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.
The "Chirag 1" platform is located 160 km to the east, and within three years it was planned to drill 24 wells from it. The terminal, gradually erected in Sangachal, covers an area of 225 hectares. The minimum program was designed for 30 months with a budget of 220 million dollars. In May 1996 Heydar Aliyev made an official visit to Norway. The agreement with the prime minister of this country, Gro Harlem Brundtland, the memorandum on cooperation in energy and the agreement on avoidance of double taxation, all concluded by H. Aliyev and N Aliyev, opened up great opportunities for technology exchange. Norway was one of the first countries to recognize Azerbaijan's independence and one of the most active countries supporting the "Contract of the Century." During the visit, the delegation visited the offshore deposits, 240 km from the coast, where it learnt about the newest technology, planned to be delivered in Baku. These deposits were not only distinguished by high technology, but also preserved the environment.
In fulfilling the conditions of the contract, AIOC originally adopted the program MPOR (Minimum Program of Required Works) and the program of early oil production in 1995-1997. This was a crucial point in the contract for foreign investors: monitoring, studying environmental protection, carrying out a three-dimensional seismic filming drilling of the first three exploratory wells, restoring and modernizing supply vessels, crane- transport and pipeline ships, self-lifting and semi-lifting floating drilling rigs, etc. And it was clearly stipulated that, in case of failure to fulfill the programs within the period specified in the document, the foreign companies would automatically lose the right to the contract, and any financing costs invested in the implementation of the project, would be neither reimbursed nor considered in the courts.
On October 9th 1995, at a meeting of AIOC leaders, the budget for project activities was increased and the decision about the production of early oil, according to the contract already in the summer of 1996, was adopted. The company then announced that the first oil, according to the contract, could be expected in mid-September 1996. One reason for the slowdown of operations at sea (according to the AIOC) were frequent winds in the Caspian Sea. In the summer of 1996, AIOC moved the deadline from September 1996 to the more distant future. SOCAR specialists first doubted the reality of the deadline, assumed by the leadership of AIOC. The pace of work did not meet the promised deadline. In response, Vice President of AIOC John Hollas continued to claim that early oil would be produced by August 28th 1997 according to contract, and that all work in preparation for the AIOC's early oil production was on schedule. As expected, the initial lack of drill rigs and the presence of a single rig, "Dede Gorgud", with its tense working schedule led to a slowdown in the work on early oil production. The accident that occurred in early May 1997 while drilling the third well in the contract area made the extension of the completion of the program of exploratory drilling within the "Contract of the Century" inevitable. The losses of AIOC amounted to 3.6 million dollars; however, it received an insurance premium, which confirmed the current level of work organization in the Azerbaijani sector.
The accident required a revision of the budget for drilling three exploratory wells, which, before the accident , was 9.7 million dollars. The accident occurred at a depth of 940 meters. AIOC, hoping to discover more oil, increased the planned depth for drilling. Thanks to the high competence of the Azerbaijani oil workers, AIOC was able to accomplish a great job within 18 months, whereas according to the executives of the foreign companies, this volume of work is typically performed within 30 months. AIOC planned to produce early oil by the end of early September 1997, "if the wind of the Caspian Sea does not disturb it." However, AIOC representatives emphasized that this was not a formally-established date, but their intention.
From a legal point of view, AIOC had no problems as a result of the postponement of the deadline for early oil production. But from a moral point of view, AIOC had violated the "gentleman's agreement" given to SOCAR and the Azerbaijani authorities. The same was said by the Vice President of SOCAR Ilham Aliyev: "Nobody made them say that."
On September 4th 1997 Heydar Aliyev met with AIOC President T. Adams. Adams reassured the President that the AIOC was in the last stage of the early oil project, and practically shifted the production of early oil to the end of September, 1997. By this time, it was also supposed to finish the work at the Sangachal terminal. Still earlier, on February 18th 1997, at a conference in Houston where a meeting of the representatives of 400 companies took place, Ilham Aliyev noted that early oil was expected in August- September 1997.
In late September, the deadline was postponed to November 7th 1997. From summer 1996 to November 1997 the basic part of the planned works was accomplished. Drilling of the first well started in March 1996. The projected depth of the well was 2909 meters. By September 20th 1997, a level of 2859 meters had already been reached. According to local and international specialists, the pace of drilling in the first few months was very high. Slowing down the timing of producing early oil, in general, had a negative impact on the implementation of the contract and dispelled the belief in its profitability. The participants in the contract gradually began to sell their shares and invest money in other projects. In 1996, following the American company "McDermott" (which gave its share to the company "Itochu"),"Pennzoil" sold 5% of "Contract of the Century" out of its 9.8% share to three companies (U.S."Exxon", "Unocal" and Japanese "Itochu"). A company representative, D. Tilley, described the sale as "a very profitable business." Re-selling of shares and ownership changes reduced AIOC's interest in the representatives of the vendor companies, and the replacement of participants led to a loss of time and decrease in intensity of the overall work of the consortium, which was not approved by the contract operator "British Petroleum", the field owner, or the leadership of the Azerbaijani Republic. Therefore it was understandable that Heydar Aliyev , a very serious and responsible person, voiced discontent in speeches and appeals to these companies. Early oil was produced from the "Chirag 1" platform , located 120 km from the coast. All the processing equipment and living quarters were located on the lower and upper decks; the rig with a capacity of up to six thousand meters rises above them. Points of drilling (24 wells) are marked by cylindrical metal constructions, located on the lower deck. The first well produced a thousand tons of oil per day. The oil, cleaned in the separator from the associated gas, water and sand, went into the underwater 176-mile pipeline, extended from the platform to the Sangachal terminal. It squeezed the water out of the pipeline, and, according to the technology, was delivered to the coast in a month.
