The State Oil Fund of the Republic of Azerbaijan (SOFAZ) is a legal entity and an extra-budgetary institution. SOFAZ is a mechanism whereby energy-related earnings are accumulated and efficiently managed. The cornerstone of the philosophy behind the Fund is to ensure intergenerational equality with regard to benefit from the country's oil wealth, whilst improving the economic well being of the population today and safeguarding the economic security of future generations.

The major sources of income for SOFAZ are:

1. Proceeds generated under production sharing agreements from sales of the Republic of Azerbaijan's share of hydrocarbons,

2. Bonuses paid under the terms of production sharing agreements,

3. Acreage fees paid by foreign investors for use of the contract areas in connection with the development of hydrocarbon resources,

4. Dividends paid under the terms of production sharing agreements,

5. Revenues generated from the transit of oil and gas over the territory of the Republic of Azerbaijan,

6. Revenues generated from the transfer of assets from investors,

7. Revenues from management of SOFAZ assets,

8. Grants and other disinterested aid,

9. Other income.

In compliance with regulations relating to SOFAZ, the Fund's assets may be used for solving major problems affecting the nation, and for construction and reconstruction of strategically important infrastructure to support socio-economic progress.

Transfers to the state budget also constitute a significant component of the SOFAZ's outflow. A very small portion of the SOFAZ's assets is utilized to cover operating costs. As per the Law "About Budget System" of the Republic of Azerbaijan, all SOFAZ expenditures, except for operating expenditures, are incorporated as part of an annual consolidated government budget presented to the Parliament for approval. In compliance with this Law, SOFAZ can only execute expenditures envisaged by its budget. Execution of expenditures is through the state treasury.

SOFAZ is funding major projects of national scale. They are:

1) Azerbaijan's equity share in the Baku-Tbilisi-Ceyhan (BTC) oil pipeline project (completed),

2) Building of housing and improvement of socio-economic conditions of refugees and internally displaced persons who were forced to flee their native lands as a result of Armenian-Azerbaijan conflict,

3) Oguz-Qabala-Baku water supply system (completed),

4) Reconstruction of the Samur-Absheron irrigation system (completed),

5) Formation of the statutory capital of the State Investment Company (completed),

6) Financing Baku-Tibilisi-Kars railway (completed),

7) Financing "The state program on the education of Azerbaijan youth abroad in the years 2007-2015.

8) Financing of the share of Azerbaijan Republic in the construction of the STAR oil refinery project in Turkey (completed),

9) Financing the share of the Republic of Azerbaijan in "Southern Gas Corridor" CJSC statutory capital (completed),

10) Financing of the share of Azerbaijan Republic in the construction of new drilling rig in the Caspian Sea (completed),

11) "State Program on Increasing the International Competitiveness of the Higher Education System in the Republic of Azerbaijan for 2019-2023" .

12) State Program for the Education of Youth in Prestigious Higher Education Institutions Abroad for 2022-2026

No. According to the rules on the preparation and execution of the annual budget for the State Oil Fund of the Republic of Azerbaijan (SOFAZ), approved by Presidential decree on September 12, 2001, no expenditures from SOFAZ shall be allowed unless the expenditures are in accordance with the Fund's budget and all SOFAZ expenditures shall be executed in accordance with the purpose for which they were approved.

As per the Law "About Budget System" of the Republic of Azerbaijan, all SOFAZ expenditures, except for operating expenditures, are incorporated as part of an annual consolidated government budget presented to the Parliament for approval. In compliance with this Law, SOFAZ can only execute the expenditures envisaged by its budget. Execution of expenditures is through the state treasury.

SOFAZ is a state extra-budgetary fund functioning as a separate legal entity, with its own specialist management team and government supervisory hierarchy. SOFAZ's operation is guided by the Constitution and laws of the Republic of Azerbaijan, Presidential Decrees and Resolutions, and the SOFAZ's Regulations. SOFAZ is responsible to the President of the Republic of Azerbaijan. The Fund is also responsible to its Supervisory Board and Chamber of Accounts established by Milli Majlis (Parliament). Reestablishment and liquidation of SOFAZ is carried out by means of decree by the President of the Republic of Azerbaijan.

The State Oil Fund of the Republic of Azerbaijan (SOFAZ), is a legal entity and an extra-budgetary institution.

SOFAZ's activities are overseen by a Supervisory Board. 6 members of the Supervisory Board were appointed in accordance with Presidential Decree dated June 27, 2018. The Board is to review SOFAZ's draft annual budget, annual report and financial statements along with independent auditor's opinion and provide its comments.

SOFAZ is lead by the Executive Director, who is appointed and dismissed by the President of the Republic of Azerbaijan. SOFAZ's Executive Director carries out operational management of the Fund's activities. The Executive Director may appoint and dismisses employees of SOFAZ in a manner as determined by the legislation. The Investment Board, comprising senior officials of SOFAZ, manages all investment related activity in SOFAZ.

Execution of the SOFAZ budget, which has to be duly approved by the appropriate Presidential Decrees, is undertaken in line with a set of asset management guidelines (AMG) and specified expenditures. SOFAZ assets are managed in accordance with AMG approved by the Presidential Decree on "Asset Management Rules (Guidelines) for the State Oil Fund of the Republic of Azerbaijan" # 511 dated June 19, 2001.

In accordance with the Law "About Budget System" of the Republic of Azerbaijan, all SOFAZ revenues and expenditures are incorporated as part of an annual consolidated government budget and approved by the Parliament. SOFAZ is audited by the Accounting Chamber, which is under the control of the Parliament and reports directly to the Parliament. Moreover, SOFAZ's activity is controlled by the Supervisory Board comprising governmental representatives and members of Parliament.

Current asset management guidelines of SOFAZ call for conservative asset allocation. SOFAZ is allowed to invest only in the investment grade instruments. Portion of the investment portfolio is managed by reputable external asset managers. SOFAZ's assets are invested in the foreign government securities, debt issued by foreign governmental agencies, debt issued by financial institutions and banks, equities, real estate and gold.

A key measure to promote transparency within SOFAZ's reporting system and operation is a regular audit of the Fund's financial activities by a reputable firm of international auditors.

Information and press releases, and both quarterly and annual statements, in Azerbaijani and English, about the SOFAZ's revenues and expenditures, investment activities are regularly published in the local press and posted on SOFAZ's web-site ( www.oilfund.az ) to reflect developments in varying areas of SOFAZ's activities, and also to promote transparency in the utilization of revenues from oil.

In development of its media relations, press-conferences are held regularly to provide direct, accurate and professional briefings on SOFAZ's activities and to offer an opportunity for the media to ask questions regarding management of the Oil Fund and its assets.

SOFAZ won the 2007 UN Public Service Award for Improving Transparency, Accountability and Responsiveness in Public Service.

Azerbaijan was awarded with ‘EITI Award 2009’ in February 2009 in Doha, Qatar for its compliance with EITI principles and criteria, along with achievements in EITI implementation.

SOFAZ's official website is regularly updated. The site contains information on the history, goals, and philosophy of SOFAZ, its management structure, international relations, projects, asset management, as well as regulatory documents related to the activities of SOFAZ. SOFAZ regularly publishes information on its website including, the Fund's expenditures, quarterly reports on revenues and expenditures, information on SOFAZ's budget, annual reports, and presentations on the Fund's activities. The press room on the website includes information on SOFAZ's public relations, information policy, news archive, and materials published in the press about the Fund.

Should you have any questions or comments on our website, please contact: pr@oilfund.az