‘Contract of Century’ revived Baku’s reputation as world oil center: Azerbaijan’s energy minister

Interfax Azerbaijan: On Sept. 20,  Azerbaijan will mark 15th anniversary of the ‘Contract of the Century’. As a direct participant in those events, can you tell how the idea of signing this contract appeared? How long have you been preparing for this event? Was it difficult to convince foreign investors of the attractiveness of the project and its profitability?

Natiq Aliyev: The idea of signing a contract to develop the Azeri-Chirag-Gunashli fields was predetermined by time because Azerbaijan who gained its independence had to build its doctrine of economic development. All were convinced that industry, gigantic industrial city like Sumgait were not working. The machine building was based on markets of the former Soviet Union and the markets had disappeared.

Azerbaijan was in an economic blockade and financial situation was not the best, if not disastrous. And the only thing that could be involved in the mechanism of further development of the economy was our oil economy and its resources.

There was a need for a wise decision and courage as Azerbaijan was not in the best condition.

In this sense, Azerbaijan was lucky because its leader appeared. I remember very well the years 1991-93. At that time people waited for their savior, a hero who will save the country from collapse, split and lawlessness. Heydar Aliyev who possessed all the necessary qualities, above all, wisdom, large public and political experience came to rescue.

Q: What Azerbaijan has gained from realization of the ‘Contract of the Century’?

A: ‘Contract of the Century’ revived former glory of the oil center of the world which Baku had always enjoyed. It created our present and determined future. We see how Baku changes and social projects are implemented. Oil Fund was set up for our contemporaries and for future generations.

This contract is designed for 30 years and we have already passed the halfway. If you compare present-day Baku and Azerbaijan with that of 15 years ago, there is world of difference.

Azerbaijan did not have foreign exchange reserves in 1994 and today we are talking about billions of dollars. Calculations show that only the Oil Fund will receive about $200 billion. But I think we will receive more. This is just a pessimistic assessment by BP.

Capital investments have already reached $24 billion. Maybe we will bid farewell with BP, thank it for its work, but the pipeline, platforms, underground storage facilities, drilling rigs and our huge terminal will remain. Such terminal has no precedent in the former Soviet Union. It is one of the best in the world.

We have upgraded the fleet. So when asked what the contract gave, you can spend hours talking and you can simply say - look around.

I believe that the contract in the political, economic and social terms gave a lot. It restored our dignity and it determined lives of our future generations to the many, many years. It changed face of our society, young people, people who work in this area and other areas. When you say Baku is developing, roads, hospitals, stadiums, hotels are built, you have to remember - all this was given impetus by the ‘Contract of the Century.’

Q: What new plans and projects related to the further development of these fields Azerbaijan has?

A: I cite the Oil Rocks as example. They were launched in 1949 for a period of 25 years and have been operated so far. This is the same case with ACG. In 1994, recoverable resources of the field were estimated at 511 million tons, but now it is estimated at 925 million tons, and by some estimations more than 1 billion tons. If the whole concept was built to extract 511 million tons in 30 years, then you think how much more oil will remain in the fields which will be extracted by our future generation.

Second, when we concluded a contract, it envisaged oil extraction from the Svita Pereriva. Everything below this layer is subject of new negotiations. Today, geological prospecting shows that there are large reserves of natural gas and condensate below the Svita Pereriva. They are estimated at hundreds of billions of cubic meters of gas and tens of millions tons of condensate. Naturally, there is a need to invite foreign companies, to negotiate with them and to seek better conditions. Someone will say again that we could do it ourselves, but we need to find reasonable solutions. We can go to the form of service contracts which is very popular around the world today. National oil companies are becoming stronger and stronger.

Q: Can we consider the construction of the Baku-Tbilisi-Ceyhan to be consequence of successful implementation of the ‘Contract of the Century’?

A: Naturally, if there would be no contract, there would be no BTC. Pipeline itself solves nothing. There must be resources, contracts for oil which are used for the implementation of such giants as the BTC. I believe that everything is interconnected. Otherwise, there would be no BTC, there would no development of the ACG, there would be the ACG and no BTC.

Of course, oil pipeline is projected to tens of years and development not only ACG, but also whole oil production in Azerbaijan is very important. Our oil industry should strive to ensure that peak oil production was stable as long as possible in time so that it will ensure BTC’s operation. Otherwise we will have to seek other resources of third countries. But I do not think we will have to experience it. Realization of ACG provides us with oil production for many years, if not tens of years.

Second, I believe that further exploration of our offshore fields will give us additional volumes of oil. Third, today there is a tendency, when the Central Asian countries have sought and openly talk about diversifying energy export routes. I think one of them is the most successful and reliable. This is use of potential established in Azerbaijan, in particular the Baku-Tbilisi-Ceyhan oil pipeline, Baku-Tbilisi-Erzurum gas pipeline, and their further expansion. That is also Baku-Supsa, which can be expanded for access to the Black Sea market.

It is even Baku-Novorossiysk as all routes depending on situation and markets have an advantage today. Therefore, their fate will be linked to overall development and in the world, and in the region, as well as to need of West for energy resources and how strongly they would react to the ideas of diversification of energy sources. Now extensive discussions underway on these issue and much will depend on development of these processes.  

/Interfax Azerbaijan/