History of the Baku Oil Industry. Part 66

After the discovery of oil fields, Baku became a special place, where various economic and political interests of international coalitions, industrial clans and leaders were concentrated and clashed. VK begins publishing chapters from the book by Ismail Agakishiyev "History of the Baku Oil Industry and the Second Oil Boom (second half of the 19th century - beginning of the 20thcentury)" The book presents a historical analysis of the emergence and current state of the Azerbaijani oil industry.

There were two points of view on the calculation of an optimal production of oil and gas in Azerbaijan. The first one provides for an intensive increase in hydrocarbon production, approximately up to about 60 million tons of oil per year. According to this scenario, in 2010-2015 Azerbaijan should reach the highest level of hydrocarbon production, which should be followed by a 4-5 years long production peak, after which the country would start to gradually decrease oil and gas production. Another approach assumes that after Azerbaijan reaches the production level of about 25 million tons a year, the country will stay at this level of production for the next 10-15 years. 4 It was planned to increase oil production to 10 million tons by 2000 with a subsequent increase of 3-5 million tons. According to these calculations, peak production would fall in the period from 2003-2014. The annual production level was supposed to reach the level of 34-35 million tons in 2006-2010. In the absence of new deposits, the work under the contract was expected to be accomplished by 2025. The first option provides for a quick settlement with creditors. According to experts, Azerbaijan can earn $100 billion on the oil market in case of favorable conditions. In addition, the country would have a 25% increase in taxes based on revenues.

In 2005 the Chirag and Central Azeri fields produced 261 thousand barrels of oil per day, or 50% more than expected. In the same year, oil production in the western part of the Azeri deposit began four months ahead of schedule. 1 The total oil production of the AIOC during 1997-2005 amounted to 371 million barrels of oil. In February 2005 the Central Azeri field began to produce oil. In March of the same year the first exports of the oil from this field took place. In the course of 2005, 42,800,000 barrels or 6 million tons of oil was produced at the Central Azeri field.

In December 2005, the development of the West Azeri field and the construction of the Gyuneshli platform began. 4 In 2005, the deep-water field ACG remained the largest complex in the Azerbaijani part of the Caspian Sea, and by 2009 it was planned to produce 1 million barrels daily.

Oil production at the ACG was organized in phases. The first phase was sanctioned in August 2001, the second in September 2002, and the third in September 2004. The sanctioning of the third phase meant large-scale development of all three fields. Two promising structures were built at the Azeri field. Reconnaissance works began in the eastern part of the Azeri field. The renewable oil reserve of the ACG amounted to 5.4 billion barrels of oil in 2004. In 2004, full-scale development of the ACG was taking place. In the same year, the average daily production of oil at the Chirag field amounted to 132,200 barrels, which was more than the originally planned 125 thousand barrels per day. In 2004, British Petroleum together with its partners spent $2.5 billion in capital expenditures. Hopes of overcoming the economic collapse had not failed.

The flow of investments into the country began to increase with each year. According to the Statistical Committee, until 2000, that is in the course of 5 years, $5 billion was invested in the Azerbaijani economy, of which 55.9% was directed at the oil sector.

In 2005 the growth of Azerbaijan's GDP amounted to 26.4%. The increase in oil exports became the main factor in the GDP growth. Another reason for the sharp increase was unprecedentedly high oil prices on the world market during 2005. Oil exports became a major factor in the growth of GDP in Azerbaijan. The growth of industrial production even outstripped GDP (in January 2006, the increase rate amounted to 40.2% compared to the same period in 2005). The GDP growth led to a sharp increase in the incomes of Azerbaijani citizens, who began to actively invest in the construction of new buildings. The government managed to increase the money allocated to  healthcare (by 44%) and education (by25%).

The Interstate Statistical Committee of the CIS reported that in 2005 Azerbaijan had the best results of GDP growth among the CIS countries.1 If, at the beginning of 2003, the total volume of investments in the oil sector amounted to $6.7 billion, on July 1st 2005 this figure reached $18.8 billion, of which more than $13.1 billion came from the Azeri-Chirag-Guneshli field. As a result of

the realization of the "Contract of the Century" a decline in the oil production in the country was prevented. Since 1998 production has only continued to grow. While 15.4 million tons of oil were produced in 2003, in 2005 already 22.2 million tons of oil were produced. The 23.5 million tons of oil produced in Azerbaijan in 1941 remained the record figure in the more than a century ofoil production in the country. 2 In 2006, the GDP of Azerbaijan amounted to 17.7 billion manats (19.85 billion dollars) which is 34.5% more than in 2005. In 2005 GDP per capita amounted to $2,373 dollars against $1,514 dollars in 2005.

The gross industrial output in 2006 amounted to 14.5 billion manats (16.2 billion dollars) and increased by 36.6% since 2005. The share of the public sector in the GDP is 23.8% and of the non-state sector - 76.2%. The year 2006 will be especially remembered in the history of Azerbaijan due to the real energy breakthrough. A decade of efforts to develop new energy transport corridors was crowned with great success.

In June 2006 the Baku-Tbilisi-Ceyhan pipeline was launched for use. The South Caucasian gas pipeline connecting Baku, Tbilisi and Erzurum started its work in the autumn of 2006. These routes did not only provide energy security for Azerbaijan, they provided energy security for the whole of Europe. Oil produced at the  Azerbaijani fields Azeri, Chirag and Guneshli is successfully exported to the Turkish Mediterranean port of Ceyhan. The first gas from Shah Deniz gas went through only in December 2006, while gas from  Azeri-Chirag-Guneshli  went to Georgia via SCP pipeline even earlier. When  the extraction of Shah Deniz gas started, Azerbaijan's energy security was ensured.