A new oil strategy of Azerbaijan, founded with the signature of the "Contract of the Century" on 1994, September 20, continues successfully and produces its fruits. The Republic of Azerbaijan has signed 26 oil contracts with the foreign oil companies in the last 12 years. In the mid 90s there was an idea to construct three oil and one gas pipeline for the delivery of the oil. Presently, Baku-Novorossiysk, Baku-Supsa and Baku-Tbilisi-Ceyhan oil pipeline deliver the Azerbaijani oil to the world market via the ports of Russia and Georgia in Black Sea and Turkey in the Mediterranean. Discovery of more than one trillion cubic meter of gas in "Shadeniz" deposit situated in the Azerbaijani sector of the Caspian Sea, brought into agenda the delivery of its gas to the world market.

The joint exploration of the deposit, discovered in the soviet period, with foreign partners was decided in the framework of the new oil strategy. Although negotiations on the joint exploration of the "Shadeniz" deposit began in 1992, an agreement on it was signed on June 4, 1996, in Baku, in the Gulustan Palace with participation of President of Azerbaijan Heydar Aliyev. The agreement was ratified by Milli Majlis, the Azerbaijani parliament on October 17, 1996. ("Heydar Aliyev: Our independence is eternal". Baku, Azernashr, vol, VI, p. 412)

"Shadeniz" structure, situated 60 km from Baku, was discovered by the Azerbaijani geologists in 1954. The structure occupies a stripe with 12 width, 30 km length in the Caspian Sea. Depth of the sea reaches 50 m in the north of the structure, 500 m in the south. "Shadeniz" gas condensate is the biggest gas deposit situated in the Azerbaijani sector of the Caspian Sea. Although estimated gas reserves of the deposit was declared 700 billion cubic meters, while current calculation showed that it is 1 trillion 200 thousand cubic meters. (http://www.president.az/)

The companies and their shares in the "Shahdeniz" project are followings: "BP" (United Kingdom) - 25,5%, "Statoil" (Norway) - 25,5%, SOCAR (Azerbaijan) - 10%, "OIEC" (Iran) - 10%, "Totalfina-elf" (France) - 10%, LukAgip - 10%, jointly established by the Russian "LUKoil" and Italian "AGIP" companies and TPAO (Turkey) - 9%. (http://www.socar.gov.az/)

The contract envisages three phases which includes exploration, exploitation and delivery. The operator of the project is "BP Exploration Shadeniz ltd." According to the contract, 4 billion investments were planned for the development of these reserves in 30 years.

After 3 years from the signature of the contract, on July 12, 1999, a presentation ceremony of three years works on "Shadeniz" deposit was held at the initiation of the President of Azerbaijan Heydar Aliyev. After analysis of the results, it was discovered that 16-20 billion cubic meters of gas will be extracted from the deposit after large-scale exploration works. It brought into agenda the selection of the route of the pipeline to deliver the gas to the world market. Republics of Turkey and Georgia were considered useful after discussions and analysis both as market and transit countries. Thus, negotiations started with the officials of those countries for the construction of the pipeline which will deliver the gas via Baku-Tbilisi-Erzurum route.

An agreement was achieved after the negotiations and it was officialized on March 12, 2001. An intergovernmental and purchase contract was signed in Ankara on a sale of a great part of "Shadeniz" gas to the Republic of Turkey. On September 29 of the same year, an agreement on "transit, delivery and sale of the natural gas via the South Caucasian Pipeline System on the territories of Republic of Azerbaijan and Republic of Georgia" was signed in Baku. Thus, necessary juridical measures were officialized and completed for the construction of the Baku-Tbilisi-Erzurum gas pipeline. It is to note that the above mentioned partner companies on "Shahdeniz" deposit have also undertaken the construction of the Baku-Tbilisi-Erzurum gas pipeline which will provide the delivery of the extracted gas to the world market.

The construction of the Baku-Tbilisi-Erzurum gas pipeline, with 980 km length, 900 million costs, started on October 16, 2004, on the day of the connection of the Azerbaijani and Georgian parts of the Baku-Tbilisi-Ceyhan oil pipeline. (http://www.xalqqazeti.com/) It was considered to raise the delivery capacity of the Baku-Tbilisi-Erzurum gas pipeline to 30-32 billion cubic meter per year, which was constructed in parallel with Baku-Tbilisi-Ceyhan pipeline. The steel pipes for the construction of the pipeline were purchased from the Japan "Sumitomo" company. Continuation of the construction works provisioned in the program of the project according to the agenda resulted in preparation for use of the gas pipeline at the end of 2006.

In early 2007, pumping of "Shahdeniz" gas into the Baku-Tbilisi-Erzurum gas pipeline started. First purchasers of the gas were Georgia and Turkey. Thus, since 2007, Azerbaijan began to be known not only as an exporter of oil, but gas as well. It is to note that tensions of relations between Georgia and Russian Federation, its usual provider of gas resulted in his deficit of gas in winter. Aiding to neighboring Georgian people, in this hard situation, Azerbaijan delivered 2,3 million cubic meter of gas per day. (http://www.trend.az/)

According to the estimates, 7-9 billion cubic meter of gas will be exported via the pipeline in 2012. It will be an additional impetus to the present rapid development of the national economy and also will put an end to the economic dependence from Russia connected with high cost gas purchased from Russia. (http://www.socar.gov.az/)

On the other hand, this project, giving an impetus to the economic cooperation based on mutual interests in the Southern Caucasus, integration processes among the countries, will ensure Azerbaijan as a leader in this region.

The government of Azerbaijan took as a priority to search alternate markets besides Turkey for sale of gas. Greece was first to begin talks with Azerbaijan as the main purchaser of "Shahdeniz" gas. The major reason for it is a demand of the European Union to Greece to diminish consummation of the oil and oil products in its internal market and increase consummation of natural gas instead. Greece needed to cooperate with Azerbaijan in this sphere in order to decrease its dependence from other natural gas exporters and promote opportunities of export of natural gas to Europe via its territory. Greece is interested in purchase of at least 500 million cubic meter of gas per year for its internal market and delivery the rest of gas to Europe via its territory. It is to note that all necessary facility is due to be completed to deliver the Azerbaijani gas to Greece via the territory of Turkey and at the end of 2007 the delivery of the gas started. Italy also started negotiations for the delivery of gas to its territory via Greece. (http://www.trend.az/)

It was reported that 625 billion cubic meter of gas will be extracted from "Shadeniz" deposit by 2010. (http://www.bp.com/)

Belarus, Moldova, Romania, Bulgaria and Germany also want to import gas from Azerbaijan. (http://www.president.az/)

All this caused revival of the idea of the Trans-Caspian pipeline of the European Union in late 1990s, which is out of serious discussions now. The idea envisages the export of the Kazakh and Turkmen oil and gas via the Baku-Tbilisi-Ceyhan oil and Baku-Tbilisi-Erzurum gas pipelines.

The Baku-Tbilisi-Ceyhan oil and Baku-Tbilisi-Erzurum gas pipelines increases the importance of Azerbaijan more, as a transit country for the delivery of the oil and gas reserves of the Caspian basin to the European market, which occupies a suitable position. Intentions of Kazakhstan and Turkmenistan to join these projects for the delivery of their oil and gas to the European market, gives ground to say so. The energy routes directed to Europe are incomparable contributions which Azerbaijan gave to the ideas of dialogue among civilizations as a restoration of the ancient "Silk road".

Exploration of "Shahdeniz" deposit and function of the Baku-Tbilisi-Erzurum gas pipeline caused the emergence of the "NABUCCO" project at a global scale. This project envisages the delivery of the gas reserves of the eastern Caspian countries, Kazakhstan and Turkmenistan to Europe. A company of "Nabucco Gas Pipeline International" has to construct a Trans-Caspian gas pipeline through the bottom of the Caspian Sea and connect it with the Baku-Tbilisi-Erzurum pipeline to ensure its delivery to Europe. The construction of the pipeline, which costs $ 7,4 billion is envisaged to start in 2010. Acquisition of gas is planned three years later. The annual delivery capacity of the pipeline will be 30 billion cubic meter. (http://www.capital.trend.az/)

The highest achievement of the past 10 years in the sphere of the extraction of gas in Azerbaijan was gained in 2007. 5 billion 997 million cubic meter of gas was produced in the country in 2007, which is 1 billion 541 million cubic meters more than that of 2006.

President of Azerbaijan Ilham Aliyev charged SOCAR to sharply increase the production and delivery of gas in the meeting dedicated to the conclusions of 2007 and tasks of 2008 which are considered important. (http://www.president.az/)