The Statement of the Azerbaijani president Heydar Aliyev before journalists in the briefing held in connection with the signing of the agreement with the oil companies of the Western countries - September 16, 1994

Dear journalists, representatives of press!

It is more than three years negotiations are being conducted between the State Oil Company of Azerbaijan Republic and the oil companies of the western countries concerning the joint exploitation of oil deposits of Azerbaijan in the Caspian Sea. The State Oil Company of the Azerbaijan Republic has negotiated with the separate oil companies of the western countries, but afterward, in 1992 these companies, having united, organized the general consortium and negotiations were preceded already with this consortium.

You know that after occurrence of the certain changes in Azerbaijan at the end of July, 1993, as a chairman of the Supreme Soviet of the republic and at the same time, carrying out powers of the president of Azerbaijan, I had made decision on the termination of these negotiations. This decision was accepted for the reason that the signals and data coming at that time spoke about the certain lacks, miscalculations in the draft contract which was already being prepared and in that form the project was unacceptable for the Republic of Azerbaijan. I made the decision to stop these negotiations in order to consider these data, and determine whether the project corresponds to the interests of the Republic of Azerbaijan. After that, the prepared materials were examined and corresponding analyses were made again in the State Oil Company of the Republic.

At that time the presidents and other heads of the western oil companies arrived in Azerbaijan, and met me personally. Then our scientists and the experts working in a petroleum industry of Azerbaijan, heads of these fields and other persons who were engaged in this business, held corresponding meeting. We have carried out wide negotiations and I declared the position of Azerbaijan on this issue. The reasons of interruption of contracts were made clear there, that is, I informed about these reasons and assured the western companies that there were no reasons for their anxiety, this work would be continued, but oil was the biggest, most valuable riches of Azerbaijan, therefore it was necessary to consider more deeply this question, to discuss it comprehensively. Such an agreement has been achieved and after that, the work has been continued.

At the first stage the Azerbaijan State Oil Company involved neutral experts from the western countries - experts from the United States of America, Canada and other countries for carrying out these works. These issues were analyzed and discussed with their participation. Then after a while, the negotiations continued in London. However having seen that the results of negotiations held in London submitted to me again did not suit the national interests of the Republic of Azerbaijan, I rejected the draft prepared there and did not accept it.

After that the Azerbaijan State Oil Company on my assignment determined the position of Azerbaijan in these negotiations once again together with scientists, experts of the republic, the skilled people working in a petroleum industry. As the President of the Republic of Azerbaijan, they wrote me the official report, and presented me their offer on what principles the Republic of Azerbaijan could continue negotiations. After the analysis of these principles and consultation with the responsible persons engaged in these affairs in our directing bodies, on February 4, of this year, I issued a decree about the Azerbaijan State Oil Company to continue negotiations on the basis of these principles. I authorized the State Oil Company, and namely its president Natig Aliyev to continue these negotiations and lead them on the basis of the submitted offers. After that a new stage of work started.

The Azerbaijan State Oil Company held negotiations with the oil companies of the western countries in Baku. At the subsequent stage, these negotiations at the request of the western oil companies proceeded in the city of Istanbul of Turkish Republic and in July came to an end. In July the president of Azerbaijan State Oil company Natig Aliev again presented me the written report on the results of these negotiations. After analyzing of this report I decided that on the basis of the agreements achieved in the talks it was possible to start a preparation stage of the contract.

At that time I received both heads of the Azerbaijan State Oil Company - the president, assistants to the president and full staff of the State Oil Company conducting negotiations with the oil companies of the western countries. After I listened to them, I invited this staff together with delegation of the oil companies of the western countries carrying on negotiations. And all the personnel including the delegation carrying out negotiations, and also representatives of a consortium of the oil companies of the western countries and a management of the Azerbaijan State Oil Company informed me that the agreement had been reached between the parties in negotiations in Istanbul. Therefore, on the basis of this agreement, it was possible to carry out preparation of the draft contract. I agreed with it and also gave my consent that the protocol to be signed in Baku at the end of the Istanbul negotiations of the Azerbaijan State Oil Company with a consortium of the oil companies of the western countries, their representative and the beginning of preparation of the draft contract. Such a protocol was signed here in the middle of July.

On July 21 the team of the Azerbaijan State Oil Company carrying on negotiations left for the city of Houston of the United States of America at the invitation of a consortium of the oil companies of the western countries. There they worked for 45 days on the preparation of the project. From the data we constantly received from there and, at last, by the data submitted us by the staff of delegation after returning to Baku, it became clear that there have been a number of difficulties in the work on the project. The plenipotentiary staff of the Azerbaijan State Oil Company tried to solve these problems. I think that as a result of their hard work and competence, the difficult problems were avoided and the draft of an agreement was prepared in this tense situation.

After returning of our delegation from Houston, I received the president of Azerbaijan State Oil Company Natig Aliyev. He presented me the written information on the results of negotiations at Houston, about difficulties and how they were overcome and gave an explanation. At the same time, he informed me about the opinion of delegation staff of the Azerbaijan State Oil Company and that the prepared projects could be signed. After that I discussed these questions and the assumed results with supervising circles of the Azerbaijan state - heads of the Supreme Soviet, the Cabinet of Ministers, the responsible persons dealing with these issues in the Presidential Administration, the corresponding ministries and ministers. Finally, I made a decision that the prepared project could be concluded. I have issued an appropriate decree about it. I also invited you, the representatives of press here in order to get the public know this information officially.

My decision and the issued decree read that contract prepared between the consortium of the oil companies of the western countries and the Azerbaijan State Oil Company, will be signed on September 20 of this year in Baku in the palace of "Gulustan".

The work carried out for long, that is for more then three years, I think, have yielded positive results. Undoubtedly, the submitted draft contract does not provide all our desires and intentions. It is clear, and I repeatedly declared it, and today, after preparation of the project and decision-making on this occasion, again I want to note that we should try very cautiously and rationally to use the natural resources of Azerbaijan and in particular our biggest riches - oil deposits in the present and future. We should try to get the maximum profit out of these riches for the present and future of Azerbaijan people.

I have always taken these as basic principles and today I adhere to them. From the point of view of these principles, undoubtedly, all our intentions, desires are not reflected in this project. We want to get still more profit of this project. But you know, the essence of a joint work is that both parties try to get the profit and should get it. If there no principle of the mutual profit, undoubtedly, there will be no contract.

You know, that "АМОКО", "British Petroleum", "Statoil", "Pennzoil", "Remco", "Unocal" and "McDermott" are the western oil companies. One of participating companies is the company of Turkey, another is the company "LUKOIL" of Russia. The western companies are very big oil companies and engaged in oil extracting in many regions of the world.

Undoubtedly, they came to Azerbaijan to get benefit, it is natural, and they tried to put their interests into practice. The Azerbaijan party is for the first time, anyway, in our century, goes to big agreement. The companies of foreign countries also participated in the past in the oil production in Azerbaijan, but after 1920, you know that it was not so. Undoubtedly, within a year, carrying out additional works as a result of my personal involvement in this issue, all were directed only and only to get the maximum profit for Azerbaijan in this agreement.

I think that although not all our desires are not reflected in this project, the submitted project provides economic interests of the Azerbaijan Republic, Azerbaijan people in the present, in the future and, consequently, I have made the decision on signing of this contract.

It is a big project and there is no necessity to speak about it. But I want to bring to your attention some economic indicators. The first contract is connected with using of oil deposits of Azerbaijan sector in Caspian Sea, that is with a joint oil extraction and sharing of the extracted oil. These are the oil deposits of "Chirag", "Azeri" and "Guneshli". You know that now we exploit the deposit of "Guneshli" and we extract approximately 6, 5 million tons of oil from there. But we cannot use one part of the deposit of "Guneshli" located in the deepest part of the sea. This part of the deposit is given to this consortium for joint development.

According to the contract, 511 million tons of oil in all will be extracted from the deposits of "Azeri" and "Chirag" and in a part of "Guneshli", where the depth of water exceeds 200 meters.

The contract is intended for a period of 30 years. 511 million tons of oil will be extracted within these 30 years. 80 percent of capital investment for implementation of the contract will be provided by the western companies which are included in this consortium. Capital investment according to the today`s prices makes approximately 7, 4 billion dollars. 253 million tons of the extracted oil will belong to Azerbaijan.

I do not want to illustrate other economic figures, but, taking into account dollar`s rate today, we will see that Azerbaijan will get profit in the sum of 34 billion dollars from the implementation of this contract. Undoubtedly, within these 30 years the dollar exchange rate will change as well. In this case these figures can change relatively.

One of the important features of the contract is the extraction of gas alongside with oil. You know what it means. Probably, it is not clear to some people. In one case when oil is extracted from the wells only and in the other case when gas is also extracted from the majority of wells together with oil. Calculations show that during this period there will be extracted 55 billion cubic meter of gas. All of them will belong to Azerbaijan, that is, this gas will not be shared any more. During a joint oil extraction with a consortium in these three deposits, the Azerbaijan State Oil company, Azerbaijan Republic can extract independently gas there by drilling and this gas will belong only to us too.

It is likely to conclude certain agreement with any company or just with this consortium on the extraction of gas in the future. I would like to point out that the whole gas in those deposits and also the whole oil and gas condensate will belong to Azerbaijan.

It seems to me that economic indications are like that. The Azerbaijan State Oil Company has built a platform on the oil deposit of "Chirag". But this platform is not being used yet. Its exploitation is also entrusted this consortium. It has certain conditions as well.

As I already told, the contract is signed for the period of 30 years. There is no doubt that after the beginning of works, at different stages the quantity of extracted oil will increase depending on a course of work. What figures can I bring to you? According to the contract, the oil extraction from a platform on the deposit of "Chirag" will be provided within 18 months. It will be the oil extracted by the Western Consortium and the Azerbaijan State Oil Company jointly. On all these deposits the work on oil extraction will be completed within 48 months. And in 54 months the oil extraction in all deposits will be provided. That is, within these 54 months the construction of the pipeline for transportation of oil will be over and after that the western companies can take their share of the extracted oil and drive it to desirable direction.

Thus, all should know clearly well how this contract will be put into practice. To begin to implement the contract is also very much matter of principle. As a result of negotiations, an agreement was reached that after signing of the contract it would be ratified by the Azerbaijan parliament and since that day it would come into force, that is, the consortium of the western oil companies should already start the activity with the Azerbaijan State Oil Company. The beginning of implementation of the contract will be considered since that date. I hope soon after this contract is signed, the parliament will also consider and ratify it.

Besides all this profit, the arrival of the western oil companies to Azerbaijan Republic and carrying out of teamwork with the Azerbaijan State Oil Company will make big changes in our economy. The first change anticipates that we will open a big road for foreign countries to invest their capital in Azerbaijan. The investment of capital will not be in small quantity, its sum will make 7, 4 billion dollars. It is very big amount.

This document plays very big role for Azerbaijan to go on a way of free economy, market economy, closely integrate into world economy. Azerbaijan will be even more known on a global scale as a democratic republic in its political life and also in economy and this will find its reflection in practice.

Certainly, the big work will be done here for implementation of the contract, large platforms will be constructed on oil deposits. As you know, for a construction of these platforms in the beginning of 80`s there was constructed a powerful factory of the deep-water basis. I want to inform you that personally I have worked hard for construction of this plant in Azerbaijan and construction of this enterprise in Baku is a big advantage for Azerbaijan. In those days this factory was a unique enterprise making platforms for drilling of oil wells, oil extraction in all seas of former Soviet Union. We have achieved the construction of the factory in Azerbaijan with big difficulties. For its purchase there was spent 400 million dollars as to the rate of that time. But now we cannot use this factory. Because it should be reconstructed. After coming into force of the contract, this enterprise will start completely a new activity. For this purpose, an additional work there will be done, the enterprise will be reconstructed. The platforms manufactured at this plant can be used not only in the Azerbaijan sector of Caspian Sea, but also in other areas for an oil extraction from deep parts of water.

Probably, some of you remember that in the second half of the 70`s and in the beginning of 80`s for an oil extraction from deep parts of Caspian Sea in Azerbaijan we have bought the platforms "Shelf - 1" and "Shelf - 2". They were made in the West, and have been brought here with the big difficulties and handed over in exploitation.

Now at a factory of the deep-water basis there will be manufactured platforms even more powerful than these. Therefore, construction and expansion of the factory will enrich the economy of Azerbaijan. As I noted before, its products will be used in parts of Caspian Sea belonging to other countries.

The question is not being settled yet. The big work should be done still, large installations should be built and powerful enterprises should be constructed in order to extract oil in great quantity, to deliver it to the coast and, finally, to transport the part of the oil in the share of to the western companies’ by means of the pipeline. Undoubtedly, all this will be created.

As you know, now Azerbaijan uses installations and vessels which are the residuary of the former Soviet Union for an oil extraction. The majority of them is obsolete and we do not have opportunity to buy the new ones. Undoubtedly, after this contract comes into force, new vessels, tankers, installations will be bought and brought for carrying out teamwork in Caspian Sea. And all this will become riches of Azerbaijan in the future.

I remember, in the 70`s the deserted condition of piers, established on Oil Rocks, disturbed us very much and we made great efforts to update these piers at that time. But we were short of allocation and consequently, for this purpose we tried to update the piers by getting additional allocation from Moscow, a capital of Soviet Union. The events which I have recollected occurred 15-20 years ago. You can imagine, now in what condition are these piers. We need a plenty of allocation for their reconstruction, putting in a suitable state. Undoubtedly, all this work will be done.

Except for oil deposits of "Azeri", "Chirag" and "Guneshli" we have got also other deposits. Their exploitation is our future task as well. Therefore import of the advanced, top-quality techniques and technology of the oil companies of the western countries to Azerbaijan, its employment here will stimulate the development of techniques and technology in our petroleum industry, and all the delivered equipment will become riches of Azerbaijan in the future. That is, we will use them together during 30 years, and then these techniques and technologies will remain in our republic.

Certainly, a plenty of experts will be required for realization of all the intended activities. So, oil-refining and machine-building plants will work, other enterprises will be engaged in certain spheres, and also other fields of the industry will function. Functioning in full power of all spheres of the industry, undoubtedly, will promote the development of our economy. Engineers, experts, economists, technicians, workers, in a word, all persons involved in realization of this project will be provided with good job, and also will be provided well from the material aspect. All these are Azerbaijan’s today and future.

Now we can extract nine millions tons of oil. But, I should tell you that our oil installations, wells and deposits are in need of repair. We need to conduct a big work. Allocation required for us to carry out this work. The allocation received from the consortium and making the use of our oil share will open a new stage of horizons in our petroleum industry.

All this is very necessary both for the present and for the future of Azerbaijan. Due to the signing of this contract, we will start teamwork with the companies of the advanced western countries having wide experience in this area, and everyone can define himself economic, technical, scientific, and also other positive results of it. I have defined them for myself, and I think that while taking this step now, we are aspiring more for the sake of future of Azerbaijan, than for today. I have already brought to your attention the following figures - 18 months, 48 months, and 54 months. As it is known, the most part of it is intended for the future generations.

Certainly, many works will be carried out now and in the near future. The beginning of these works will lead to basic changes in life, and in economy of Azerbaijan. So we endeavor not only for the present, for ourselves, but also for the future generations. Therefore, I hope that this 30-year contract will not be the only thing. We shall sign also other contracts. I do not doubt that it will have a continuation. That is, for providing of a life, economy and well-being of Azerbaijan people in XXI century, we take very serious, responsible, and at the same time, in my opinion, very necessary steps.

Considering all this and looking through the history of a petroleum industry of Azerbaijan in the past, taking into account my being engaged in the petroleum industry of Azerbaijan for 25 years, and also all our activities, considering the situation in which was the petroleum industry of former Soviet Union, I have issued the decree and made decision on signing of the submitted draft contract. I undertake big responsibility and I am ready to bear it today and in the future.

I invited you here to give you this information. If there will be questions, I do not want to answer any of them. I believe, I have answered all the questions by the words that I told you. I informed you about the basic essence of this contract and if we sign it on September 20, it means that I answered all questions. After signing of the contract you can ask your questions. Thank you. I invite you to a ceremony of signing of the contract on September 20.