Speech of the President of the Republic of Azerbaijan Heydar Aliyev at the ceremony of the signature of the contracts between SOCAR and foreign oil companies on joint development in the off-shore block of "Kurdashi" and in the blocks "South-Western" and "Kursengi-Garabaghli" - 2 June, 1998

Ladies and gentlemen!

Dear guests!

It is an historical date in Azerbaijan today. The "Caspian oil and gas" exhibition is held in Azerbaijan for the fifth time. Today we, together with you, have attended its opening and became witnesses of how much this exhibition has developed within these five years. In these five years, the number of the participants of the exhibition has increased from 120 in 1994 to 400 companies in 1998. The companies of 29 countries are represented at the exhibition which opened today. But the point is not only the increase of the number of the companies. Today, during the acquaintance with the displays of this exhibition, we saw how many oil companies of the world, in particular, the companies represented at this exhibition involved in oil and gas industry, have developed in technical and technological fields.

The foundation of all these accomplishments was laid in May 1994. In the same year, four years ago, Azerbaijan undertook a very big and courageous step aimed at the efficient utilization of its natural resources and establishment of contacts with industrially developed countries of the world with the purpose of using oil and gas deposits of our republic together with the big oil companies of the world.

Four years ago, on September 20, at this grand "Gulistan" Palace, the State Oil Company of Azerbaijan signed a contract with the Consortium established by eleven oil companies of the world. The contract was named the "Contract of the Century".

Based on this contract, joint works in "Azeri" and "Chirag" oil deposits, as well as in thea deep-water portion of "Guneshli" started in the Azerbaijani sector of the Caspian Sea. Positive results of the join work were achieved in the passed years. The Azerbaijan State Oil Company is carrying out very efficient activity, as a result of which, a beautiful platform equipped with up-to-date technologies was installed in "Chirag" oil deposit. As a result of the fulfilled drilling works, early oil was extracted last November.

However, along with the installation of this platform, drilling and oil production, oil pipelines were laid for the transportation of the produced oil, a large oil terminal was constructed in Sangachal and a big infrastructure was created as well. The oil from "Chirag" is transported via oil pipelines to Sangachal, and from there it is exported to the world market via the reconstructed Baku-Novorossiysk oil pipeline.

The work accomplished by us has yielded even greater results than we had anticipated. Until today, five oil wells have been drilled at "Chirag". Nine thousand tons of oil is daily extracted from these five wells.

I have been informed today in the morning, during the opening ceremony of the exhibition that another four oil wells had been drilled and seven thousand tons of oil is daily produced from there. But now I was said that not four, but five oil wells have been drilled and nine thousand tons of oil is produced daily. And I am not mistaken. I told the truth in the morning and I am telling the truth now. The words I said in the morning were based on yesterday's information. And today, when I was getting acquainted with the exhibition and met the administration of the International Operational Company, they informed me with great pleasure that the fifth oil well had been already drilled and put into operation, which allows the production of additional two thousand tons of oil every day. Therefore I am saying that nine thousand tons of oil is produced every day. You see, the drilling of oil wells is carried out so speedily that I cannot even get timely information about their completion and operation. It is pleasing news.

As you remember, when we signed this contract in 1994, many people in different countries spoke against it. And some considered that there will be no results, as some countries or someone is against the implementation of these contracts. In addition, some people were saying that we followed this way in vain, because it is characteristic for the western companies, including American, to sign a contract, determine the oil field, but not work then. They keep it and use when they need it.

But I can say today with a feeling of pleasure that all these unkind statements remained just unkind statements. We fearlessly signed the contract and achieved its implementation through fruitful work. Today, we enjoy the results. When the contract was signed, we expected 510 mln tons of oil to be extracted at these oil deposits. It was reflected in the contract too. And now it is informed that 630 mln tons are expected from these oil deposits. I hope that in future, this figure will change and grow still more.

However, today, while implementing this contract and applying this experience along with it, we also take necessary measures for the joint work with leading oil companies of the world in other oil deposits in the Azerbaijani sector of the Caspian Sea. Consequently, we additionally signed eight more contracts since the first contract. Practical work is being carried out in majority of them. For instance, I was informed today during the exhibition on the work fulfilled at "Shahdeniz", "Garabagh", "Lankaran - deniz" and "Talish - deniz" oil deposits.

The amount of oil expected to be produced in the oil deposits in the Azerbaijani sector of the Caspian Sea will grow even more. Just therefore, we proceeded to the construction of Baku-Supsa oil pipeline, the second oil pipeline in the western direction. I am confident that this pipeline will be ready at the beginning of 1999. Within all this time, we have been seriously engaged in the issues of the construction of the main oil pipeline. I think the last decision regarding this pipeline will be adopted in the September of this year. The government of Azerbaijan, having analyzed all the possible routes, considers the Baku-Ceyhan the most appropriate route. I hope that till the end of this year, we will start practical works in this field.

Nevertheless, the majority of oil deposits located in the Azerbaijani sector of the Caspian Sea have not been developed yet. Many oil companies from a number of the world countries appeal to our republic for joint work in these oil deposits. I want to say once more that there is a large number of applications. Therefore, the Azerbaijan State Oil Company has the opportunity to announce a tender. And then, the companies with the highest economic result, will get the opportunity to work in the Azerbaijani sector of the Caspian Sea, as well as in the offshore and onshore oil deposits of our republic.

I can say realistically that the work done in this area by the Azerbaijani Republic within the latest years showed clearly that the Caspian Sea is important for the world economy, that the Caspian Sea is rich in oil and gas. I consider that this is the greatest achievement of the independent Azerbaijan.

Azerbaijan is an ancient oil land and the first oil gushed in the world just in our country. Azerbaijan holds the first place both in the utilization of offshore oil deposits and oil production. Fifty years ago, in 1949, large oil deposits were discovered and put into exploitation in the Caspian Sea, at the Oil Rocks. And thereby, it was stated all over the world that the offshore oil extraction is possible. I emphasize once again that now, at the end of the XX century, Azerbaijan has stated to the world about the huge potentials of the Caspian Sea, i.e. about the potential of mineral resources, oil and gas. We are well-aware that rich oil and gas deposits exist in other sectors of the Caspian Sea, too. Each pre-Caspian country can use these oil and gas deposits in the sectors belonging to it. I stress with satisfaction that such work has already started. Azerbaijan is expanding its circle of work in its sector of the Caspian Sea belonging to it, and fulfills practical work for the joint development of deposits discovered in due time.

Along with it, there are many rich onshore oil and gas deposits in the territory of Azerbaijan. We think that the biggest part of the underground oil and gas resources of Azerbaijan has not been developed yet. Therefore, now, the joint development of onshore fields with foreign oil companies of the world is also of great interest. We receive such kind of proposals, too, and carry out concrete work basing on them.

As a result of all these accomplishments, we have assembled here today at the signature ceremony of contracts and documents connected with three oil deposits. One of them is "Kurdashi" oil deposit in the Azerbaijani sector of the Caspian Sea. It is a very rich oil deposit. According to the preliminary data, more than 100 million tons of oil is forecasted to be extracted there. It is doubtless that there is gas, too. This oil deposit was discovered by the Azerbaijani oilmen, scientists and geologists approximately in 1940-1950s. In due time, relevant work was carried out there. But later on, this work was impossible to carry on. Many big oil companies of the world showed interest in these oil deposits. As a result of analysis of the submitted proposals, the Azerbaijan State Oil Company worked out a draft contract on this oil deposit. The Italian "Agip", Japanese "Mitsui" and Turkish "Turk Petrolleri" will carry out work at this oil deposit along with the Azerbaijan State Oil Company. A certain draft contract has been drawn up in this regard, and today this document will be signed.

I have mentioned that interest is also shown in the onshore oil deposits of Azerbaijan. One of them is the oil deposit situated in the south-west of Gobustan. According to the proposals, a draft contract has already been worked out for the joint exploitation of "South-western Gobustan" oil deposit. The decision of the joint work there was taken by the Azerbaijan State Oil Company, "Union Texas" of the United State of America, as well as the British-Canadian "Commonwealth oil and gas" companies.

One of the very rich off-shore oil deposits of Azerbaijan is "Kursengi-Garabaghli". A consortium was established by the Azerbaijan State Oil Company, "Frontier Resources" and "Amerada Hess" of the US, as well as "Delta" of Saudi Arabia for joint exploitation of this oil deposit, and a necessary document was prepared.

It is well-known that all the oil deposits of our country belong to the Azerbaijani people. Therefore, all of them are at the disposal of the Azerbaijan State Oil Company, and doubtlessly, there should be a special resolution, a decision of Azerbaijan to work jointly with foreign companies. I have looked through these proposals and consider them to be profitable for Azerbaijan. Therefore, based on these proposals, I have taken necessary decisions aimed at fulfilling joint works at the mentioned fields.

I want to state once again that the strategic policy of Azerbaijan in connection with the exploitation of its natural resources is fully consistent with its national interests.

We consider that the joint work of the oil companies of different countries with the Azerbaijan State Oil Company in our republic is efficient. Undoubtedly, this is equally profitable for both sides - for the companies arrived in our republic from different countries, for the countries they represent and for Azerbaijan. As a result of this, we achieve large amount of investments put in Azerbaijan by foreign countries, profitable use of natural resources belonging to Azerbaijan and application of the most up-to-date technology in the oil and gas industry. All this serves the primary goal - improvement of the welfare of the Azerbaijani people, the citizens of our republic.

Being guided just by these principles I take decisions as regards these issues. I have also taken a decision regarding the contracts introduced for the signature and consider it expedient to sign them today.

Consequently, we undertake new steps towards the development of the economic links with big oil companies of the world, and many countries. I hope that these steps will be successful. I congratulate you on this occasion.

Thank you.