Petroleum industry in Azerbaijan
In the 3rd and 4th centuries, merchants moved petroleum from the Apsheron peninsula to distant markets including Iran, Iraq, India, and other countries. Charles Marvin wrote in 1877 that irrefutable proof existed showing oil exports began 2500 years ago from this region where Baku now stands. Travelers like Prisk of Pontus in the 5th century and Abu-Istakhri in the 8th century documented these early trade routes. Marco Polo described a spring near the Georgian border gushing a stream of oil so abundant that a hundred ships could load there at once. He noted the substance was not edible but excellent for burning or as a salve for men and camels suffering from itch or scab. Men traveled long distances to fetch this oil because no other type burned in the neighborhood. An inscription from 1593 in Balaxani commemorated a manually dug well reaching 35 meters deep. The Turkish traveler Evliya Çelebi reported between 1611 and 1683 that the Baku fortress surrounded 500 wells producing white and black acid refined oil. Adam Olearius gave a description of 30 Baku oil wells in 1636, remarking that some were gushers. Engelbert Kaempfer provided the first detailed account of the industry in 1683 while serving as Secretary of the Swedish Embassy to Persia. His notes confirmed natural gas discharges to the surface, describing what he called a flaming steppe occupying territory 88 steps in length and 26 in width.
Haji Kasimbey Mansurbekov began the world's first undersea oil extraction in 1803 from two wells located 18 meters and 30 meters from the coast in Bibi-Heybat bay. These early structures were later destroyed by a strong storm in 1825. In 1846, engineer Nikolay Matveyevich Alekseev used a percussion drill to dig a 21 meter deep well in Bibiheybət, striking oil before Edwin L. Drake struck oil on American soil in 1859. Robert Nobel arrived in Baku in March 1873, purchasing an oil refinery and then buying a large portion of the Balakhani Oil Field in 1875. The Nobel Brothers Petroleum Production Company formed in 1877, followed by Branobel in 1879. They added infrastructure including Russia's first pipeline system completed in 1877, pumping stations, storage depots, railway tank cars, and the first oil tanker named Zoroaster. By 1898, approximately 8 million tons of oil were produced daily, rising to more than half of the world's output by 1901 at 11 million tons. Between 1898 and 1903, British oil firms invested 60 million rubles into the region. Ethnic Armenians reportedly ran almost a third of the region's oil industry by 1900. Three companies held 86% of equity capital on the eve of World War I, controlling 60% of production. Alexander Mantashev owned the third-largest oil company in Baku by 1904, while Calouste Gulbenkian arranged the merger forming Royal Dutch Shell.
After the Bolshevik occupation of Azerbaijan, all oil assets were nationalized and Azneft State company was formed in 1920. Alexander P. Serebrovsky became head of Azneft, soon known as the Soviet Rockefeller. In 1920, only 1800 qualified specialists worked in the Russian oil industry, with 1232 working specifically in Azerbaijan. The Azerbaijan State Oil Academy established that same year trained new specialists through scientific exchanges with US fields in Pennsylvania, Oklahoma, California, and Texas. By 1940, total production reached 23.5 million tons, setting a historical record not broken until 2005. During World War II, Azerbaijan produced 25.4 million tons of oil for the Russian war effort in just one year. A decree of the Supreme Soviet in February 1942 honored more than 500 workers and employees with orders and medals. By summer 1942, over 25,000 women comprising 33% of all workers labored 18-hour shifts in the oil industries. At refineries and chemical plants, the percentage of women rose to an estimated 38%, growing to 60% by 1944. Hitler signed Directive No. 45 on the 23rd of July 1942 ordering the strategic advance into the Caucasus codenamed Edelweiss. The German military command planned occupying Baku by the 25th of September 1942, but Axis forces were defeated at Stalingrad.
In 1864, German mineralogist Otto von Abich surveyed structures present on the seabed of the Caspian Sea. Engineers proposed construction of offshore wells from timber piles connected by a causeway in the early 1930s. Oil engineers S.A. Orujev and Y. Safarov proposed tubular collapsible constructions for offshore bases in 1945. Construction of trestles and other causeways began in 1948 on Pirallahi and Neft Dashlari. On the 24th of August 1949, the first offshore exploration well at Neft Dashlari was spudded after the causeway was built. At a depth of 1,000 meters, well N1 tested oil with significant output rates. Neft Dashlari is referred to as The Island of Seven Ships because disused ships were sunk during bridge-head construction to provide solid base for causeways. Intensive development began in 1950 using multiple drilling sites connected by trestle bridges employing deviated holes. In 1953, water flood application maintained reservoir pressure. The field continues delivering oil after 50 years of exploitation. By 1975, several large fields including Bahar, Sangachali-Duvanni, and Bulla Deniz came into production. Four new multireservoir fields opened at 200 meters depth: Gunashli in 1979, Chirag in 1985, Azeri in 1988, and Kapaz in 1989.
President Heydar Aliyev signed International Contract No. 1 on the 20th of September 1994, ratified by Parliament on December 2 and effective December 12. This agreement required $60 billion investment and became known as the Contract of the Century due to potential reserves estimated at vast quantities. A consortium called Azerbaijan International Operating Company formed in 1995 with eleven major international companies including BP, Amoco, Lukoil, Pennzoil, Unocal, Statoil, McDermott, Ramco, TPAO, Delta Nimir, and SOCAR. Terry Adams served as AIOC's first president from BP. The Baku-Tbilisi-Ceyhan pipeline officially opened the 13th of July 2006, transporting crude oil from the Caspian Sea to the Mediterranean coast of Turkey. More than 1.9 million tons of Azerbaijani oil exported from Ceyhan port in September 2017 included over 1 million tons from the State Oil Fund. Around 15,000 people worked during pipeline construction costing $3 billion. Shah Deniz gas field discovered in 1999 transformed Azerbaijan into a major gas producer when its plant started up in 2007. Stage 1 supplies Georgia and Turkey with 8 billion cubic meters annually via the South Caucasus Pipeline. In April 2019, SOCAR president Rovnag Abdullayev signed a contract worth $6 billion for the Azeri Central East platform scheduled for completion mid-2022.
The Baku, Tbilisi, Ceyhan pipeline transports crude oil from the Azeri, Chirag, Gunashli oil field on the Caspian Sea to Ceyhan, a port on the south-eastern Mediterranean coast of Turkey. It stands as the second-longest oil pipeline globally after Russia's Druzhba pipeline. The BTC pipeline is expected to contribute significantly to world energy supply with capacity exceeding daily volumes. Turkey earns approximately $300 million annually thanks to this project. The pipeline runs from Sangachal Terminal near Baku through Tbilisi, capital of Georgia, to Ceyhan. Entirely, 344,133,525 tons transported via BTC pipeline from June 2006 until the 1st of November 2017. Shah Deniz gas plant at Sangachal Terminal started operations in 2007 transforming Azerbaijan into a major gas producer. Stage 1 supplies Georgia and Turkey with 8 bcma of natural gas via the South Caucasus Pipeline. In December 2013, Stage 2 approved design transfers hydrocarbons to Turkey and Europe through TANAP and TAP export pipelines. Poland's president Andrzej Duda visited May 2019 stating gas and oil flow from Azerbaijan also to Poland via corridors constituting elements of China's Belt and Road Initiative.
The State Oil Company of the Republic of Azerbaijan operates headquarters in Baku as a fully state-owned national oil and gas company. Non-government watchdog organizations claim revenues channeled to ruling elites through complex webs of contracts and middlemen. The State Oil Fund of Azerbaijan founded by decree of former president Heydar Aliyev on the 29th of December 1999 began operating in 2001. Approximate financial reserves reached 34.7 billion dollars maintaining macroeconomic stability while decreasing dependence on oil revenues. SOFAZ lacks transparency in finances and contracting raising questions about corruption. Critics describe projects funded by SOFAZ as useless noting contracts awarded to companies owned by ruling Aliyev family. Main projects financed include the Baku, Tbilisi, Ceyhan pipeline, Baku, Tbilisi, Kars railway, Trans-Anatolian gas pipeline, Oguz-Gabala-Baku water supply system, and Samur-Absheron irrigation system. In April 2020, Azerbaijan supported OPEC agreement cutting production reducing output by 164,000 barrels per day for two months. October 2020 saw Azerbaijan claiming the BTC pipeline targeted during Nagorno-Karabakh war though Armenia rejected accusations.
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Common questions
When did the petroleum industry in Azerbaijan begin exporting oil to distant markets?
Merchants moved petroleum from the Apsheron peninsula to distant markets including Iran, Iraq, and India during the 3rd and 4th centuries. Charles Marvin wrote in 1877 that irrefutable proof existed showing oil exports began 2500 years ago from this region where Baku now stands.
Who was the first person to drill an undersea oil well in the petroleum industry in Azerbaijan?
Haji Kasimbey Mansurbekov began the world's first undersea oil extraction in 1803 from two wells located 18 meters and 30 meters from the coast in Bibi-Heybat bay. These early structures were later destroyed by a strong storm in 1825.
What year did the State Oil Fund of Azerbaijan start operating after its founding decree?
The State Oil Fund of Azerbaijan founded by decree of former president Heydar Aliyev on the 29th of December 1999 began operating in 2001. Approximate financial reserves reached 34.7 billion dollars maintaining macroeconomic stability while decreasing dependence on oil revenues.
When was the Contract of the Century signed for the petroleum industry in Azerbaijan?
President Heydar Aliyev signed International Contract No. 1 on the 20th of September 1994, ratified by Parliament on December 2 and effective December 12. This agreement required $60 billion investment and became known as the Contract of the Century due to potential reserves estimated at vast quantities.
How many tons of oil were transported via the Baku Tbilisi Ceyhan pipeline until November 2017?
Entirely, 344,133,525 tons transported via BTC pipeline from June 2006 until the 1st of November 2017. The Baku, Tbilisi, Ceyhan pipeline transports crude oil from the Azeri, Chirag, Gunashli oil field on the Caspian Sea to Ceyhan, a port on the south-eastern Mediterranean coast of Turkey.