History of the Baku Oil Industry. Part 41

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 Agakishiev "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.

The historical analysis of the situation in Azerbaijani oil and gasindustry in the last years before the dissolution of the USSR allows to make the following conclusions:

1. Azerbaijan had a huge complex Soyuzneftemash (Azneftemash) that united 14 plants producing machines for oil sector, engineering bureau and two research institutes. This complex produced 70% of all the oil machinery in the USSR. The machines were exported to 25 countries. Azenftemash was the main supplied of the equipment for all the oilfields in the USSR.

2. Baku had the world known Azerbaijani Oil Institute.  Its graduates were among the elite of oil sector on the level of Azerbaijani republic and the USSR and were the expert core  of the big oil companies in the 1990s.  Nowadays some of them are top-managers of the oil corporations on the post-Soviet space.

3. The oil extraction on the Apsheron peninsula, that from the late 19th century was one of the main world oases of black gold, continued throughout the 20th century. However, after the World War II the volume of extraction declined due to the breaks in the technological
cycle and the lack of the necessary equipment. The main reason of this decline is the decrease in the oil resources on the land and the growth of the expenditures to extract it. According to some oil specialists, the old drills are still full for about one third. The insufficient financing was the main hindrance to develop the remaining oil on Apsheron peninsula. This created the need for cooperating with foreign companies that had the necessary technology to extract the remaining oil.

4. In 1949 Azerbaijani oil specialists for the first time in the world started extracting oil from the sea bottom.  Special oil highways and the entire town Oil Stones were built in the sea. Later Soviet engineers created floating stations to extract oil. The explorations were particularly intensive in the 1980s-1990s in the Azerbaijani sector of the Caspian sea. In 1970s-1980s  the oilfields Chirag, Azeri and Gyuneshli were discovered, but the USSR had no technology to develop them. Unfortunately, the USSR yielded to the international corporations working on the Northern Sea.  In the last Soviet years the economy of the USSR was in a deep crisis, and the
risky exploration works could not be financed.  There was also no political willingness to do it because of the abundant Siberian reserves of oil and gas. Therefore Azerbaijan faced the objective necessity to cooperate with foreign corporations in the extracting carbohydrates from the bottom of the Caspian Sea. This was neither the expression of separatism nor the anti-Russian move of the independent Azerbaijan. It was then when the leadership of the republics started the negotiations with Amoco, British Petroleum and other foreign companies about the development of the Caspian oil resources. 

5. From the mid-1980s, in the situation of the all-country economic and political crisis the lack of financing resulted in the drastic decrease in already low volumes of carbohydrates extraction in Azerbaijan.  The lack of gas was particularly perceivable in the rural areas of the republic that got used to the comfortable level in the Soviet times. In order to meet the demands for gas in Transcaucasia, in 1990 the USSR started purchasing gas in Iran. However, the decline in carbohydrates extraction, dependence on the other suppliers (Iran, Turkmenistan, Russia), the growth of gas prises and the ineffective policy turned the lack of gas into a "Achilles heel" of the Azerbaijani economy.  This meant the problems with heating and electricity, cutting down of forests, emigration and the decline in economic life in some regions of the republic.

6. The integration of the countries from the Caspian regions in the oil and gas sphere started already in the Soviet times.