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 vice-president of the company, Ravil Maganov, admitted in 1999 that the list of the new contracts in the Azerbaijani sector of the Caspian included an agreement to rehabilitate and develop the Govsany-Zykh offshore block. The share of each side was supposed to be 50%, the term 25 years and the volume of investment 250-300 million dollars. The oil structures of Govsany and Zykh are located south of the Absheron peninsula, their common surface amounts to 128 sq. km and the reserve of extractable oil is estimated at 33.3 million tons. The project was aimed at the internal market. According to the plan, the extracted oil was supposed to be processed at the Baku oil-processing plant and sold at LUKOIL gas stations in Baku. The Govsany-Zykh block had been developed by Azerbaijan for 70 years and the remaining oil reserves were estimated at 27 million tons. 4 Two deposits had 12 drills. 5 The agreement on Govsany-Zykh was signed in June 2000 by SOCAR, LUKOIL Overseas Absheron Ltd. and the SOCAR-affiliated ANK.
It was among the documents received by Vladimir Putin when he visited
Azerbaijan. One month after the presidential decree entered into force, LUKOIL was supposed to pay a one-million-dollar bonus to Azerbaijan. According to the agreement, the company had to pay the Azerbaijani state 2.5 million dollars for each 100 million barrels of oil from the Govsany-Zykh fields.
The 25-year contract stipulated equal shares for LUKOIL and SOCAR. In six years LUKOIL invested $250 million to develop the fields. By 2007 annual extraction had reached 600 thousand tons, 10 times more than in 2000.
In 3 years LUKOIL was supposed to complete exploration and the drilling of the two evaluating drills. With each new contract LUKOIL became more and more cautious about investing. The assessment of hydrocarbon reserves was postponed to the stage of seismic expertise both off- and onshore. This was the first large-scale investment contract between Russia and Azerbaijan. Alekperov was born in Baku and was familiar with the ecological problems of Absheron, with its long tradition of oil-extraction.
Together with SOCAR he wanted to revive these territories. He had a natural attachment to these lands, as to his home country. Therefore, LUKOIL proposed to SOCAR to increase the contract area from 1287 sq. km to 3037 sq. km. The sides agreed on this enlargement and signed the appropriate agreement in April 2003. In addition, SOCAR gave LUKOIL a part of its share, so the share of the latter reached 80%.
The sea depth in the area of the perspective structure is between 80 and 700 m. The possibility of industrial reserves of hydrocarbons was high.
The start of drilling of the first exploration drill in the D-222 area was planned for the second half of 2004. Evaluating the importance of D-222 deposit for the company, Alekperov noted: “The activation of works in Yalama corresponds to our strategy to concentrate the financial and technological resources of the company on international projects, where the company has the role of operator. With this agreement LUKOIL widens its presence in Azerbaijan, considering the Azerbaijani Republic is one of the strategically-important regions of its activity.”
By 2003 LUKOIL had a noticeable place in world ratings: it had 1.3% of world oil reserves and 2% of oil extraction. It was the second-largest private oil company in terms of oil reserves, 13th in terms of volume of net profit, 20th according to holdings and 13th according to trade volume.
In September, Baku held the “Days of LUKOIL”, where Alekperov noted the historical importance of the company’s participation in the “Contract of the Century”. He explained the withdrawal of LUKOIL from the contract was due to the new strategy in favour of projects where the company was an operator: “I am proud that our company participated in the realization of this project. As you know, in 2003 we decided to sell our share to INPEX. LUKOIL wants to focus on the realization of the projects where it has the role of operator. Nevertheless, the Azerbaijani Republic and the Caspian Sea remain one of the key regions for our activity.”
By 2003 8 prospective structures and 6 deposits had been discovered, with extractable reserves of above 100 million tons of oil and 600 billion cubic meters of gas, according to Vagit Alekperov. The estimated resource potential of the Russian sector of the Caspian is 4.5 billion tons of conditional fuel. 4 This strategy was aimed at getting greater legal and economic possibilities to implement the project to enlarge the development of oil deposits in the Caspian, particularly in the Azerbaijani sector.
