Oil in Azerbaijan has been produced for 150 years
(content privided by the Embassy of Azerbaijan in Washington, DC)

by 1911, half of the world oil was produced in Azerbaijan

In 1994 - 2002 than 22 contracts were signed with 35 large multinational oil companies from 15 countries

According to this contracts in the years to come 60 billion dollars of foreign investment will be invested in oil and gas sector. Being one of the oldest known oil producing regions in the world, Azerbaijan served as the major refining center of Former Soviet Union. After gaining independence in 1991, Azerbaijan entered the new oil era. On September 20, 1994 Azerbaijan signed the "Contract of the Century" with International Consortium of Oil Companies on exploration of Azeri, Chirag and Guneshli (ACG) oil fields, located in the Azerbaijani sector of the Caspian Sea. The contract provides development of oil deposits for the term of 30 years. It created favorable conditions for investments in the petroleum sector and beyond and opened once again the door to the world markets for Azerbaijani oil. In 1997 Azerbaijan acquired early oil from "Chirag" field. Initially it was transported through Baku- Novorossiysk pipeline (northern direction). At the same time Azerbaijan was in the process of construction of Baku -Supsa pipeline in the western direction, which has began operational since April 1999. However, two pipelines were not sufficient for the transportation of existing and potential oil and in November 1999 Azerbaijan, Georgia and Turkey signed an agreement on construction of Main Export Pipeline Baku - Tbilisi -Ceyhan (BTC), which is aimed at bringing rich oil resources of Caspian Sea to the world markets through Mediterranean port Ceyhan . The partner companies involved in the construction of the main pipeline were BP, SOCAR, Unocal, STATOIL, TPAO, ENI, Itochu, Delta Hess, TFE and INPEKS. Azerbaijan has undertaken 25 % of the project finance. BTC pipelinehas beencompleted and put into operation on june 4, 2006. Recent explorations of ACG have shown that deposits of oil which could be developed increased from 4.2 billion barrels to 5.4 billion barrels, which is equaled to 730 million tons. For the rational use of these opportunities the full-scale exploration project was launched in August 2001. This project focuses on the exploration of central part of Azeri field. Oil from this platform will be transported to Sangachal terminal through 187 km sub-water pipeline. To proceed large amounts of oil and gas enlargement of Sangachal terminal is of a great importance. As a result of the implementation of this part of the project development of oil in the platforms Chirag -1 and Markezi Azeri will reach 250 thousand barrels a day by the first quarter of 2005. Next stage of the project will focus on the development of eastern and western areas of Azeri fields, which will complete the exploration of Azeri field. As a result of development of oil in Azeri field will increase to 800 thousand barrels a day (40 million tons a year). The third phase of the development of ACG will come to an end by 2007 and by that date total exploitation only in those three fields will exceed one million barrels a day. In 21-th century the oil recovery in Azerbaijan is forecasted at a rate of 30-50 million tons.

The Shah Deniz partnership announced the major gas condensate discovery in the Azerbaijan sector of the Caspian in July 1999. The results of the preliminary tests suggested a world-class gas condensate resource. Further appraisals were conducted on the deeper pre-Fasila horizons during the Stage 1 pre-drilling programme after the first pre-drill well – SDA-01 discovered an additional gas reservoir below the previously mapped horizons. This layer was further tested through the subsequent pre-drill wells and this has allowed the Shah Deniz partnership to further upgrade the reserves. However, to determine the incremental reserve volumes and production capacity available from those lower sections of the reservoir, BP as operator of the Shah Deniz development project continues the analysis of the data.

The Shah Deniz field lies in water depths between 50 metres and 600 metres, some 70 kilometres south east of Baku. The Shah Deniz PSA was ratified on October 17, 1996.

The parties to the Shah Deniz Production Sharing Agreement (PSA) are: BP (operator – 25,5%), Statoil (25,5%), the State Oil Company of Azerbaijan Republic (SOCAR – 10%), LUKOil (10%), NICO (10%), Total (10%), and TPAO (9%).

The 692km South Caucasus Pipeline has been designed to transport gas from the Shah Deniz field in the Azerbaijan sector of the Caspian Sea, through Georgia and on to the Georgia-Turkey border.

At full capacity, and after additional stages of development, it is envisaged that the pipeline will export up to 16 billion cubic metres a year. At the border the pipeline links up the Turkish-built extension joining SCP to the domestic supply grid at Erzurum. First deliveries of gas to Turkey are scheduled to commence on 30 September 2006.

The Shah Deniz partnership announced the major gas condensate discovery in the Azerbaijan sector of the Caspian in July 1999. The results of the preliminary tests suggested a world-class gas condensate resource. Further appraisals were conducted on the deeper pre-Fasila horizons during the Stage 1 pre-drilling programme after the first pre-drill well – SDA-01 discovered an additional gas reservoir below the previously mapped horizons. This layer was further tested through the subsequent pre-drill wells and this has allowed the Shah Deniz partnership to further upgrade the reserves. However, to determine the incremental reserve volumes and production capacity available from those lower sections of the reservoir, BP as operator of the Shah Deniz development project continues the analysis of the data.

The Shah Deniz field lies in water depths between 50 metres and 600 metres, some 70 kilometres south east of Baku. The Shah Deniz PSA was ratified on October 17, 1996.

The parties to the Shah Deniz Production Sharing Agreement (PSA) are: BP (operator – 25,5%), Statoil (25,5%), the State Oil Company of Azerbaijan Republic (SOCAR – 10%), LUKOil (10%), NICO (10%), Total (10%), and TPAO (9%).

The 692km South Caucasus Pipeline has been designed to transport gas from the Shah Deniz field in the Azerbaijan sector of the Caspian Sea, through Georgia and on to the Georgia-Turkey border.

At full capacity, and after additional stages of development, it is envisaged that the pipeline will export up to 16 billion cubic metres a year. At the border the pipeline links up the Turkish-built extension joining SCP to the domestic supply grid at Erzurum. First deliveries of gas to Turkey are scheduled to commence on 30 September 2006.