"WE SHOULD PUT THE INTERESTS OF OUR COUNTRY ABOVE THE INTERESTS OF COMPANIES" - HEYDAR ALIYEV OR THE HISTORY OF THE CONTRACT OF THE CENTURY
In September 20, 1994 is the signing of the contract of the century that became as turning day in the history not only of Azerbaijan but as experience showed after 11 years for whole CIS and abroad. Today, Azerbaijan's model is used in major leading countries of the world. "Azerbaijan oilmen are our teachers in the Caspian", chief of one of the largest oil companies in Kazakhstan says. Azerbaijan and its partners with the help of Baku-Tbilisi-Ceyhan oil pipeline "named after Heydar Aliyev" got a direct access to deep water port with exit to world markets. Precedent of Azerbaijan served as catalyst of global world economy processes. There is no dominant or dominants, "the interests of country and interests of state are major for us", - said Nationwide Leader Heydar Aliyev.
In September 20 is a Day of Oilmen of Azerbaijan. Oilmen of Azerbaijan helped to Azerbaijan in successful realization of intended, exactly oil fuel served as locomotive for development of non-oil sector. From $6 bn of investments invested annually in economy (annual growth of investments in Azerbaijan approximately 10%), $2 bn is domestic investments vs. 0 internal investments of some 5-10 years ago. It is not just a progress, if we take into account that presently the 1 from 8 mln. ofpopulation - refugees in result of 20% of Azerbaijan territory's occupation by Armenian forces, we can say that this is a victory - real economy victory of Azerbaijan nation. We would like to talk about its history in short on September 20, 2005.
Soviet Union's breakup and sovereignty getting brought to new 15 independence nations not so quite "easy" freedom, but also many economy problems that became so important to solve them. There are problems connected with development of priority fields of national economy by own power.
And as a result of the potential lack the dilemma became clear or we should thread one's way through the tough economy crisis, or create the profitable conditions for attraction of foreign investments with the aim of economy situation's stabilization in the country.
The first meant, "to enter to the same water twice". And the second was attractive and at the same time deceptive, that for liquidation of political problems and beginning the process of multi-billion of investments attraction is required the close combination of two rarely meet factors. Particularly, - strong political will that should define the priorities of domestic and foreign policy, including clear economy programs aimed to providing of the profitable regime for attraction of investments.
Exactly stated above was deficit during the first stages in Azerbaijan, taking into consideration its geopolitical location after USSR breakup became as a centre of struggle for the sphere of influence in the Caspian region.
The largest oil and gas reserves of Azerbaijan make the "pour oil on the flames" (only proved oil reserves make more than 1 bn tons). Knew about the Caspian oil boom in the beginning of XX century foreign investors began their flew to Baku in 1990s.
By this time Azerbaijan government had already negotiated with some largest companies like Statoil/BritishPetroleum, Amoco and Unocal.
FORE-HISTORY
In winter of 1991, there were done the concrete steps on creation of conditions for oil development in Absheron. According to decree of the Ministry of Oil and Gas Industry of the USSR and Soviet of Ministries of Azerbaijan SSR dated January 18, 1991 there was decided to organize the tender on creation of joint venture with "Kaspmorneftegaz" for survey and development of offshore "Azeri" field.
The results of realized tender were acceptable: one of the leader from oil business - American Amoco became the winner of tender in June 1991 for implementation of surveys at stated field.
In further for participation in the project there were attracted alliance BP/Statoil, Unocal, Mc.Dermott and Ramco. Amoco has kept its leading position and saved 45% of total interest of all western companies. Generally, there is assumed the further shares' allocation - 85% will be in Azerbaijan, 15% will belong to new established company. However, the changes in power structures of Azerbaijan mixed everything. Spring of 1992 in result of struggle National Front headed power. And decided to take for realization of economy reform, and the oil matter will be first.
JUNE 1992 - APRIL 1993
State Company "Azneft" continued negotiation with the western companies regarding surveys and development the bowels of Azerbaijan sector of the Caspian Sea. Negotiations were prosperity and in 1992 the first info about joint oil produced in Azerbaijan appeared in American press. It is true that the speech was not about offshore developments, but about onshore fields which had already been discovered and launched. In September 7, 1992 one more contract was concluded with the alliance of two European companies BP/Statoil. Alliance received exclusive rights for realizing of survey at "Dostlug" field and "Shah Daniz" area's development. The shares in new established joint venture are distributed by 50/50. Moreover, BP/Statoil had agreed to pay $30 mln. for exclusive rights to development of stated fields.
In March 1993, there happened signing of the second preliminary agreement between alliance BP/Statoil and SOCAR about joint operation at "Chirag" field and later at "Shah Daniz". By this time BP had already had 19% of interest in "Azeri" project.
Soon, at the beginning of October 1992 there was signed the third agreement with Pennzoil. According to agreement, company received the rights for participation in development of "Gunashli" field where Azerbaijanian oilmen had already conducted oil production since 1980. So, there were offered to attention of foreign investors four offshore fields "Azeri", "Shah Daniz", "Chirag" and "Gunashli".
Project proposed by American Unocal on unitization of surveys' operations at all three fields was positively accepted by SOCAR. Proposal got its development in October 1992 and there was signed five memorandums in November with all participants of contracts regarding mutual understanding about unique base of provision, unique system of subsea pipelines and terminals.
Azerbaijan informed Pennzoil, Amoco and BP some months later about its wishes to unite all of three projects into one - with unique management. Companies frostily reacted to news. However, nobody expressed its principal disagreement with perspective of operation in the staff of unique consortium.
During further negotiations the Turkish Oil Company TPAO joined into staff of getting ready transaction that BP gave the part of its share. Within stated period, Azerbaijan refused to companies like Total, Lukoil and Iran. It was one of major mistakes of the National Front of Azerbaijan, which resulted with changes of political situation in the Republic.
In the middle of May, the companies signed last - sixth memorandum about unique program of operation at all three fields and the matter about unitization got its final stage. By that time the staff had the following participants like BP/Statoil, Pennzoil/Ramco, Amoco, Unocal, TPAO and Mc.Dermott.
In June 5, the Board of Directors of SOCAR approved the declaration about unitization of all works conducted at "Azeri-Chirag-Gunashli" fields. Only TPAO from all foreign companies did not declare about its public agreement with SOCAR's plans but finally they got unique declaration. According to new terms 70% of share belonged to SOCAR and the rest 30% distributed among participants of Consortium.
Several political mistakes resulted that two Azerbaijan's neighbour super powers Russia and Iran did not agree with the regime of National Front of Azerbaijan.
In April 1993, Armenia began the occupation of regions belonging to Azerbaijan adjoining to Nagorniy Karabakh and Armenia. Azerbaijan found itself in the worst economy and political crisis.
LIGHT AT THE END OF TUNNEL
At such kind of situations, the helm of power took experienced politician, Nationwide Leader of Azerbaijan Heydar Aliyev and later he was elected as a President of the Republic of Azerbaijan. Combination of experience and knowledge, energy and caution with rely to unlimited trust of nation permitted him to made a place the accents and priorities both in domestic and foreign policy of state. And done things served as a security of further success. President Aliyev could define who and what is not enough in the project of oil contract. Besides it became clear to him that negotiations with future partners on business are not fulfilled by needed people, so, H.Aliyev had to postpone the signing of the contract.
Regarding investors then they waited the final of political instability in the Republic and were not going to leave the region. They made a resolved to stimulate the power in oil project and eight oil companies in June 22 decided to offer $70 mln. bonus for Azerbaijan against that was planned for payment after contract's signing.
However, despite all of these contrivances, chief of state rested as uncompromising and the matter's solving about concluding of transaction was postponed. Soon Aliyev gave explanations regarding delay of signing of almost ready contract. "I understand that oil companies attracted in Azerbaijan have their own economy interest. It is normal. But at the same time, we should put the interest of our country above the interest of companies", - the president declared in interview to Chicago Tribune.
He has also explained that he was surprised to such kind of strong anxiety of foreign companies regarding government's wishes to more closely introduce with the contract's terms.
In stated interview, there was declared that contract were made by not competent persons and since the time there would be paid more attention to the contract.
Besides Aliyev made statement in so many words during meeting with representatives of oil companies that held in August 1993 in Baku. Its main point was"… if oil companies from the largest countries are interested in oil pool of Azerbaijan… then state departments should pay attention and interest to present public-political situation in the republic".
Further, Aliyev made a steps for achieving of agreement about cease the fire, including many intensive diplomatic negotiations with all countries participated in settlement of Armenian - Azerbaijan conflict, pacifying domestic opposition, improvement of relations with Iran, but the main was that he made - partly satisfied the wishes of the north neighbour and achieved the decision from Parliament about joining in CIS stopping the consideration of oil contract.
Following the postponed date of contract's signing, there was founded special commission from foreign experts that should fulfill its detail checking. There was also conducted full cleaning of management staff in SOCAR and its chief had been appointed incumbent Natig Aliyev.
Some months later the negotiations with foreign companies were continued.
However, the terms had already been changed and at present, Azerbaijan offered two instead of three fields (without Gunashli).
Share in the contract distributed as follows: 80% belong to Azerbaijan and 20% to representatives of foreign companies that divide it among each other by following: Amoco - 24.3%, BP/Statoil - 36.7%, Pennzoil/Ramco - 17%, Unocal - 16%, Mc.Dermott - 3.5% and TPAO - 2.5%. Bonus for development of fields was risen up to $500 mln. and the half of which should be paid immediately after contract's ratification by the parliament of country.
Such kind of amendments would not surprise for western companies though did not call special delight. It will be logically to offer that Consortium's staff will be enlarged.
Share participation in ACG project are as follows: BP (operator - 34,1%), Unocal (10,2%), SOCAR (10%), INPEX (10%), Statoil (8,6%), ExxonMobil (8%), TPAO (6.8%), Devon (5,6%), ITOCHU (3,9%), Amerada Hess (2,7%).
However, firstly, there should be fulfilled several visits and realize many political consultations.
In result, new agreements one after one began to sign. Totally 21 contracts were signed with companies form 30 countries of the world. (!). For two years two oil pipelines had been commissioned for early oil export from the contract area ACG - Baku-Novorossiysk (5 mln. tons a year with initial power). In 1998, there began negotiations with foreign companies regarding main export pipeline - MEP, which previously called the present transport corridor Baku-Tbilisi-Ceyhan named after Heydar Aliyev. Then the decision about Baku-Erzurum gas pipeline construction was accepted.
It is enough to say that according to estimations of experts the dynamic of attracted by Azerbaijan of foreign investments look as following: 1993 - 15 mln. USD, 1996 - 546 mln. USD, 1997 - 1,3 bn USD and 1998 - 1,6 bn USD. At the same time, according to Ministry of Economy of Azerbaijan the volume of investments in 1999 reached 2 bn. USD and by 2010 will be more than $15 bn. It is necessary to note that according to forecast, the main part of investments in 2010 was the investments in non-oil sector.
Presently Azerbaijan successfully develops own processing and it is important that country imports the final production, seemingly daily there are opened in all regions of Azerbaijan new industrial processing, tanning mill, tinned food factory, battery farm and others. "We should do in further more, - says in interview to famous publishing house the President of Azerbaijan, Ilham Aliyev, - I would like during my governing to make from Azerbaijan one of the most prosperity country in the world, I would like to leave policy in principally other country that all of these years has moved on the way of public progress". n
Main stages of realization of the contract of the century and the Eurasian Transport Corridor named after Heydar Aliyev - Baku-Tbilisi-Ceyhan and Baku-Tbilisi-Erzurum pipelines:
September 20, 1994 (Baku) - Official ceremony of signature of the Agreement on Exploration, Development and Production Share of the Azeri-Chirag - deepwater Guneshli (ACG) fields.
January 24, 1995 (Baku) - First session of the Azerbaijan International Operational Company (AIOC) supervisory committee.
January 18, 1996 (Moscow) - Signature of the bilateral agreement between the governments of Azerbaijan and RF on transportation of first oil from ACG fields via the territory of Russia (Baku-Novorossisk route).
March 8, 1996 (Tbilisi) - Signature of the intergovernmental agreement on transportation of Azerbaijan oil through the territory of Georgia via the Baku-Supsa route.
June 1996 (Baku) - PSDA signing on development of "Shah Daniz" field.
November 12, 1997 (Baku) - Official ceremony dedicated to production of first oil from the Chirag-1 platform within framework of the ACG development project.
October 29, 1998 (Ankara) - The Ankara Declaration regulating transportation of Caspian energy resources, in particular Azerbaijan oil to international markets via the Baku-Tbilisi-Ceyhan route is signed.
November 18, 1999 (Istanbul) - The Istanbul Declaration on achievement of agreement among the working groups of Azerbaijan, Georgia and Turkey on the pack of documents was signed. This marked beginning of the practical realization of the Baku-Tbilisi-Ceyhan (BTC) main export pipeline project, as well as support of Kazakh oil transportation via this route.
October 17, 2000 (Baku) - Two Agreements were signed between the government of Azerbaijan as the owner of transit territory and the project stockholders; and the Agreement on financing and cooperation for designing and detailed engineering of BTC MEP.
March 2001 (Baku) - The programme of geological exploration works in the Shah Deniz field fulfilled, the Notification about Discovery and Commercial Value submitted to SOCAR.
March 12, 2001 (Ankara) - The Agreement on Sale and Purchase of Gas was signed between Azerbaijan and Turkey appropriately. Pursuant to the contract, Azerbaijan will export 79.7 bn c.m. of gas to Turkey at the first stage of Shah Deniz project implementation.
August 2001 (Baku) - AIOC shareholders provided with sanction for development of Phase-1 (development of the Central part of "Azeri") the project of ACG fields' development.
September 29, 2001 (Baku) - Azerbaijan president H.Aliyev and Georgian president E.Shevardnadzeh signed the Intergovernmental Agreements (IA) and other corresponding agreements between the AR and the Republic of Georgia on transit, transportation and sale of natural gas from the Shah Deniz field.
July 2002 - The BTC MEP project base designing keeping on for six months and the further stage of detailed designing on track for twelve months finished.
September 18, 2002 (Baku) - Official ceremony dedicated to the start of BTC oil export pipeline construction took place in the Sangachal terminal expansion area.
September 18, 2002 (Baku) - AIOC shareholders gave sanction to development of Phase-2 (development of western and eastern parts of "Azeri") the project's development of ACG fields.
February 2003 (Baku) - "Shah Daniz" shareholders gave sanction to Phaze-1 realization of the project.
January 2004 (Baku) - TPG 500 templates manufacture commenced in the upgraded yard Zykh 3 under the Stage 1 of Shah Deniz development project.
February 3, 2004 (Baku) - A pack of agreements on financing the BTC project was signed with credit institutions.
June 31, 2005 (Baku) - savings of the State Oil Fund of Azerbaijan totaled to $838,5 mln.
September 2004 (Baku) - AIOC shareholders gave sanction to development of Phase-3 (development of deepwater "Gunashli") the project's development of ACG fields.
October 2004 (Baku) - "Shah Daniz" shareholders began to construction of South-Caucasian Gas pipeline (SCP).
October 16, 2004 (Akstafa) - Official ceremony of "Golden weld" at Azerbaijan-Georgian border where pipes' sections connected Azerbaijan and Georgia areas of BTC export oil pipeline were welded to each other by the Presidents, Mr. Ilham Aliyev and Mr. Michael Saakashvili.
February 14, 2005 (Baku) - oil production beginning from "Azeri" (Central) field, there was begun large-scale development of ACG fields.
May 25, 2005 (Baku) - there was held the ceremony of inauguration (celebration of the first oil pumping) of Azerbaijan area's BTC oil pipeline at head pumping station in Sangachal terminal by the Presidents of Azerbaijan, Georgia, Turkey and Kazakhstan.
August 1, 2005 (Baku) savings of the State Oil Fund of Azerbaijan totaled to $1 bn 180 mln