Oil Trading Contracts Award and Sumato Energy Group

The purpose of the following is to explain the relationship between Sumato Energy Group Ltd and SOCAR.

SOCAR as a state-owned company is very strict with its compliance and due diligence procedures with respect to its counter partners. Since the oil industry is a strategic field for Azerbaijan, and taking into account the geopolitical realities and the unresolved conflict with Armenia, we are always very strict with our compliance procedures.

SOCAR’s Marketing and Operations (SOCAR MO) which is responsible for conducting marketing surveys and selling crude oil to trading companies, including major international trading oil companies, awards crude oil cargoes on the basis of the best prices achieved during these marketing surveys. Among the main requirements for awarding contracts as a result of marketing surveys conducted by SOCAR MO are: the best price (determined on the basis of relevant quotations) proposed by the bidders and the ability to open a letter of credit (LC) with a first class international bank. The requirement to provide LC from a first class international bank (as well as some other requirements to bidders) serves as an indicator for SOCAR that the bidder enjoys a good business reputation and has passed compliance and proper due diligence with reputable banks.

Among companies which became winners of marketing surveys we may name Glencore, Addax Petroleum Corp., Vilma Oil, Arcadia Petroleum Ltd., OMV Supply & Trading AG, Vitol SA, a trading unit of Royal Dutch Shell, BP Oil International Ltd., Exxon Mobil Sales and Supply LLC, IPC Europe Limited (affiliate of Itochu), Statoil ASA, Petro Diamond Company Ltd (affiliate of Mitsubishi) and Oil Refiners Limited (Israel).

In 2006, Sumato Energy Group became a winner of SOCAR MO marketing survey for the first time to buy 80,000 tons of Azeri Light crude from SOCAR. Sumato Energy PTE was awarded contracts only as a result of successful bidding during marketing surveys and the attractiveness of its bids. All tenders were conducted according to SOCAR and applicable Azerbaijani guidelines for public tendering procedures. There had been necessary compliance with respect to Sumato Energy before it was awarded any contracts and its ultimate beneficial owners were identified. SOCAR identified that Sumato Energy Group Ltd was incorporated in New Zealand in 2005 and further companies under the same brand name, were registered in Singapore, Switzerland and the UAE. From due diligence conducted, SOCAR was satisfied that Mr Alizade is not a beneficial owner of Sumato Energy. In the meantime, SOCAR is bound by confidentiality agreements and is unable to reveal the identity of the ultimate beneficial owners to any third parties. Moreover, neither SOCAR nor any of its subsidiaries have any connection with Sumato Energy Group and for further company details, it is recommended to contact them directly.