BAKU (RT)—Azerbaijan’s state energy company, State Oil Company of Azerbaijan Republic (SOCAR), once a lavish spender on projects ranging from new hospitals to the Eurovision song contest, has closed several offices abroad to curb spending as oil prices slump, its president said on Wednesday.
Oil-rich Azerbaijan’s economy and currency, the manat , have come under intense pressure from sliding oil prices and ratings agency Fitch downgraded SOCAR on Feb. 29 to ‘BB+’ with a negative outlook.
The country’s parliament in February revised its 2016 state budget to base it on an average oil price of $25 per barrel, down from original forecasts based on a price of $50.
“The fall in oil prices has led to a reduction in the number of SOCAR structures,” SOCAR President Rovnag Abdullayev told reporters on Wednesday, adding operations had been transferred to the central office in the Azeri capital Baku and other SOCAR-owned companies.
German, Belgian and Swiss offices had closed, he said.
SOCAR used to spend its oil income lavishly during the good times. It was building schools and hospitals, and was the main sponsor of the Eurovision Song Contest in 2012, held in Baku, as well as the inaugural European Games last year.
But the sharp decline in oil prices prompted it to cut spending on transport, communication, some sponsorship projects as well as conferences this year. It also put on hold an ambitious petrochemical project earlier this year.
SOCAR officials say reducing spending will help the company save about 400 million manats ($267 million) over three years.
“We are working on projects aimed at optimization of our business…that will help us to save about 400 million manats in 2016 and the next two years,” SOCAR Vice-President Suleiman Gasymov said.
Ernst & Young was consulting SOCAR, he added.
Gasymov said the fact that some of SOCAR’s assets are in U.S. dollars helped the company avoid losses totaling more than one billion manats.
SOCAR officials said if oil prices fall below $35 per barrel from about $44 now, the company would be forced to “tighten belts” further.