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WORKS / OIL STRATEGY / Oil contracts

 

Esteemed ladies and gentlemen!

Today we have gathered here on the occasion of a very remarkable event. Today we are here for getting acquainted with the positive results of implementation in practice the new oil strategy, oil doctrine of Azerbaijan and discuss this issue.

It is well known that since 1994 Azerbaijan is under way of implementation of its first oil strategy and the core, the main principles of this strategy are more efficient use of rich natural resources of Azerbaijan, including oil and gas resources for the sake of prosperity of Azerbaijani people.

Young, independent Azerbaijan, while dreaming all these, was aware that it would be impossible to do all these works by itself. That`s why the development of abundant oil and gas fields and their use for the sake of people could be achieved together with developed countries of the world only, by means of their oil companies, using high technology. For this purpose State Oil Company of Azerbaijan Republic has signed the first large contract with most of major oil companies on September 20, 1994. The contract was entitled as "Contract of Century". It is under way of implementation in series, we have already observed and felt the positive results it recently and we make use of them.

It is well known, that consortium, founded in the connection of the oil, extracting from "Azeri", "Chirag" and "Gunashli" oil fields worked successfully and we have extracted the mother oil from "Chirag" oil field on November 12, 1997.

A lot is done in Azerbaijan in this regard. One of these deals is that we managed to construct pipelines for exporting our oil to the world markets: the first one - Baku-Novorossiysk and the second one - Baku-Supsa. Both of them reach the ports on the Black Sea: the first - in Russia and the second - in Georgia. Unfortunately Baku-Novorossiysk pipeline that we constructed earlier doesn`t function normally, the oil transportation is shut down periodically and it is blocked off completely during the last 3 months. It created a lot of problems for us.

I can say in this regard that while signing the "Contract of Century" in 1994, the Russian government has assured us, saying: "export all extracted oil through the territory of Russia, don`t rely on other itineraries and we will provide everything".

We believed in it and consequently we constructed the first pipeline for exporting of the mother oil through the territory of Russia to the port of Novorossiysk. Unfortunately, Russian government doesn't keep its words and export of our oil via this pipeline faces many big problems. Consequently both foreign companies and Azerbaijan Republic suffer considerable damages.

However Baku-Supsa pipeline commissioned on April of this year is functioning. It works to its full capacity and the oil extracted from "Chirag" oil field is delivered to the world market via this pipeline. It is nice of us to plan and construct this pipeline in due time.

It is necessary to construct the biggest ever pipeline envisaged by us for exporting of big oil - Baku-Ceyhan pipeline, connecting Baku - Georgia - Turkey and it is well known that we have done a lot for this purpose. Recently the State Oil Company of Azerbaijan Republic held some negotiations with Turkish government, with authorities of Turkey on this issue. As I have learned already, the Grand National Assembly of Turkey examined this question and gave its consent to the government for the guarantee. Thus we are going to begin the construction of Baku-Ceyhan pipeline also. That is, undoubtedly, necessary. Those deprecating or opposing our measures see that the contract "Azeri", "Chirag" and "Gunashli" functions and gives oil. Herewith we will speak about another contract also. And here also we see big perspectives as it was envisaged. Azerbaijan is implementing its oil strategy. As it was expected previously, there are abundant oil and gas reserves in Azerbaijan and their development and transport to the world markets is our current and future objective. For the realization of all these objectives we have to construct these pipelines. State Oil Company of Azerbaijan has signed a new contract with some major oil companies of the world on June 4, 1996. This contact was signed in connection with development of a very large, abundant oil field of "Shadeniz", located at the Azerbaijani sector of the Caspian Sea. A consortium was set up after signing of the contract. The consortium is consisted of "BP-Amoco" representing Great Britain, "Statoil" representing Norway, "Elf Aqiten" representing France, "Lukoil Agip" representing Russia and Italy, "Turk Petrollari Sirketi" representing Turkey, companies of OPEC, representing Iran. I am not sure if I named all of them. It seems me that there is not any missing.

I would like to draw your attention to the composition of the consortium. The major oil companies of a number of great European countries take part at this consortium. Oil companies of America, Russia, Turkey and Iran. You see how big circles we managed to embrace.

The contract was ratified by Milli Majlis of Azerbaijan on October 1996 and after this the consortium commenced to work.

One can say that "Shahdeniz" oil field is the largest and most abundant one in the Azerbaijani sector of the Caspian Sea. It is even a gas field to the greater extent than an oil field. It was stricken by oilmen, oil explorers of Azerbaijan in 1954. Some drilling operations and geological investigations were carried out at this site in 1976 and it was established that the field is abundant in gas reserves. After this some works were done in 1980. I even remember when Khoshbakht Yusifzada, I don`t know in 1990 or after, said that he wanted to drill a borehole for gas production. But at that time it was not easy to develop such a big deposit.

I would like to say you frankly that when we were a part of Soviet Union, the Soviet government didn`t pas enough attention to the development of these deposits and didn`t allocate sufficient funds to Azerbaijan. Evidently it is a fortune because we, one can say, protected and kept these deposits in order that when Azerbaijan became independent know, could make use of them independently, as it wishes, it is to say that "Shahdeniz" oil field has a great history. The oilmen, geologists and explorers of Azerbaijan contributed a lot to the striking of it, carrying out of drilling works and definition of its capacity. I would like to note especially, as I always do.

The work carried out by consortium at "Shadeniz" oil field proves how efficient and accurate were works carried out previously by Azerbaijani oilmen. While signing the contact we undoubtedly paid a big attention to this and we adjusted everything. According to the forecast of our geologists and oilmen it is possible to produce some 400 billion m³ of gas and a large amount of condensate from "Shahdeniz" deposit. Having familiarized with the document on this deposit "BP", "Statoil" and many others knew before signing the contract about it and believing this they signed the contract.

A great work was done in 1997-1998 and in the first half of this year by the consortium. According to the information that I received, very good results were obtained. For hearing about these results I have invited here the members of the consortium and other concerned persons, as well as Ambassadors of foreign countries that are represented by their companies.

Final address

First of all, I cordially congratulate the State Oil Company of Azerbaijan, "Shahdeniz" consortium and companies taking part at this consortium on the occasion of this great achievement. The information reported by the president of "Shahdeniz" consortium and that reported by other speakers please us infinitely and I think that it will be an important event on a global scale. If the president of "Shahdeniz" consortium making here the initial report puts a question of gas export, which will be subject of transport to the world market and indicates herewith the appropriate itinerary, it means that the achievement is well based - this achievement is assessed not only in figures, perhaps it exceeds these calculations, because for gas exporting it is necessary to have it enough, well, there is as much gas as it was indicated in "Shahdeniz" deposit, maybe more. And that is the most pleasant.

Today is an important holiday for me personally, because esteemed Khoshbakht Yusifzade reminded here of the fact that since 1969, when I headed Azerbaijan, in 70-80s I contributed a lot to the development of the oil industry of Azerbaijan, I have remarkable services. Khoshbakht Yusifzade says rightly that if we wouldn`t create the necessary material-technical base for the exploitation of oil and gas fields at great depths of the Caspian Sea, wouldn`t carry out this work, we aren`t be able, undoubtedly, achieve today`s results.

Previously I participated with a great pleasure at the commissioning ceremony of "Dede Gorgud" and "Istiglal" drilling rigs, because they were one of the most important means for implementation of the plans facing us. The another reason is that these facilities are not new, they were brought to Azerbaijan, to the Caspian Sea in 70-80s on my initiative - these are "Shelf-2", "Shelf-3", "Shelf-4" and "Shelf-5" drilling rigs. We brought them at that time in order to hole not at the depth of 20 meters, but 80, 90, 120 and 200 meters.

We achieved it. Those "shelfs" did their work; they holed a lot of wells. You are right, if there wouldn`t be those "shelfs", we couldn`t obtain oil from "Gunashli" oil field. You have just said that "Gunashli" field gives 60% of overall Azerbaijani oil. Wouldn`t we do that, wouldn`t we bring those drilling rigs, wouldn`t we, as the saying goes, wring them from the Soviet Union, there wouldn`t be "Gunashli` oil field, and while being the country of petroleum, it would left without oil.

They continue to serve us, our modern life nowadays. But only two of them were upgraded, and there are a lot in the queue! The modernization of these drilling rigs is under question also, isn`t it? And it will be carried out, because we signed 20 contracts. It is impossible to do all the works envisaged by them by means of two drilling rigs. The others will be upgraded as well. So, we laid the basis of it in due time. And this is of great importance for our today`s work.

"Shahdeniz" is one of the largest oil fields stricken by scientists, oilmen and geologists of Azerbaijan. The territory of this field was shown on the slides and it became clear for everybody the surface of this deposit. But today it is more important for us the statement made by the President of "Shahdeniz" consortium that "Shahdeniz" oil field is of universal importance.

At the very beginning of our meeting I said that we were aware of potential of "Shahdeniz" oil field. That`s why we signed contract and we knew that it will give good results. But all these were only forecasts. But now we see that those forecasts were well-grounded, rightful. It testifies to the high level of skills of oilmen, scientists and geologists of Azerbaijan, who make forecasts proved completely afterwards in these conditions.

Today the president of "Shahdeniz" consortium declared the availability of 400 billion m³ of gas, but the reserves can reach 700 billion m³ also. And our esteemed geologist - one can say that there is not second man who know the Caspian Sea as perfectly as Yusifzade does - says that there will be up to 1 trillion cubic meters of gas.

Today, seizing the opportunity I thank our scientists, geologists who stroke "Shahdeniz" deposit as well as other ones in the Caspian Sea - all oilmen of Azerbaijan, those deceased and alive nowadays.

At the same time the today`s presentation that we informed all over the world about, will show to many that they were wrong or they opposed Azerbaijan purposefully. After signing of the first contract - the "Contract of Century" on September, 1994 big troubles fell on us: terror acts, attempts of coup d`etat, and many other crimes. External and internal enemies saw that Azerbaijan has determined its own way of development of economy and follows this way. But nobody succeeded - the government of Azerbaijan followed, still follows and will follow further on its will. Unfortunately, citizens of Azerbaijan inland - groups of opposition - opposed the signing of these contracts as well as implementation of the works in this sphere.

Not having a clear idea on these subjects they took him following position: "We wish in Azerbaijan everything would be bad, not good" - that`s why they were against it.

I remember that during the discussion of the first oil contract - "Contract of Century" in Milli Majlis the groups of opposition opposed this idea, they said, why we should give the riches of our country to foreign countries, we must preserve them and develop them by ourselves and use it for the sake of our people afterwards. But they couldn`t understand that we wouldn`t be able to do this work even after 10, 15, 20 years. I say it as a person who was engaged in the oil industry of Azerbaijan and that of Soviet Union during 30 years. But those who didn`t have any idea on oil industry, who came to the parliament of Azerbaijan from streets and declared their opposing thought every day - they didn`t and couldn`t know this. They aspired only one thing - to undermine the negotiations on these contacts.

In 1996, on the eve of signing of "Shahdeniz" contract, one of those, working with us in our country, disputed completely signing of this contract. I haven`t mentioned his name since he left Azerbaijan 3 years ago, because he doesn`t merit it. But today, in order to reveal the truth I must name him. This was Rasul Guliyev, the former chairman of Milli Majlis.

The contract was under elaboration in the course of several months, it was already agreed by all oil companies and was ready for signing. A week before signing of the contract he came to me and said: "the contract cannot be signed". I asked: "Why?" He said that agents of oil companies have informed me incorrectly, there are a lot of wrong, harmful for us, that`s why it is impossible to sign it. I asked him where he was so far. Always abusing his authorities of the chairman of Milli Majlis he maintained contacts with oil company and tried to supervise the work of this company. He was well-informed on the process of preparation of this contract. He knew that everything is perfect.

We hold an oil and gas exhibition here. The contract was due to be signed at the same day. He raised this question a week before it in order hamper the work. I take into account every remark, that`s why I took into account his opinion, I invited to this cabinet all leaders of State Oil company. There were Rasul Guliyev, Arthur Rasizade and all managers of State Oil Company. I said him: stand up and prove your opinion that it is impossible to sign this contract. Of course, he commenced to say nonsense, insult the representatives of the State Oil Company. Natig Aliyev, the President of State Oil Company, Khoshbakht Yusifzafe - the most eminent expert in this sphere, Valeh Alaskarov and many others stood up and said him in person that his opinion is completely groundless. They said that he intends simply to hamper the work and he doesn`t understand anything in this issue at all. He seemed to be frustrated. He declared that he will officially write about it. I said him: you said what you wanted and you got your answer; if you want you can write also. But he didn`t write anything because he hadn`t anything to write.

This man knew only oil refining in oil industry. Previously, in 1981, I designated him to the post of the director of a petroleum refinery, he knew well this job. But he knew also how to get illegal profit from oil production. But he didn`t have any idea on oil industry, rigs, wells, oil production, sea - he didn`t know all these issues. But he was against not only because he didn`t know these deals - he wanted to strike a blow to us at the moment when we were working, to undertake a sabotage, but he failed to do it. We have never allowed anybody to do it.

The contract was signed and ratified by Milli Majlis on October 4 and now it is under way of implementation. Now we are witnessing the excellent results of it. But he proposed to postpone it till our receiving of benefits from the first contract, after we will purchase the equipment, create all conditions and perform all works by ourselves. Firstly, when we will receive this benefit? Secondly, if we will use this benefit to the oil industry, what to do with other social-economic problems of Azerbaijan? It is clear, that no comment is required here. Putting forward these proposals he wanted only to hamper us. But he couldn`t and that`s why he run away, he is hiding now in the United States of America. A man, who doesn`t have any idea on oil industry, writes a book about oil, in Russian as if "he were fluent in it". Today there are still those wanting to hamper the work, too. But nobody will succeed. The new oil strategy of Azerbaijan is determined. We will implement it in series from this time onwards, as well.

It was spoken here about some 367 million of US dollars invested in "Shahdeniz" deposit. Imagine that in the course of the last 2 years 367 million of US dollars were invested in Azerbaijan. The president of consortium reported that the major part of this amount is shared among different companies of Azerbaijan for payment of salaries and taxes. It means that the major part of it is of benefit and brings profits. Our oil contracts from the very beginning and in the work process draws investments to our country, a major part of our population was employed. It means that before achieving the final result Azerbaijan makes the most from these investments and this is significant in itself.

The information given by the President of "Shahdeniz" consortium is clear completely. There is nothing to add. I want to note once again that this information is very pleasant. But a thing that makes me gladder is that the president of the consortium put forward an objective: it is necessary to work for the export of gas from today. Well, I think so, too. That`s why I give instruction to the State Oil Company of Azerbaijan and the consortium to speed up the drilling of new wells on the basis of the achieved results. Maybe they know also it, but I would like to suggest them to prepare a detailed plan and start its implementation. Because as soon the new wells will be drilled as exactly we will determine the volume of gas and oil condensate. And this will help us to do everything necessary for the gas export.

I give instruction to the Cabinet of Ministers to provide jointly with State Oil Company and consortium creation of necessary infrastructure for meeting the needs of the Republic of Azerbaijan in gas, prepare and present me the plans of creation of the infrastructure and facilities.

Of course, we need a gas pipeline for export of gas abroad. Now we must take care of it. I agree completely with the proposal of the head of consortium that the most important market for us is Turkey. Recently during a conversation with esteemed Suleyman Demirel, the President of Turkey he said me that in future, perhaps till 2010 Turkey will be in need of 40 billion m³ of gas. We will be able to satisfy this demand.

I think that on the basis of the given information and achieved results one can say that it will be possible to export some 16-20 billion m³ of gas in the course of next 25 years from "Shahdeniz" oilfield. I give order to the Cabinet of Ministers tom prepare and hand me in some proposals for the end-to-end solution of this question.

Thus we pass to the next stage. Along with the oil pipelines, we have to construct gas pipelines for export of gas from Azerbaijan to the world market. I reiterate that the gas pipeline must be constructed on the Baku-Georgia-Turkey itinerary. Thus, after "Contract of Century" this is the second large contract that gave excellent results in short terms.

Give a glance at the future of Azerbaijan. There will be put some 60 billion US dollars worth investment in Azerbaijan in accordance with all signed contracts. Imagine how important, new riches will be brought by these investments, first of all, to the investors itself, companies of foreign countries and those of Azerbaijan. I believed in it 5 years ago, I believe in it today. And with this belief and optimism I would like to close today`s meeting.

I congratulate once again the "Shadeniz" consortium and State Oil Company of Azerbaijan!

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