Azerbaijan is one of the world’s oldest oil producers with the Nobel family at the front of development in the 1880s. The country remained a major producer in the Soviet era, but the discoveries in Western Siberia reduced Moscow’s interest. Production declined to 200,000 b/d in early 1990s when the government began negotiations with international oil companies. The contract of the century for the Azeri-Chirag-Gunashli fields in 1994 led to new investments and fast growing production.
The Aliyev family has dominated the political scene for more than 30 years. Heydar Aliyev was the leader during the Communist era in the 1980s and President from 1993 to 2003. His son, Ilham Aliyev elected after his father’s death and was re-elected for a second five year terms in 2008.
Azeri-Chirag-Gunashli field is the backbone of the Azeri economy. The field’s estimated reserves are at least 5.4 billion barrels. The ACG partners would like to extend the PSA beyond 2024. Statoil is one of the partners. Oil production may reach one million barrels per day and is exported mainly through the BTC system to Ceyhan in Turkey.
Azerbaijan believes it is on the verge of a brand new era in the development of its natural gas resources. The expansion of its giant Shah Deniz field may be the first of several gas projects in the years to come, fields like Umid, Absheron, Shafag/Asiman, Nakhichevan and deep levels of Azeri-Chirag. The Shah Deniz partners are aiming for production from 2016 from phase 2. Gas from the first phase is delivered to Turkey and Georgia through the South Caucasus Pipeline system. Gas production could increase to 35-40 billion cubic meters annually. Azerbaijan is attracting potential gas buyers from all parts of Europe.
Azerbaijan and the oil companies are looking at three different routes for delivering gas to Europe from the field; Nabucco, The interconnection Turkey-Greece-Italy (ITGI) and the The Trans-Adriatic pipeline (TAP) where Statoil is a shareholder.
Statoil’s activities are among the biggest companies in Azerbaijan with interests in the Azeri-Chirag-Gunashli field and the Shah Deniz field where it has served as the commercial operator.
Azerbaijan established its oil fund December 1999 by Presidential decree. The fund functions as a saving fund and stabilization fund. Azerbaijan was the first country to implement the Extractive Industry’s Transparency Initiative (EITI).
Socar is the national oil company. The company has become more assertive in recent years and is now playing a leading role in the Shah Deniz negotiations and as a partner in the large projects in the Caspian Sea. Socar is a major investor in Georgia and is partnering with Turkish firms for building refining and petrochemical industries in Turkey.
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