Baku and Oil. The Modern Period.

After the USSR has collapsed and Azerbaijan has gained its independence, the industrial complex “State Oil Company of Azerbaijan Republic” (SOCAR) is engaged in oil and gas extraction in the country. Since its establishment on September 13, 1992 SOCAR has become a holding with full production cycle “from drilling to a consumer”. The management of the company includes the extraction of oil and gas on and off-shore, the production of the machine-building articles for oil and gas industry, transportation of oil, geophysics and engineering geology. Besides this, SOCAR includes 2 oil refineries (“Azneftyag” and “Azneftyanajag”), construction trusts, enterprise of auto-transport, oil fleet, enterprises of automation and complex setting, research and design institutes. About 70 thousand people work in the company, SOCAR controls about 6800 on-shore and 1400 off-shore oil wells, a fleet with over 300 tankers; 6 floating oil-drilling platforms and so on. In 1995 SOCAR extracted 9.161 million tons of oil and 6.643 billion cubic metres of gas.

Despite the amount of the big oil and gas deposits in Azerbaijan, SOCAR at a moment when it was established did not have enough financial resources to restore the oil industry of the country. Therefore the Azerbaijani government paid a special attention to the attraction of foreign capital to realise the projects of exploration and development of the new biggest fields and perspective structures. In January 1991 a tender was announced for the development of the fields which had been opened back in the 80s of the XX century. After the continuous negotiations on September 20, 1994 the first contract called “Contract of the Century” was concluded in Baku with the foreign oil companies on the development of the fields of Gunashli, Chirag and Azeri. To realise the contract, at the beginning of 1995 SOCAR and 10 foreign oil companies created the Azerbaijan International Operation Company – AMOC. According to the agreement AMOC became an operator of the work carried out within the frames of the concluded contract, to manage the daily work, to carry out oil and gas operations and their realisation, as well as to co-ordinate the entire work. In 1999 BP, which has most of the shares in the contract, became the operator of the project. In accordance with the project by the end of 1997 AMOC completed the work on the export oil-pipeline Baku-Novorossiysk and on October 25, 1997 the first Azerbaijani oil was transported to Novorossiysk.

“Contract of the Century” was followed by the contracts of Garabagh, Shahdaniz, Ashrafi-Dan Ulduzu, Lankaran-Daniz, Talysh-daniz, Nakhchivan, Apsheron, Oghuz, Kurdashi, Inam and Araz-Alov-Sharg and others (all in all 20) one after another which opened the doors of Azerbaijan to the great number of the foreign investors. Out of the concluded contracts only one was signed directly on the open field, the rest – on the perspective structures. To open fields on these structures it is necessary to carry out an exploratory work, that is to drill exploratory wells which is connected with a certain risk and financial losses. Explorations are carried out mostly at the expense of the investments of foreign companies which in case of negative results reduces the losses of SOCAR.

The realisation of the concluded oil contracts is in different stages. Side by side with “the Contract of the Century” the most successful one was the contract on Shahdaniz, where as a result of the exploratory work 1 trillion cubic metres of gas was discovered.

At present Azerbaijan increases the oil export year after year which is carried out in various directions: northern – Baku-Grozny-Novorossiysk and western – Baku-Supsa. Further to provide the annual export of about 50 million tons of Azerbaijani, as well as transit east-Caspian oil there  the Main export pipeline is built on the route Baku-Tbilisi-Jeyhan. To export the Azerbaijani gas to Turkey a gas-pipeline Baku-Tbilisi-Erzurum is suggested and built. All these pipelines in different directions enable to avoid the risks of force-majeur and to provide political-economic independence of the country.

Today 231 perspective structures are discovered, prepared for drilling and are under exploration in Azerbaijan (on and off-shore), including 38.1% on-shore and 61.9% in the Azerbaijani sector of the Caspian. Out of them 25.1% comprises the structures prepared by seismological exploration for the introduction of the deep-water drilling. 69 deposits have been discovered in the Republic, including 42 - on-shore, 21 – offshore. 61 deposits have been in industrial exploitation, including 40 - on-shore, 21- offshore.

All in all about 1,4 billion tons of oil with the condensate (out of them about 400 million tons in the sea) and about 500 billion cubic metres of gas have been extracted from the bowels of the Republic. Prior to its independence the maximum oil extraction in Azerbaijan reached 23.4 million tons (in 1941) and gas – 15 billion cubic metres (in 1981).