project is implemented through a separate IFC grant agreement with the Micro-Finance Bank of Azerbaijan (MFBA) and a total loan capital of $316,000. This will provide loans for up to three selected local suppliers of BP and its partners in Azerbaijan. Under this agreement, BP on behalf of its partners will provide $140,000, the IFC $140,000 (of which $20,000 is for technical development and appraisal of this pilot phase) and the remaining $56,000 will be invested by MFBA. 
Local companies eligible to receive SFF loans will be selected for competitive pre-qualification exercises by the Enterprise Centre, then will pass through the MFBA credit appraisal and will finally be approved by the SFF Credit Committee comprising representatives of all the three parties involved. 

Phase 2 of the SFF will be much larger in scale and once approved, it will allow us to begin extending further loans to more local companies, who meet the established criteria, by the end of 2006. 

Notes to Editors: BP together with its partners is implementing world-class oil and gas development and export projects in the region. These projects present a great opportunity to make a positive difference to the people of Azerbaijan, Georgia and Turkey. As part of their efforts to achieve this, BP and its partners have set an ambitious new target to double the value of contracts placed with Azerbaijan-owned companies within five years. By 2010 BP and its partners aim to spend an additional $250million annually with small and medium-sized enterprises (SMEs) and joint ventures, bringing the total spend with locally-owned companies to over $500 million a year. This target aims to encourage enterprise development throughout Azerbaijan, Georgia and Turkey assisting the countries in diversifying their economies, as well as creating innovative and transparent practices of support to local businesses. 

In addition, BP and its partners have committed to spend around $ 20 million a year on regional development and community projects. 
In Azerbaijan in 2006, these regional development and community programmes focus on three key themes
  1. Community Investment - focusing on the local communities close to BP-operated projects, the objective is to support long-term socio-economic development, making a tangible difference in the quality of peoples’ lives (e.g., economic development, health, education, infrastructure rehabilitation).
  2. Enterprise Development - building local business capacity. This includes support for SMEs through technical assistance, access to transparent financing, capacity building, training on business ethics and corporate governance.
  3. Effective Governance – supporting capacity-building and transparency with particular interest in revenue management.
Through our regional development and community programmes we will continue to work with local communities in collaboration with local and national authorities, non-governmental organizations, the private sector and other stakeholders to help ensure that long-term, sustainable investments we and our partners make benefit all. 


Further information:
Tamam Bayatly at BP’s Press Office in Baku, telephone: 994 (0) 12 599 4557