Azerbaijan has been one of the most successful world countries in the 21st century. The economy of the Republic is developing successfully. Social life conforms to the call of the times. The modern panorama of our capital Baku and regions clearly demonstrates financial capacities of the country. The issues concerning the welfare and living conditions of people are solved sequentially. New grand creative programs referring to different areas are introduced. Azerbaijan is advancing successfully along the way leading to modernity and prosperity.
It is the way associated with a new oil strategy determined and developed on basis of broad foresight of our Nationwide Leader Heydar Aliyev.
The decisive role of Azerbaijani oil in rapid development of the country through independence years has been inseparably linked with Heydar Aliyev’s name. While governing the republic he found the oil industry to be the driving force of the economy, attached big importance to this sphere and showed concern for oilmen. I can declare it as the participant and witness of the long-term tense struggle that Nationwide Leader had been through for ensuring Azeri oil production.
The country’s famous oil epopee filled with real heroic and selfless performances, brave proposals, initiatives and rich ideas of a 34-year period of Heydar Aliyev is clearly stamped in my memory.
My first meeting with Heydar Aliyev had taken place a year before his accession to the leadership of the country. Suleyman Demirel, who was a Prime Minister of Turkey at that period, was returning back to the country through Baku after completion of negotiations with the Soviet government in Moscow in 1968. Within the framework of his visit to Azerbaijan’s capital he expressed a wish to get familiarized with the work of the Caspian oilmen. For this reason, a trip to Gum Adasi was arranged for the guest. Heydar Aliyev, Chairman of the Committee for State Security of the Republic, was among those who accompanied Suleyman Demirel to Gum Adasi. He made an impression of friendly, sincere and sympathetic man right from the first acquaintance. I still remember his decisive and penetrating look.
I must say that most of foreign guests who arrived in Azerbaijan in 1960s expressed wish to visit and see offshore oil fields, meet and talk to our oilmen. It was a natural wish because Azerbaijan became famous in the world for its being a pioneer in the offshore oil production. In the meantime, it is noteworthy that the situation in the oil industry of the republic was not satisfactory at all. Along with other economic spheres of the republic, the decline was also observed in the oil and gas industry. It was the time when Heydar Aliyev was appointed the first secretary of the Central Committee of the Communist Party of Azerbaijan. He made it clear from the very beginning that he did not intend to tolerate such development lag. We were very glad because it was very painful for oilmen to observe the decline of this industry in the republic that had been famous as the land of fire.
The report that Heydar Aliyev presented at the plenary session of the Central Committee of the Communist Party of Azerbaijan showed that the government of the republic had worked out a strategy for recovering the oil industry and ensuring accelerated development of the economy.
I do remember this session very well, the way Heydar Aliyev thoroughly analyzed the work of the oil industry in his report, pointed out the reasons that caused long decline and offered the program of operations to be done. In this way, performance of thoroughly considered and global activities began. Over 400 of different purpose vessels were purchased for the oil industry during 70-80s of the past century. Among them we can mention crane ships, including the crane ship “Azerbaijan” with a carrying capacity of 2500 tons, pipe laying and seismic ships, passenger vessels, etc. The deep water jackets factory with no analogues in the world was built at that period.
Self-lifting drilling units like Khazar and semi-submersible floating drilling rig like Shelf were provided to oilmen for performing geological survey work.
All of this was a logical continuation of important activities that aimed at development of the sea depths since 1970s. The Ministry of Oil Industry of Azerbaijan was eliminated that year and production union Khazardenizneft was established instead. Considering the working experience of Azerbaijani oilmen in offshore conditions, the Ministry of Oil Industry of the former USSR shifted the performance of geological-exploration, drilling, production and other work in all the sectors of the Caspian Sea (that was a huge territory extending from the Iranian border right up to the North Caspian) on our shoulders.
I would like to note that our Nationwide Leader appointed me Deputy Director and Chief Geologist of this production union at that period. Thus, I was lucky to meet him periodically and work under his supervision for many years.
What were the benefits that our country gained as the result of changes made in the oil industry? The answer to this question is rather broad. In order to remember successes we gained at that period I will mention the most important facts and figures.
Oil and gas reserves of the republic grew by 2 and 3 times respectively during Heydar Aliyev was the secretary. Total oil and gas production increased up to 27.1 mln tons of reference fuel in 1975. Azerbaijani oilmen also carried out efficient exploration work in the offshore sectors of Turkmenistan, Kazakhstan and Russia right until the collapse of the Soviet Union and discovered over 500 structures in the sea. Along with new fields discovered in the Azeri sector of the Caspian Sea, they revealed the fields East Livanovo, Gubkin, Barinov, LAM, Cheleken in the Turkmen sector, Inchkhe-Deniz 1 and Inchkhe-Deniz 2 in the Russian sector and one field in the Kazakh sector.
The period when Heydar Aliyev was the secretary is not characterized only by production achievements. Here noteworthy is also Nationwide Leader’s concern and care for oilmen. I would like to note only one fact: the number of block of flats built for oilmen during the office of Nationwide Leader reached the record level. Oilmen’s apartment needs were covered by over 95% in 70s of the past century.
Years passed. A new stage of ordeal began for the republic. A new structure called State oil concern was created in 1991 when Azerbaijan became a sovereign state. The situation in the republic was very tense at that period including the chaos that started in the oil industry. The concern was eliminated later. State Oil Company of Azerbaijan was created instead. In spite of all attempts of oilmen, the situation in the oil industry still remained critical.
Finally in 1993, Heydar Aliyev returned to the office for the second time by the demand of people.
All economic relationships were broken at that period. Supply problems emerged. Oil industry was in the state of collapse. Oil and gas production level kept falling. It was necessary to commence development of the deep-water section of Gunashli field as well as Chirag-Azeri fields in order to get out of the crisis and ensure economic recovery. Azerbaijan was certainly not able to handle this on its own due to the lack of necessary financial and technical resources.
There were two ways: either to wait for 30-40 years or attract foreign oil companies for the joint development of fields. Under the presidency of Heydar Aliyev the State Oil Company of Azerbaijan chose the second way that fully met the national interests of Azerbaijan. I would like to note that there were opponents of this plan as they assumed that all these operations could have been done by means of domestic opportunities of Azerbaijan.
However, the impoverished republic was not able to fulfill such capacious work. On the other hand, it is known that development of oil-gas fields at deep-water sections of the sea is a rather hard task. Joint cooperation is established with foreign companies in the world practice for recovering oil and gas from such fields. Such powerful countries as the USA, Great Britain, France, other developed states and large oil companies preferred unification of their capacities and efforts in order to minimize risks when performing operations on such deepwater areas. I would like to note that negotiations with foreign companies for the development of Azeri field began as early as in the Soviet period. However, the logical completion of these negotiations turned out possible only after the second return of Heydar Aliyev to power. Owing to his initiatives, the negotiation process was resumed and accelerated. The parties reached an agreement on all complicated issues with 11 world known oil companies representing 7 countries. As the result, the agreement on joint development and production sharing of Azeri, Chirag and Deepwater Gunashli was signed on September 20, 1994. It entered down in history as the Contract of the Century.
We can talk a lot about the significance of the Contract of the Century for Azerbaijan. Nevertheless, I would like to draw attention of the readership to two issues which remain basic for us.
First of all, the contract assured the leading countries and companies of the world that Azerbaijan is a sovereign state and reliable partner where they can operate and make investments. Signing of 33 more agreements with foreign companies after the Contract of the Century was no coincidence. It proves the political significance of the contract.
The huge economic benefit gained owing to the Contract of the Century was the role it played in oil-gas production growth of the republic. Oil production rose from 9 mln tons in 1997 up to 50.7 mln tons in 2010. Gas production grew from 5 bcm fixed in 2004 up to 26.0 bcm in 2010.
According to the Contract of the Century, over 60 production wells have been drilled from the deepwater platforms installed on Chirag, Azeri and Deepwater Gunashli fields. The average daily production on these fields totals over 91,000 tons of oil and 35 mln cubic meters of gas. Over 298.4 mln tons of oil and 81.4 bcm of gas have been produced on these fields since their commissioning (since November 1997).
It is already 14 years that all parties of Azeri-Chirag-Gunashli project including Azerbaijan have been gaining oil profits. Means gained from oil sale were spent on reimbursement of investments until 1999 whereas the first tanker loaded with profit oil of Azerbaijan headed towards the international oil markets in December of the same year. 152 mln tons of profit oil of Azerbaijan were sold at international markets as of April 1, 2013. Nationwide Leader Heydar Aliyev once again demonstrated wisdom and foresight by creating the Oil Fund of Azerbaijan in order to accumulate and spend revenues gained from sale of profit oil on needs of the people and improvement of their welfare. Revenues gained from sale of profit oil of Azerbaijan are concentrated in the oil fund and spent on development of the non-oil sector, regions and general prosperity of Azerbaijan.
The main export oil-pipeline Baku-Tbilisi-Ceyhan was the second product of Nationwide Leader after the Azeri-Chirag-Gunashli project. During the construction of this oil pipeline, Azerbaijani oil was exported to world markets through two pipelines: Baku-Novorossiysk and Baku-Supsa. There were also forces that opposed the construction of the Baku-Tbilisi-Ceyhan (BTC) pipeline. But time showed that BTC pipeline with the length of 1730km and carrying capacity of 50 mln tons has been of great significance both for Azerbaijan and the entire region.
The main export pipeline Baku-Tbilisi-Ceyhan was commissioned on May 28, 2005. The solemn opening ceremony was held on July 13, 2006. As a participant of the opening ceremony, I may say that this export oil pipeline caused big resonance in the whole world. Taking the floor at the opening ceremony, President of Azerbaijan Ilham Aliyev expressed assurance that the oil pipeline would play an important role for strengthening of friendly and economic relations between Europe and world states.
BTC has many advantages as the pet project of the Contract of the Century. The export oil pipeline reaches the Mediterranean Sea bypassing the Black Sea, Bosporus and Dardanelles channels which are not capable to admit high-tonnage tankers. Broad opportunities for receiving of high capacity tankers in the Mediterranean Sea once again confirmed the economic efficiency of oil transportation from Ceyhan in different directions. Thus, conditions for supplying oil to the states around the Mediterranean Sea and transporting large volumes of Azerbaijani oil to other countries of the world were created. I once again would like to note that over 213 mln tons of oil had been supplied to the world markets along the Baku-Tbilisi-Ceyhan oil pipeline by the end of March of this year.
If the Contract of the Century made Azerbaijan an oil country, then discovery of Shah Daniz field ensured recognition of our republic as the gas country.
Shah Daniz was for the first time discovered by Azerbaijani geophysicists in 1954 and prepared for deep prospecting drilling in 1983. However, no results were gained due to the high depth of the sea, location of promising oil-gas formations at higher depths and economic difficulties. The following exploration drilling on the field was carried out owing to the agreement signed with foreign companies on June 4, 1996 for exploration, development and production sharing on Shah Deniz field located in the Azeri sector of the Caspian Sea. Shah Deniz field was opened in July 1999 as the result of exploration work carried out within the framework of the Agreement.
During the ceremony dedicated to the achievements on July 12, 1999, the Nationwide Leader gave the floor to me. I spoke about contribution that Nationwide Leader made to the discovery and development of big oil-gas fields in the Caspian. Speaking about Shah Deniz field, I noted that the fate of this field had also been associated with Heydar Aliyev. I emphasized that no results were reached despite the Azerbaijani geologists and geophysicists believed in the prospectiveness of this field for 20 years and performed operations there. I remember it was in May 1996 when His Excellency gathered us all and listened. Then, he made decision saying that Shah Deniz field should be developed jointly with foreigners in order to fully supply Azerbaijan with oil. Then, touching upon the reserves of Shah Deniz field I said: “We believe that reserves will grow after drilling of the second and third wells on the field, we do not doubt it”. Then my dialogue with Heydar Aliyev followed:
Heydar Aliyev: So you say that reserves total 700 bcm now.
My answer was: Yes, but I may say that the field contains reserves at least one trillion cubic meters or even more but not less.
Time and work proved the correctness of our expectations. It is already known that hydrocarbon reserves of Shah Deniz field total 1 trillion 200 bcm of gas and 240 mln tons of condensate. It is one of the biggest world’s gas-condensate fields that have been discovered in the sea so far.
Development of Shah Deniz field was commenced in December 2006. The works in this direction are ongoing successfully. 6 production wells have been drilled here so far. Daily production on these wells total 25 mln cubic meters of gas and 6,000 tons of condensate. 40.6 bcm of gas and 10.7 mln tons of condensate have been produced since the launch of Shah Deniz field development. Production on this field may reach 25 bcm of gas per year after the realization of the second stage.
Discovery of Shah Deniz field turned Azerbaijan from gas importer into an exporter.
South-Caucasian pipeline (SCP) was commissioned in 2007 in order to deliver Azerbaijani gas to the world market. This export pipeline with the length of 971km starts from Sangachal terminal located near Baku. The pipeline section is crossing through Azerbaijan (443km), Georgia (248km) and Turkey (280km) where it links with the pipeline system of Botas company. The pipeline diameter is 1066 mm (42 inches). The carrying capacity totals up to 20 bcm of gas per year.
The country has produced 252 bcm of gas over 22 years of independence. 24.2 bcm, 5.9 bcm and 2.8 bcm of gas were supplied to Turkey, Georgia and Russia (respectively) as of the beginning of March, 2013.
President Ilham Aliyev keeps successfully performing large-scale work for implementation of grandiose tasks determined by the new oil strategy of Nationwide Leader Heydar Aliyev. Owing to his presidency the Azerbaijani oilmen wrote new pages into the famous oil history over the past years. Broad range of work was done to reach the goals of Nationwide Leader. One of these notable pages concerns the discovery of Umid field. I would like to note one moment in this regard: if exploration work used to be carried out in the Caspian together with foreign companies till 2010, the part of this work has been carried out by SOCAR starting from this period. Exploration work on Umid (Azeri sector of the Caspian Sea) was resumed after a long break and resulted in discovery of the biggest gas condensate field in November 2010.
Due to this outstanding event in the oil-gas history of the country President Ilham Aliyev met with the management of the State Oil Company of Azerbaijan on November 24, 2010.
The Head of State said in his speech: “Umid field has been discovered. It is a very important historical event. On this occasion I would like to congratulate all workers of the State Oil Company and all people of Azerbaijan as this event will play a very important role in successful development of oil-gas industry of Azerbaijan.
The new oil strategy that Nationwide Leader Heydar Aliyev introduced in 1990s promoted radical changes in this sphere. Signing of the Contract of the Century, contract of Shah Deniz field and other steps helped Azerbaijan to regain previous positions in the oil-gas sphere. We managed not only regain our positions but also strengthen them considerably. I would like to note once again that Azerbaijan plays a particular role in the global energy map. Our positions are strengthening and the initiatives we put forward led to the development of the new situation in this sphere.
Discovery of Umid field bears special importance. It shows that all work in the oil-gas sector of Azerbaijan is carried out successfully. It shows that Azerbaijan has become a large gas country. We are already famous in the world as the oil country. Azerbaijan will say its word as the gas country at the following stage (in the 21st century). Though, it is already saying it.
Addressing the meeting, SOCAR President Rovnag Abdullayev expressed his gratitude to the President of the country for high evaluation of the labor of oilmen.
In my turn, I have informed the head of the state about technical-economical indicators of the number of gas fields located in the Azeri sector of the Caspian Sea.
According to preliminary estimates, reserves of Umid field total 200 bcm of gas and 40 mln tons of condensate.
Drilling exploration well #10 with a budgeted depth of 6,500 m began on Umid platform in July 2011. The mentioned well was developed after completion of perforation on June 8, 2010. The pressure on the well mouth totaled 600 atm. Daily production rate from the well’s connection line 10mm in diameter totaled 700 mln cubic meters of gas and 100 cubic meters of condensate.
Currently drilling of an exploration well #12 with a budget depth 6550m is going on at the platform. The depth of the well has already reached 6000m. The drilling is continued.
Another important event happened after discovery of Umid field. One more big gas condensate field (Absheron block) was opened in the Caspian in September 2011. Discovery of this field at a depth of 473.5 meters in the Absheron archipelago of the South-Caspian oil-gas basin is the result of the joint work that is carried out within the production sharing agreement signed between the French companies Total, Gas de France and SOCAR.
On September 9, 2011 the President of the Republic of Azerbaijan received the executives of Total and SOCAR, who informed about the discovery of a large gas-condensate field Absheron in the Azerbaijan sector of the Caspian Sea.
President Ilham Aliyev appreciated the discovery of the large gas condensate field Absheron in the Azerbaijan sector of the Caspian Sea as the important milestone in the life of the country. The Head of State said that the discovery of the new gas condensate field would help to strengthen the positions of Azerbaijan among the largest gas producing countries. He said: “The discovery of the gas condensate field Absheron will encourage us to promote our gas strategy more resolutely, achieve a wider recognition of Azerbaijan worldwide as a gas exporting country and uphold interests of the Azerbaijan people”.
Total Company Senior Vice President Michael Borrel expressed hope for a further long-term cooperation with Azerbaijan.
I informed President Aliyev about the history of Absheron structure’s discovery, the works performed prior to field discovery and technical and economic figures of the new gas condensate field, and I stated geologic-geophysical properties of the field and its prospects.
According to the primary calculations of SOCAR, estimated hydrocarbon reserves of the Absheron field make as much as 350bcm of gas and 45 million tons of condensate.
Thus, with gas reserves of early formations of the productive thickness of Azeri-Chyrag-Gunashli fields estimated as 250bcm the current proved reserves of gas in Azerbaijan make 2 trillion 550bcm.
Further exploration work on Babek, Nakhchyvan, Zafar, Mashal, Shafag and Asiman structures will promote increase of these reserves in the future.
Modernization of the existing infrastructure is now a special focus in the Republic with the purpose to raise the oil and gas output because it is impossible for some reasons to perform drilling operations on ultra deep areas of the Caspian Sea using the existing drilling rigs. To achieve the set up objectives it was decided to build 4 new drilling rigs of new generation capable of drilling wells with the depth ranging from 8,000 to 10,000 meters at the water depth of 1,000 meters. This project requiring large investments is very important in terms of development of the national economy. Active drilling operations at Umid and Absheron fields and the start of exploration work at perspective Babek, Nakhchyvan and Zafar-Mashal fields is connected with the implementation of this project.
The documents on TANAP construction project (Trans-Anatolian Gas Pipeline) were signed last year in the presence of the President of Azerbaijan Ilham Aliyev and the Prime Minister of Turkey Recep Tayyip Erdogan. The TANAP project implemented with the aim to supply Turkish and European consumers with Azerbaijan gas will lay a basis for implementation of the Southern Energy Corridor, so long expected by the EU countries. The relevant agreements have been already ratified by the parliaments of Turkey and Azerbaijan and they gained a status of a Law in the two countries. The international community is showing a keen interest to the TANAP project and supports its implementation. The initial throughput capacity of the gas pipeline is expected to make 16bcm and subsequently be expanded even more.
One more aspect: it is common knowledge that the oil refining and petrochemical plant in the country is physically and morally obsolete. To change the situation for good, preparatory operations are now in process to be able to start construction of a new oil refining and petrochemical plant meeting up-to-date standards. It is the biggest industrial project in the history of Azerbaijan, which will reliably ensure a future development of the country.
SOCAR is now also involved in important projects encouraging the development of oil refining and petrochemistry in Turkey. Construction of a new oil refinery has been started in Turkey with the purpose to provide raw materials for the Petkim petrochemical company where the 61.32-percent stake belongs to our company. Expansion of the existing port is now continued and soon it is going to become the largest port of Turkey. Preparatory work for construction of a new power plant is now underway to improve energy supply of Petkim petrochemical company.
Construction of carbamide plant is to start in Sumgayit soon. This plant will be an important contribution from the oilmen to ensuring food security of the country. A similar plant shall be constructed in Georgia taking into consideration a great need of the region in nitric fertilizers.
Construction of a shipyard with no analogs in the Caspian Sea is now successfully proceeding in Baku. This plant will enable to update the ship park of the Caspian Sea oil fleet and play an important role in providing the Navies of Azerbaijan, Caspian Shipping Company, the Ministry of Emergency Situations and the Caspian Sea countries with modern vessels.
Our company successfully continues business operations in Switzerland, Turkey, Romania, the United Arab Emirates, Ukraine and Georgia.
All the aforesaid, including the achieved successes in the tense struggle for big Azerbaijan oil along with implemented international and regional projects and their results, is the bright example of the great significance for the people and the state and demonstration of sustainability of the new oil strategy laid with a great wisdom by Nationwide Leader Heydar Aliyev and successfully followed by his worthy successor Ilham Aliyev.
Once more I would like to emphasize that all the work performed by Nationwide Leader Heydar Aliyev for the republic in general and for the development of the oil industry in particular along with the oil strategy laid by him will ensure a sustainable development of Azerbaijan on a powerful basis. So, we as oilmen will do our best to make those goals a reality.
