The role of petrolium in the development of Azerbaijan

There are several stages in the development history of Azerbaijan oil industry, and each stage had specific successes.

The first stage began with the extraction of oil from the wells drilled with the mechanical method in 1847 and lasted till 1920.

In 1859, the first oil refenery plant (unit) was built in Baku. In 1863, Javad Malikov built Baku kerosene plant and used refrigerators in the oil processing for the first time in the world. 15 oil refinery unit had been operating in 1867.

As the technology of well drilling with the mechanical method developed, several new oil fields (Binegedi, Pirallahi, Surakhani, etc) were discovered, oil production, processing and sail of oil were established.

As a result, Azerbaijan national bourgeoisie was formed, Baku became one of the industrial centers of the world.

In 1871, Balakhani-Sabunchu-Ramani field in the Absheron peninsula was developed the industrial method for the first time.

In that period, oil was discovered in the unused lands under state control, and were rented for 24 years for oil development. The Lessee had the right to export the oil produced and to define its sales price.

The pure national investment to the oil industry was only 4% in the 70s of the XIX century. The priced capital together with the national one was up to 10%. However, in the late XIX century 49 entrepreneurs (24,8%) out of 167 in the oil industry were Azerbaijanis. National “Oil millionaires” had a great role in the development of oil industry. The first joint-stock oil company in Baku – “Baku oil society” was founded in 1874, Robert Nobel, who is Swedish by nationality, came to Baku and witnessed economic growth connected with oil. Nobel Brothers founded an oil company on oil production and processing in Baku in 1876. Several oil fields, oil refineries, the first of transportation tanker in the Caspian, barges, railways, hotels, etc belonged to the Nobel Brothers at that time. After the excise tax for oil products was concelled, new oil refineries were built and put into operation.

The first 12 km oil pipeline in Russia, which connected Balakhani field with the oil refinery in Baku, was built in 1878. In 1898, the total length of oil pipelines that connected the oil fields and Baku oil refineries, was 230 km. 1 million tons of oil were transported via the pipelines.

In 1883, Baku-Batumi railway was put into operation and it was of great importance for axporting oil and oil products to the European countries.

11 million tons of oil were produced in Azerbaijan in 1901, and itcomprised 50% of oil production in the world. In 1880, well-known chemist D.I.Mendeleyev propesed the construction of Baku-Batum oil pipeline for exporting Baku oil of the world market. Te pipeline was 833 km long, and 200 mm in diameter, the construction works began in 1897 and were completed in 1907.

109 joint-stock companies operated in Azerbaijan till the nationalization of oil industry. 72 belonged to the Russian capital (240 million Rubles), 37 to the English capital (100 million pound sterling). The capital Nobel Brothers invested was 30 million “Hadji-Cheleken” oil company, which belonged to Isa bekh Hadjinski – one of the richest oil entrepreneurs and philan thropests, comprised 1.25 million pound-sterling. On the eve of nationalization of oil industry, 270 oil production enterprices 49 small and medium firmes dealing with oil well drilling, more than 100 mechanical workshops, repair workshops, etc were operating in Azerbaijan.

The second stage began after the nationalization of oil industry in Azerbaijan and covered the period of discovery of “Oil Rocks” in blue waters in 1949. In the period of war in 1941-1945, oil production decreased to 11.1 million tons in Azerbaijan as oil units and oil specialist were moved to the eastern regions of the USSR (Tatarstan, Turkmanistan, Bashkortoston, etc).

The 70-80s of XX century is remembered with great success in Azerbaijan oil industry, has been the years of strengthening material-technical base of the industry.

Those years are characterised with the development of deeper offshore fields by Azerbaijani oilmen. In that period, oil industry strengthened and great oil infreastructure was established as a result of purposeful measures. Drilling rigs for the development of offshore fields, special vessels technology, and equipment for construction works in the sea were brought to the country, an enormous strategical production unit like Basku Deep Water Jacket Plant was established. Besides, oil processing, oil-chemistry industry, and oil machine-building industry developed rapidly.

Since the early 70s, planned geological-exploration works has been conducted in the Caspian.

In the first years of independence, the increase in oil and gas production was viewed as a means of eluminating economic and social challenges in the country.

Discussions and talks on the oil contract was actually re-started in 1994, and after long-term discussions Azerbaijan achieved the contract terms which was coined with the interests of the country.

The oil contract signed with the western oil companies on September 20, 1994 opened a glorious page in the new history of independent Azerbaijan republic. The contract, later rightfully called “Contract of the Century”, was engraved to the oil chronicle of independent Azerbaijan forever.

In the past period, Azerbaijan signed 27 oil contracts with oil companies of foreign countries in the grandiose palaces of the greatest world capitals – Washington, Moscow, London, and Paris Today, 30 oil companies from 14 world countries participate in the realization of the contracts.

In the contracts, 60 billions USD are intended to be invested to the oil-gas industry in Azerbaijan, 4.5 billions has already been invested.

Currently, hydrocarbon resources of all categories in Azerbaijan are more than 4 billion tons and it makes Azerbaijan one of the richest oil regions.

One of the main directions of oil strategy is the transportation of Azerbaijan oil to the world market.

Intense works have been conducted for the realization of strategically important Baku-Tbilisi-Jeyhan main export pipeline with the purpose of defending Azerbaijan’s interests in that field, development of large-scale international economic co-operation, transportation of oil to the world market as a result of increase in the oil production in the region, and the talks in that direction were successful. Thus, important intergovernmental contracts were signed on the transportation of Azerbaijan oil to Turkey.

As a result of oil strategy, Azerbaijan is one of the oil centers of the world and a country which first used the enormous energy potential in the Caspian and formed a new economic model in the development of the region, which plays an important role in the Caspian and Caucasus region in strengthening political and trade relations between Europe and Asia, in the realization of INOGATE, TRACECA and other enormous projects.