Azerbaijan is nowadays holding leading positions on economic development rates in the world. The competitiveness of the Azerbaijani economy remains high, the development is locally observed in the all economic sectors and social sphere. The leading world rating agencies raise its credit ratings. The foundation of such development was laid 20 years ago on September 20, 1994 with signing of the Contract of the Century under leadership of National Leader Heydar Aliyev, which commenced full-scale development of the Azeri-Chyrag-Guneshli fields in the Azeri sector of the Caspian Sea. Possessing considerable reserves of energy resources, Azerbaijan built its system of oil marketing and sales, taking, first of all, national interests and market mechanisms into account. It was much harder with gas. However, a long and hard process of negotiations held under the leadership of President of Azerbaijan Ilham Aliyev resulted in creation of the Southern Gas Corridor concept aimed at ensuring diversification of Azeri gas supply to the European markets, which will be one of the factors strengthening energy security of Azerbaijan, countries of the region and Europe.
Discovery of new gas fields and export of larger gas volumes promote geopolitical and political interests of Azerbaijan. Azerbaijan managed to turn from importer into exporter of natural gas. Today the country is already exporting gas to neighbor countries: Georgia, Turkey, Irand and Russia. The interest toward Azerbaijani gas is extremely big now. The country is considered one of the main suppliers of natural gas.
The signing of the Contract of the Century became a strong impulse to Azerbaijan’s development. This document plays a great role in the history of Azerbaijan. Namely this contract took the Azerbaijan oil industry into the new stage of development after it had been signed. A modern infrastructure was built. Oil equipment was brought to the country. New drilling rigs Dede Gorgud, Istiglal, Gurtulush and the biggest one named after Heydar Aliyev appeared in the industry.
Modern production platforms were built and commissioned on offshore fields in cooperation with leading energy companies of the world. Strong operational infrastructure, which heart is the Sangachal terminal, was built. New export pipelines were constructed.
Rapid economic development, implementation of big infrastructure, energy and transport projects changed the situation in the region. New power plants and gas units were built in the country. The construction of highways and other infrastructure is underway.
Success gained by Azerbaijan’s oil industry over the past years is the result of the new oil strategy.
The main export oil pipeline Baku-Tbilisi-Ceyhan and Baku-Tbilisi-Erzurum gas pipeline, have once again drawn attention of the world to Azerbaijan which for many centuries was famous as the “Black gold land”. The commissioning of new pipelines, an integral part of the new oil strategy, as well as development of the Shah Deniz gas condensate field which began playing an exceptional role in the energy security of Azerbaijan, countries of the region and Europe made the political and economic positions much stronger in the world.
SOCAR started implementing a special gas program in order to meet growing gas consumption needs of the population and industrial enterprises of the country. Huge scope of work was carried out within a short period of time. New gas wells were drilled. New gas pipelines were laid within the internal network. Over 90% of population (except for lands occupied by the Armenian military forces) is regularly supplied with gas.
A total of 345mln tonnes of oil has been produced since the launch of oil production at Azeri-Chyrag-Guneshli fields (since 1997). Over the past 9 years the Ceyhan terminal shipped 2500 tankers loaded with oil produced at this field. 54.4 bcm of gas and 14 mln tonnes of condensate were produced at Shah Deniz field over the past years.
Oil-gas contracts of the State Oil Company of Azerbaijan, implemented jointly with the foreign partners, opened the access to the advanced technologies of exploration of reservoirs, development of fields, and led to the emergence of the new generation of oilmen. Nowadays, the oil sector has a talented workforce, big experience and opportunities for reaching high performance figures in global oil production. The work performed by SOCAR shows that the order given by President Ilham Aliyev to turn the State Oil Company into the modern structure of the international level is being fulfilled successfully. The company is determined to gain new success within the framework of the oil strategy of Azerbaijan.
At present, SOCAR is facing such tasks as securing of growth and stability of oil-gas production offshore and onshore, especially at Azeri-Chyrag-Guneshli fields, securing of stability of gas production at Shah Deniz field, intensity of prospecting-exploration work, modernization of oil refining and petrochemical enterprises, meeting of domestic demand at their expense prior to commissioning of the oil-gas processing and petrochemicals complex, creation of modern production chain of oil-gas processing and establishment of chemical products production.
Among priority plans noteworthy is the continuation of investing into foreign projects and active involvement of Azerbaijan in projects on exploration, development and production of oil-gas resources overseas.
Gas production in Azerbaijan will reach 18-20 bcm (injection into formations exclusive) in 2015 and rise up to 40 bcm till 2025. It will increase country’s role in ensuring energy security of the region and Europe.
Oil production at West Chyrag where the budgeted capacity totals 25,000 tonnes of oil and 8 mln cubic meters of gas per day was commenced in January 2014.
In the meantime, oil production was stabilized at such fields as Neft Dashlary, Guneshli and other fields. Recoverable reserves of ACG total 1 bln tonnes of oil and 350 bcm of gas.
Shah Deniz, one of the largest offshore gas fields of the world, with recoverable reserves of at least 1.2 trillion cubic meters of gas and 240 mln tonnes of condensate, is the basis of the Southern Gas Corridor. Gas currently produced within the framework of Shah Deniz-I is being exported to Georgia and Turkey. After the commissioning of the Shah Deniz II, the production on this field, alone, will total over 25 bcm of gas. The final investment decision on the second stage of development of the field was made in December 2013.
Implementation of the Southern Gas Corridor projects, where Shah Deniz gas is the major source of energy resources, will be the second stage of drawing of big investments, this time into the gas sector. “The implementation of the TANAP project has already been commenced. TANAP is the project of the 21st century. “Shah Deniz-II, TANAP and TAP are the biggest infrastructure projects of Europe”, President of Azerbaijan Ilham Aliyev said in April and expressed confidence that the construction of pipelines would be commenced soon. The tenders for the implementation of these projects have already been announced.
These projects were launched as early as 2013. Azerbaijan is demonstrating leadership in implementation of the Southern corridor. “I assume and am fully convinced that this project would never be implemented without our policy, energy policy and brave policy. Azerbaijan is the initiator of these projects and plays a major role. The country assumed all risks. Azerbaijan undertook all financial and technical risks. I am sure that we will implement this project successfully as well, just like we did in all energy projects that we initiated. Baku-Supsa, Baku-Tbilisi-Ceyhan, Baku-Tbilisi-Erzurum oil-gas projects have already become a reality. They have been functioning for many years. Therefore, I am sure that we will be able to implement these big projects as well”, President Ilham Aliyev says.
Implementation of the TANAP project is at stage of preparation for construction. “These three projects will change the energy map of Europe, make Azerbaijan a very important economic and energy partner, and what is more, will keep ensuring the welfare of the Azerbaijani people in the field of solution of economic and financial issues. Implementation of this project will enable us to benefit from gas export at least for 100 years”, President of Azerbaijan Ilham Aliyev said.
Estimated reserves of Absheron field, discovered in 2011, total 350 bcm and 45 mln tonnes of gas condensate. The preparation for the first stage of development of this field is currently carried out.
Designing of the second producing platform meant for 10 wells will be completed in 2014. It will provide an opportunity to conduct broad-scale development of Umid field (200bcm of gas and 40 mln. tonnes of condensate). Since the date of commissioning, Umid field has yielded 491 mln. cubic metres of gas and 84,000 tonnes of condensate.
There are still many unexplored fields in Azerbaijan. Exploration on Shafag-Asiman (jointly with BP), Nakhchivan (jointly with RWE), Zafar, Mashal, Babek and other fields will be continued in Azerbaijan. In particular, to accelerate these operations SOCAR signed a memorandum of understanding with Statoil in 2013 on promising structures Zafar and Mashal. According to this document, coordination of basic commercial principles and terms of the contract on development of these areas will be signed within a year after its signing.
The State Oil Company currently intends to conduct broad-scale development of Bulla-Deniz field in the Azeri sector of the Caspian Sea. Bulla Deniz used to produce about 200,000 cubic meters of gas before and for this reason it was planned to shut it down. However, deep-laying gas formations containing about 20 bcm of gas were revealed after drilling of the exploration well #90. It gave a new breath to Bulla Deniz project. A new producing platform was built. A new drilling rig enabling to develop deep-laying formations and drill to the depth of over 6.5ths metres was purchased. All this work was done in record short time (just 4 months). According to the forecasts, gas production by two platforms will grow up to 2 bcm per year. It means that old fields of Azerbaijan possess a certain potential and SOCAR is actively working over the development projects.
SOCAR which signed 18 PSA with 25 companies representing 15 countries of the world is successfully representing Azerbaijan in the world arena. Nowadays, SOCAR has been awarded ratings by all three rating agencies (Standard&Poor’s, Fitch Ratings, Moody’s) which are recognized by foreign investors. SOCAR issues its Eurobonds in 2012 and 2013. SOCAR is nowadays implementing different projects in foreign countries – Georgia, Turkey, Switzerland, Romania, the UAE, Ukraine and other countries. Opening of foreign representative offices of SOCAR is an indicator of rapid development of the company.
SOCAR is making the largest investments in Turkey. Among them noteworthy are such projects as construction of STAR oil refinery in Turkey, development of Petkim Holding and other investment projects. SOCAR, as a main shareholder of Petkim, is controlling about 30% of the petrochemical market in Turkey. Construction of the new oil refinery has been commenced in Turkey in order to supply petrochemical complex of Petkim with raw materials. The issues concerning the sources of financing for this project have been solved. Along with it, Petlim Company (subsidiary of Petkim) commenced construction and reconstruction of the biggest and deepest container port in Turkey. In the meantime, preparatory work for construction of a new wind farm is carried out in order to improve power supply to petrochemical complex of Petkim.
Apart from this, SOCAR Turkey LNG received a 30-year license for purchase-sale of LNG in Turkey. The company also obtained a right for importing and exporting liquefied gas. SOCAR is currently the largest foreign investor into the economy of Turkey.
A phenomenal increase in demand for petrol has now overwhelmed the domestic market. It is necessary to increase oil refining volumes in order to meet the growing demand in Azerbaijan. It can be done at the expense of radical modernization of existing and construction of new oil refineries. Therefore, the work on acceleration of construction of the new petrochemical complex at 60-kilometer distance from Baku on the frontier of the Garadagh and Absheron districts is underway. Gas processing and petrochemical plants will be erected at initial stage. After that, a new oil refinery will come on stream in the area of the complex, approx by 2023.
In this regard, the service life of existing oil refineries will be prolonged. There is a task to produce petrol there in accordance with standards above Euro-4. For this reason, the modernization of the Heydar Aliyev oil refinery has been commenced.
Owing to the Contract of the Century, Azerbaijan turned into a serious player in the international arena. The country is independent and self-reliant in the full senses of this word. The economy is developing, all scheduled social, cultural programs including infrastructure projects are being implemented. Azerbaijan plays an important role in international projects as one of the guarantors of energy security. Today SOCAR is the world class company promoting interests of Azerbaijan far beyond the country.
