Heydar Aliyev′s Oil Strategy

Oil production of Azerbaijan has an old and rich history. It is proved by facts that thousand years before our century oil was produced by using elementary methods and transported to various countries by caravan routes. Industrial oil production, refining, transportation of oil by tankers, railway, pipes, operation of oilfields in an open sea and a deep part of the sea were founded in Azerbaijan. Baku oil workers were always known as generators of numerous ideas in the field of oil, gas exploration, production, refining and transportation, demonstrating unparalleled devotion applied the most progressive innovations in production. However, it is also known that in Soviet period, especially on the eve of the II World War and in subsequent years oil industry of Azerbaijan lost the first place in technical development parameters, gradually lagged behind in comparison with other countries of the world which produce oil. So, what did happen in next years? Which historical role did Heydar Aliyev, the common national leader play in modernization of oil industry?

Heydar Aliyev coming to lead the government first in 1969, set as his duty to gain back previous fame of oil industry that played decisive role in national economics, effectively using the available natural and intellectual potential to achieve dynamic development of this sector. Heydar Aliyev demonstrating farsightedness, concentrated several establishments which provide development perspectives of oil industry – scientific-research institutes, production unions, significant strategic institutions in Baku. The aim was modernization of oil economics and to turn our republic again to one of the big oil centers.  By the leadership of common national leader who predicted that the future development of oil industry would be connected with offshore oil production started large scale activity in this direction.

As it was known, till 1970 technical means used in Caspian Sea made it possible to work just till the 40 m depth of the sea. Perspective structures in such depth in Azerbaijani sector of Caspian Sea were fully explored. Therefore, first of all were purchased floating “Khazar” type drilling installations that made it possible to carry out drilling in 70 m depth of the sea. Taken measures soon resulted in opening of “Bahar” and “Bulla-deniz” fields.

It is happiness of our people that Azerbaijan has great oil and gas wealth and this is the most significant factor for good life of our people and development of our people in future.

(Heydar Aliyev)

Common national leader of our people later set the task to work in 200 m depth and more. Great political figure achieved his goal on account of his determination and will. In 1970-1980s bringing “Self” type modern floating drilling installation to our republic made it possible to explore rich oil and gas fields. “Self” type installations for a long time served Azerbaijan and during independence period played a principles role in establishment of such much more modern facilities as “Dede Qorqud”, “Istiglal”. While talking about activities of common national leader Heydar Aliyev in modernization of oil industry of Azerbaijan, construction of Deep Water Jacket Plant should especially be noted. Getting permission for establishment of a plant which had no analogue in the world and considered for construction of platforms in offshore fields explored one after another (first planned to be constructed in Astrakhan), allocation of a great amount from budget of Soviet Union for this purpose, delivery of industrial giant established in 1978 since 1984 were possible at the result of political wisdom, his initiative and adherence to principles. It is not a coincidence that this plant which carries properly the name of common national leader serves economic strengthening of our independent state. Really the role of Baku Deep Water Jacket Plant named after Heydar Aliyev in realization of global energy projects in Azerbaijan is undeniable.

After grandiose returning to power in Azerbaijan Heydar Aliyev started to implement the very rare project in the world history. This was Baku-Ceyhan oil pipe project which is included in history as a “Contract of the Century”.  Still in summer of 1993 Heydar Aliyev determined the main strategic directions of revival of economics of Azerbaijan.

He farsightedly carried out determined actions in order to realize the most courageous plan that established the base for economic development of our country, for country's prosperity, which served at the same time its sovereignty and independence, Baku-Ceyhan oil pipe which will make possible to transport Caspian Oil to the international market. However, negotiations with the well-known oil companies of the foreign countries were not easy. Several countries which do not want to transport Caspian oil to international market tried to impede realization of Heydar Aliyev′s plan.

Notwithstanding all these, Heydar Aliyev was able to persuade heads of most of the leading oil companies in that the issue of transportation of Caspian oil to the world′s market is real. At the result, on September 20, 1994 an event happened in the history of the world that can only be compared with establishment of Suez Canal. In Gulustan palace Contract of the century was signed by and between “Pennzoil”, “AMOCO”, “Unacoil”, “McDermott” of USA, “BP” of Great Britain, “Statoil” of Norway, “TPAO” of Turkey and “Delta” of Saudi Arabia and Azerbaijan. According to the contract oil to be produced from “Azeri”, “Chirag”, “Guneshli” fields should be transported to the world market through Baku-Ceyhan pipe. But forces that were against realization of the pipe were not sleeping. They organized death of Afiyaddin Jalilov who was the first deputy of chairman of Milli Mejlis and Shamsi Rahimov, a chief of special department at that time.

On October hostile forces rebelled by support of Prime Minister Surat Huseynov to impede implementation of the Contract of century. But, Heydar Aliyev prevented the rebel with his determined actions. 2-3 years after the contract of the century Baku-Novorossiysk and Baku-Supsa pipes started their function that makes it possible to transport the oil of Azerbaijan to the world market. So, signing of the Contract of century, the masterpiece of Heydar Aliyev resulted in economic prosperity, revival of the Azerbaijani people. In a short period of time investment in the amount of billions of dollars was made in economy of the country and Azerbaijani people will for a long time be benefited from a product of greatness of Heydar Aliyev, Baku-Ceyhan.

Oil and gas resources operation in Azerbaijani sector of Caspian Sea is expanding year by year and at the result of it, Azerbaijan fully ensured its energy safety. The share of the country in energy supply of the world and strategic importance is increased. At the same time in connection with expansion of gas operation in Shahdaniz field, Azerbaijan along with meeting its domestic needs, gained a possibility to export this gas to the international markets. On account of activity of gas transport infrastructure, especially Baku-Tbilisi-Erzurum gas pipeline Azerbaijan became one of the significant gas exporter and global energy safety guarantor of the West.

Under condition of successful realization of National Oil Strategy operation of hydrocarbon resources together with international companies and export is getting expanded year by year and at the result of it currency earnings of our state is rapidly getting increased. Azerbaijan stands in the first place for the rate of economic growth in the world and is the participant of important regional and international projects. At the result of integration to the world economic system in the field of oil revenues management, a path was opened for application of the best practices in economics. In this respect, as a logical continuation of oil strategy with the purpose of collection of oil revenues of Azerbaijan and their purposeful use in 1999 by the order of the common national leader Heydar Aliyev State Oil Fund was established. By establishment of Oil Fund was provided fair division of oil wealth among future generations, their effective and purposeful management.

When was established the amount of its assets was 271 billion USD and currently assets of State Oil Fund is more than 10 milliard USD and year by year this amount will be increased. It should be estimated as a successful result of realization of national oil strategy.

On account of increasing financial capacity of the state, it became possible to finance the important investment, as well as regional programs and infrastructure projects in the country. In recent years various infrastructure projects are being implemented, construction of educational, social and other objects are successfully continue in Baku city and all regions of the country within a frame of state programs and events carried out under leadership of Mr. Ilham Aliyev, the president of the Republic of Azerbaijan. Important activities are carried out in order to improve the quality of life and social situation of the people, solution of social problems, decrease of poverty and incomes of the people are being increased.

At the result of increase of financial incomes of the people, suitable opportunity was created to carry out purposeful activities in direction of development of non-oil sector. As a priority of economic course of the president Ilham Aliyev today an attention is also given to development of non-oil sector along with oil sector in Azerbaijan. For this purpose, on account of increased oil revenues and funds of Oil Fund significant infrastructure and social projects are being financed in the country and the role of State Oil Fund in stimulation of economic development of the country, financing strategic state programs and projects, as well as provision of investment in regions is getting increased year by year.

At the result of successful implementation of infrastructure projects and regional development programs a strong base for economic development of our country is being formed. In each region of Azerbaijan a new, modern infrastructure is established, power stations are constructed and gas and water pipes and roads are constructed. Purposeful events in direction of renewal of infrastructure and its development are the important part of social measures for people's comfort, their prosperous life.

On account of increased oil revenues first of all numerous actions are taken in the field of social policy, as well as in direction of improvement of social welfare of people with low income, refugees and internally displaced people and the first funds from the State Fund will thoroughly settle down the problem relating water supply of Baku among the projects financed by means of these measures. Construction of water channel in Baku city from Oghuz-Gazakh area and restoration of Samur-Absheron melioration system are the important projects among these projects and realization of these projects are accepted as logical continuation of oil strategy. So, revenues made from export of oil through Baku-Tbilisi-Ceyhan the main export pipeline that will ensure export of oil are directed to implementation of water and other infrastructure projects and in suc a manner oil revenues are spent on improving the life of the people.

At the same time, on account of oil revenues today, significant measures are taken to increase staff potential of the country. As one of these measures, at the result of realization of State Program on study of Azerbaijani youth in foreign countries in 2007-2015 approved by the president of the Republic of Azerbaijan Ilham Aliyev financed on account of funds of State Oil Fund, there will be an opportunity for establishment of staff potential that meets modern requirements in our country, increase of education level of the youth and to reach international level. Financing this program on account of funds of State Oil Fund is a strategic step taken towards realization of an idea “turning black gold into human capital”.

As a result of national oil strategy there is an opportunity for Azerbaijan to be known as a leader state of the region, as well as one of the leading participants of regional and global projects. Today, the basis of all economic success achieved by our country is the national oil strategy, the first famous page and the basis of this strategy is the “Contract of the century”.  In this respect, we can with confidence say that on the basis of it welfare of our people will be improved.

General Director of “Azpetrol LTD” LLC
Jeyhun Ahmad Mammadov