Speech of the Azerbaijan President Heydar Aliyev at the ceremonial arrangement held on the occasion of extraction of the first oil on "The Contract of the Century" - November 12, 1997

Dear ladies and gentlemen!

Esteemed guests, dear friends!

On September 20, 1994 historical event took place in of Azerbaijan. 11 large oil companies, belonging to 7 countries of the world, created a consortium and signed contract with the Republic of Azerbaijan, Azerbaijan State Oil Company on joint exploitation of deposits of "Azeri", "Chirag" and a deep-water part of deposit of "Guneshli" in the Azerbaijan sector of the Caspian Sea. This contract is named "The Contract of the Century" and it caused a great sensation and big resonance in the world. The Azerbaijan International Operational Company was founded for implementation of this contract.

The companies and countries included in this contract and consortium are known. Flags of these countries are hanging here and also flags of these companies are being demonstrated. These companies are "Amoco", "Unocal", "Pennzoil", "Exxon" of the United States of America, "British Petroleum", "Remko" of Great Britain, "LUKOIL" of Russia, "Statoil" of Norway, " the Turkish Petroleum" of Turkey, "Delta" of Saudi Arabia and "Itochi" of Japan. Together with Azerbaijan State Oil Company they have formed Azerbaijan International Operational Company. Azerbaijan International Operational Company began to put the project into practice, as stipulated in the contract and within three years all works intended by the program were carried out. Therefore all obligatory works were done by means of a powerful platform, established on oil deposit of "Chirag" and initial oil was extracted.

Today we have gathered at this ceremony to celebrate results of "the Contract of the century" carried out during three years and in connection with the extraction of the first oil according to this contract which is of great event. I congratulate you, Azerbaijan people and all citizens of Azerbaijan with this historical and significant event with all my heart. I wish all of you happiness and good luck in the name of prosperity of the independent Republic of Azerbaijan.

Esteemed guests have arrived in Azerbaijan to mark this important event. Our guests are people representing countries and companies, included in the first contract - "The Contract of the Century" and high-ranking representatives of companies and countries to which these companies belong, participating in new contracts and the consortium established after the first contract for teamwork on deposits of the Azerbaijan sector of the Caspian Sea. Today I extend a heartily to all the welcome all visitors who have paid attention and respect to Azerbaijan and came here in connection with the event and participating in this ceremony. You are welcome!

Azerbaijan is an ancient oil country and has received popularity in the world as the oil country. I want to remind you some historical figures. In 1847, the oil gushed for the first time in the world in Azerbaijan, in Baku, in Bibiheybat and for the first time in the world the oil extraction by the industrial way began in our country.

At the end of XIX and in the beginning of XX century Azerbaijan was the biggest country extracting oil in the world. In the beginning of XX century more than 50 percent of oil extracted in the world was produced in Azerbaijan, in Baku. In XX century as an oil country, Azerbaijan has very much developed. The oil industry of Azerbaijan had great services in discovery of new oil deposits on territory of the Soviet Union, especially in the territory of Russia. It is no casual that large oil deposits in territory of Russia afterwards were named "the Second Baku ", "the Third Baku ", and "the Fourth Baku"

75 percent of oil consumed in Soviet Union was extracted in Azerbaijan during the Second World War in the struggle against German fascism. Today we can tell with feeling of great pride that Azerbaijan, Azerbaijan people, the oilmen have great services in a victory over the German fascism.

Azerbaijan as a country, which goes ahead in the world in business of oil extraction by the industrial way, is also the country which has taken the first steps in discovering oil deposits in the sea, in its deep-water parts and in their use. In the Caspian Sea, in the legendary area called "Oil Rocks", in November, 1949 - this month, 48 years ago, the first oil-well gushed a fountain. And in this way, oil industry was established and began to develop in the Caspian Sea.

Scientists, oilmen and experts of Azerbaijan had great services in studying mineral resources of the Caspian Sea and in discovering oil-and-gas deposits, and they have always been ahead. Today I can safely say that the majority of oil deposits of the Caspian Sea were discovered by oilmen and scientists of Azerbaijan.

The Azerbaijan oilmen attained great successes in the field of an oil extraction in the Caspian Sea. Since 1949 till today 420 millions tons of oil, 320 billion cubic meter of gas have been extracted in Azerbaijan, in the Caspian Sea. In the territory called "Oil Rocks", there have been established piers on tens of kilometers, platforms have been constructed for extraction of oil on separate oil deposits. The Azerbaijan oilmen working in the Caspian Sea in severe and difficult conditions have shown exsamples of heroism and made much for constantly oil extraction in the Caspian Sea. All this - the scientific - technical, material base, and also big technical installations founded in Azerbaijan in the field of a petroleum industry in last years, became a good basis for carrying out the big work in a new stage of a petroleum industry of independent Azerbaijan.

For this reason only and due to our available great experience and big material basis being at our disposal, Azerbaijan also started to undertake the new steps directed to an oil extraction in the Caspian Sea, from deep-water deposits. Now, in this stage, Azerbaijan works together with the large oil companies of many countries of the world. As a result of it, in September 1994, the first oil contract was signed. As a result of it, during the subsequent period, in the last three years, new contracts were signed on joint development of many other oil and gas deposits located in the Azerbaijan sector of the Caspian Sea with the large oil companies of the world. After the first contract, 8 more contracts were signed on joint exploitation of oil-and-gas deposits. Now 20 large oil companies, which belong to 12 countries, participate in contracts signed for exploitation of deposits in the Azerbaijan sector of the Caspian Sea.

Thus, Azerbaijan, as a country, making its first steps in discovering and exploitation of oil deposits of the Caspian Sea, now at the end of XX century and on the threshold of XXI century, has shown an important initiatives in the field of use of huge energy resources of the Caspian Sea both for Azerbaijan, all littoral Caspian countries, and as well as for the world economy on the whole. As a result of all these the great work has been carried out for the last three years.

I can tell with satisfaction that a big interest is already shown to the Caspian Sea all over the world. So many companies address to us in connection with the teamwork on oil-and-gas deposits of the Azerbaijan sector of the Caspian Sea. I want to tell with feeling of great satisfaction that other littoral Caspian countries, like Russia, Kazakhstan, Turkmenistan and Iran have already begun to carry out activities in sectors of the Caspian Sea belonging to them. I hope these works will be successful. As energy resources of the Caspian Sea are very important for humanity, they will be used in the name of development of humanity.

Today we are gathered here for the event which is connected with the extraction of the first oil. But today simultaneously it is great holiday in the Azerbaijan Republic – the second anniversary of the acceptance of the first democratic Constitution of the independent Republic of Azerbaijan.

I congratulate you, all citizens of Azerbaijan on this holiday - day of the acceptance of the Constitution of the Republic of Azerbaijan and I wish all of you success in the establishment of democratic, legal, secular state in Azerbaijan on the basis of this Constitution.

Today – the Constitution day being honorable for Azerbaijan, at the same time ceremony of the extraction of the first oil is marked by us as a result of the work carried out during three years on deposits of the Caspian Sea, are all closely connected with each other. As soon after Azerbaijan gained the state independence, people become the owner of the riches and got an opportunity to use their riches as they like, Azerbaijan as the independent country has achieved the signing of such a contract, as "The Contract of the century" with many countries and companies of the world. And namely independent Azerbaijan has accepted its first independent Constitution. There is a process of construction of the democratic state in Azerbaijan. All these events are connected and supplement with each other.

Today we are gathered here to celebrate the extraction of the first oil from the oil deposit of "Chirag". Today early in the morning, we visited to the platform established on oil deposit of "Chirag" by helicopter, got acquainted with the work and examined the platform. A miracle has really been created there in the middle of the sea.

The piers and platforms in the sea would not come as a surprise to Azerbaijan. I hope, the visitors going to the deposit of "Chirag" by helicopter can confirm it. While flying from coast up to platform of "Chirag", from helicopter we have seen numerous platforms in Caspian Sea, founded on Oil Rocks and multikilometer piers, and apartment houses. All this was set up by Azerbaijan people. Therefore, it does not surprise us much. But alongside with it, the platform created within three years on oil deposit of "Chirag", is really a miracle, surprising a person. It differs from other platforms, piers in the Caspian Sea for its modern techniques, technology and modern opportunities. A person who sees this platform just admires because it is a huge integrated plant, factory, it is possible to tell, a big city. People both live and work there. People have begun the exploitation and extraction of oil there.

This work has economic, political and moral value. Economic value of it is that the work started by us this year, will bring great economic profit to Azerbaijan, to both companies and countries working jointly with Azerbaijan in the Caspian Sea. However, the moral and political value of it is that we together introduce there modern techniques and technology existing in the world today. Highly professional experts, engineers, and workers, who have come from many countries of the world, work together with the Azerbaijani oilmen and experts. It pleases us very much. This is the beginning of our future activities, this is a fine beginning.

The work done within three years, is worth of a high estimation. A big platform was also set up on oil deposit of "Chirag". There, where the depth of water makes 120 meters, they have drilled a well at 3 thousand meters deep and oil is extracted from this well. According to the project from this platform there will be drilled a second well, then 8 more wells and as a whole, there will be drilled 24 wells in the future. Annually there will be extracted about 6 million tons of oil from this platform.

However, alongside with this platform, the work carried out for these three years, has set up the material basis for the prompt export of extracted oil. The oil pipeline of 176 kilometers was built from a platform up to coast. Oil, extracted from the platform of "Chirag", already passes on this oil pipeline to the coast. Together with oil, accompanying gas is also extracted from these wells. The gas pipeline has been constructed by extent of 48 kilometers to the Oil Rocks for use of this accompanying gas from the platform of "Chirag". Accompanying gas will flow there, and from there it will be delivered to the coast and used. A big terminal, complex has been constructed on the seacoast - in Sangachal, near to Baku for collecting extracted oil and its transfer to the foreign market. It means that delivering and allocation of an extracted oil on the coast has been provided. The oil pipeline has already been constructed for the export of extracted oil abroad, world market.

You know that at one time we planned the construction of two oil pipelines for export of extracted oil in the Azerbaijan sector of the Caspian Sea and oil extracted in Azerbaijan in general. The first oil pipeline should go through territory of Russia to the port of Novorossiysk of Black sea and the second oil pipeline - through territory of Georgia to the port of Supsa of the Black Sea.

After big difficulties, the first oil pipeline started operating already. The length of this oil pipeline in territory of Azerbaijan is 230 kilometers, and its extent up to Novorossiysk is 1400 kilometers. As a result of works done in the territory of Russia, obstacles were eliminated in Northern Caucasus. On October 25 of this year, Azerbaijan oil on this oil pipeline passed Azerbaijani-Russian border. According to the message we received today in the morning, oil on this oil pipeline has already passed the city of Grozny. I hope that the oil will reach Novorossiysk port in the nearest future. However, today we were informed that the oil extracted from the deposit of "Chirag", will reach Novorossiysk port in February of the next year on this oil pipeline. That is, the whole work has been arranged and adjusted at an identical level.

I am familiar with experience of the last years, and of the past. Sometimes a part of work was carried out but because of default of other part, all works did not give any results. However, here a work is carried out in a complex form.

The second oil pipeline is being constructed in the territory of Georgia. The leadership of the Azerbaijan International Operational Company informs that this oil pipeline will be ready in September of the next year. Thus, extracted oil not only from deposit of "Chirag", but also from other deposits can run on two various directions to the world market.

Certainly, all these works are the result of activity of companies included in a consortium, and also the capital invested by them. Under the direction of the International Operational Company the shareholders of a consortium have invested the capital at a total cost of 1 billion dollars in the work carried out for these three years. It is great event in itself. Most likely 1 billion dollars is considered to be a small sum for any other state. But carrying out teamwork at a total cost of 1 billion dollars within three years is very great and joyful event for our region, for Azerbaijan.

I want to inform that all these works have attracted attention of a many companies of the world to Azerbaijan and they came to work here. More than 400 companies from different parts of the world are taking part in the work carried out to realize the program of the first contract. These companies have made use from the capital investment of 1 billion dollars and each company got benefit from it. Here there are many companies from the United States of America, Great Britain, and some countries of Europe. With feeling of satisfaction I can tell that among these companies, carrying out teamwork, 72 enterprises are industrial or building enterprises of the Republic of Azerbaijan. A cost of works carried out by the enterprises of the Republic of Azerbaijan, makes the sum of 163 million dollars.

Thus, many countries, companies of the world and also companies, enterprises, scientists, experts and highly professional workers in a petroleum industry of Azerbaijan have been involved in the implementation of this contract. We are pleased that the quantity of highly professional experts invited from abroad is reduced day by day, realization of the contract increases. And it is natural. Because Azerbaijan possesses a great scientific and technical potential in petroleum industry. It is necessary to use Azerbaijan’s potential. It is more rational from the economic point of view.

Once again I want to note that all works have displayed the energy resources of the Caspian Sea to the world. I informed you that 9 contracts on the deposits of the Azerbaijan sector have been already signed. The capital of the first contract is intended at a cost of 8 billion dollars. All feasible investments make 30 billion dollars according to all contracts. All of them are intended for deposits of the Azerbaijan sector of the Caspian Sea. However, there are very rich oil-and-gas deposits in sectors belonging to other littoral Caspian countries. I think that the work carried out in the Azerbaijan sector, and experience obtained can be very useful for them to start an action. We are ready to exchange our experience with all the littoral Caspian countries, to help them in using of energy resources of the Caspian Sea.

While speaking about all these activities, I would like to my express gratitude to all companies which are included in the first contract, for their services in the implementation of the contracts. I express my gratitude to all experts, oilmen arrived both from abroad and from Azerbaijan working in the International Operational Company.

I express gratitude to the leadership of the Azerbaijan International Operational Company and, in particular, its director mister Terri Adams and representatives of the company "British Petroleum". I think that the teamwork carried out by us within these three years has opened wide road for the future. We are ready to work jointly with all companies working in Azerbaijan, with all countries participating in this work in the future. 

We wish the littoral Caspian countries make use of recourses available in their sectors. As much as they can we are always together with the friendly neighboring countries in this work and ready to work jointly and share our experience with them.

As I noted, the Caspian Sea became known as the pool possessing the richest energy resources in the world. At the same time, on the other coast of the Caspian Sea, in territory of countries of the Central Asia, there are also very rich oil deposits. The development and use of these deposits both on the onshore and offshore in the future, is our major task. We want to do our contribution to a realization of these tasks. This work is very important for creation of economic strategy of XXI century.

All contracts signed by us are approximately for the period of 30 years. However, I hope that these contracts will operate even more than 30 years. I think that contracts signed by the Republic of Azerbaijan the large oil companies of the world will be very important documents in XXI century both for Azerbaijan and companies of countries, acting jointly with Azerbaijan. We stand on a threshold of the big, happy future. We have laid down foundations and basis of this work. Today’s solemn ceremony is just dedicated to this event. Therefore, I wish successful continuation of their activities in XXI century to Azerbaijan people and people of all littoral Caspian countries, to all countries and companies wishing to use resources of the Caspian Sea.

There is one more important question facing us. And that is an export of oil to be extracted in the future. As I noted, it is known that according to the first contract, two oil pipelines have been constructed for export of extracted oil. However, in our first contract it was envisaged to construct the main, big oil pipeline. It is intended in one contract. However, if we take into account that 8 contracts have been signed and the 9th contract - "Kurdashi", on the joint exploitation of deposits, is going to be signed, then there will be 9 contracts. On the basis of these contracts very big work will be carried out, ten millions tons of oil will be extracted. For example, according to our initial calculations, in 5-6 years there will be extracted approximately 50-60 million tons of oil in Azerbaijan under these contracts. The construction of the main oil pipeline and alternative pipelines, going to several directions is necessary. Now it is one of the basic tasks before us.

I want to say that, unfortunately, it is now one of the questions causing a lot of disputes and various opinions in the international arena. Now there are many discussions about through which territory of countries, in what direction and from where Azerbaijani, Caspian oil will flow. Certainly, the basis of these questions is its economical efficiency. For instance, I talked to shareholders of the first contract time and again. They pay a very serious attention to the commercial aspect, that is, the economic side of this issue. Probably this main oil pipeline cannot be constructed on the East. But which of them is efficient from the economic point of view, which of them is reliable and in which a safety is completely ensured? Undoubtedly, all these questions should be thoroughly considered. First of all, the oil companies and consortiums should make their thoughts known about it. Certainly, we should also express our opinion.

Now there are two oil pipelines. There are many conversations over the route of the main oil pipeline, in which direction it will take to the South or to the West, by Black sea or through territory of Turkey or from northern part, through territory of Russia. I repeat that we should discuss all these issues.

There is one more point. There are big oil deposits in Kazakhstan and oil is being extracted there. The American oil company "Chevron" extracts oil from the deposit of "Tengiz" and searches for ways for its export. Oil Company "Chevron" has addressed to us. We have agreed that oil of "Chevron" be delivered from the port of Aktau of Kazakhstan in the Caspian Sea to Baku by tankers and from here via territory of Georgia up to port of Batumi of the Black Sea by rail. Since March till now there have been transported 500 thousand, that is, half a million tons of oil of "Chevron"- "Tengiz" and delivered to the port of Batumi by this route. I think that this figure will increase and the next year it will be possible to export 2 million tons of oil by this route. However, this is very complex route. Therefore, in the summer of this year, an agreement was signed between the Presidents of Kazakhstan and Azerbaijan on the construction of an oil pipeline from port of Aktau to Baku at the bottom of the Caspian Sea. We have agreed to it as it is necessary for the Kazakhstan oil. Our terminals in Azerbaijan and oil pipelines, going now from Azerbaijan to the North and to the West, can export oil. Therefore, I hope that the solution of this question is one of the most important issues in the delivery of oil which will be extracted in the future and its export to the world market.

Besides, we conducted negotiations on construction of gas pipeline from Turkmenistan to Azerbaijan. The agreement was signed in May this year in Ashgabat. If this question is solved, it will bring great benefit to the West.

Countries located in the pool of the Black sea, for example, together with Georgia, the Ukraine, Bulgaria, Romania, Greece, etc. and also other countries of Europe want to take advantage of the oil extracted in the Caspian Sea. Thus, if we can take out oil on these pipelines to Turkey, to the coast of the Black Sea - to Georgia or to Turkey, certainly, these countries will be provided. They show great interest in oil extracted from the deposits in the Caspian Sea.

All these need to be calculated in detail. The construction of the main and big oil pipeline in a direction to the Baku – Ceyhan is intended in our first project.

It is true that the investors and shareholders say that this is expensive pipeline. They should clarify the economic aspect of it. We count that this route, can become one of the basic lines for exporting Azerbaijani, Caspian oil. Therefore, we supported it before and today we also support the construction of this oil pipeline. However, the final solution of the question, undoubtedly, depends on companies, a consortium and shareholders.

Today the first deputy of the Russian Prime-Minister Boris Nemtsov raised a question about the construction of new oil pipeline through territory of the Russian Federation in northern direction. It is possible to consider and discuss this question. It is possible to carry out much work in other directions. In any case, I think that it is necessary to do still much, it is necessary to construct many oil pipelines for export of oil extracted in the Azerbaijan sector of the Caspian Sea and in other sectors, in the Central Asia, especially in Kazakhstan, to the West. We will accept active participation in this work.

All works carried out by us have already led to the establishment of a new transport line between Asia and Europe. The question of restoration of the ancient "Silk Route" has already been realized. Last year we signed an agreement and on the basis of this agreement, we opened transport corridor from the Central Asia through the Caspian Sea, from Azerbaijan to Georgia, from the Black Sea to Europe. This transport corridor already works. Cargoes are carried from the Central Asia to Europe and from Europe to the Central Asia. And it is very favorable from economical point of view. These cargoes are shipped by the ferries belonging Azerbaijan across the Caspian Sea. Cargoes from territory of Azerbaijan to Georgia are carried by rail. Then these cargoes are delivered to Europe from the Black Sea by means of ships. This transport corridor has very great importance and future. We have supported it and we cooperate with countries which joined this transport corridor and we will continue this cooperation in future as well.

I think that both oil pipelines and transport corridor of Asia-Europe, Europe-Asia will unite the economy of these countries and strengthen their communications even more.

Dear ladies and gentlemen!

Today`s celebration and the attained achievements became possible, only after gaining of the state independence by Azerbaijan. Today we see fruits of the independent Azerbaijan state.

When we signed the first big oil contract in September 1994, we demonstrated to the whole world that Azerbaijan was independent state and being an independent state, the owner of its natural riches, made a decision on their use. After three years, we once again confirm that Azerbaijan is the independent state, the state independence of Azerbaijan is unshakable and everlasting and we already see fine fruits of this independence.

The work carried out today by us is for the sake of XXI century, for the sake of the future generations. Today we are celebrating the event connected with the first oil. The next year, 2 million tons of oil will be extracted from the oil deposit of "Chirag". But in some years, 5-6 millions tons and in 5-6 years, 40-50 million tons of oil will be extracted. After that even more oil will be extracted. So, in XXI century the economy of Azerbaijan will even more revive and develop thanks to the petroleum industry.

We consider that it is a fine opportunity not only for the petroleum industry, but also for all spheres of economy of Azerbaijan, for development of Azerbaijan as an independent state, for development of market economy in the country. And we will take advantage of these opportunities.

Today`s ceremony and these meetings once again prove that the doors of Azerbaijan are open to the world economy. Everyday Azerbaijan is even more closely integrated with the world economy. Azerbaijan builds its economy on the way of market economy. And henceforth Azerbaijan will develop its economy as a market economy. We already see the best results of it.

I want to give you a few information. The reforms and democratic state construction carried out in the economy of the republic in last years have prevented the decline which had been observed 5-6 years ago in Azerbaijan’s economy. Now there is an increase in our economy. Last year the gross domestic output in the country increased for 1, 3 percent and this year it is 5 percent. Industrial output used to drop annually for 20-25 percent. Now a decline is suspended. For 9 months of the current year, growth was observed approximately 1 percent. In 1994 inflation within a year was 1600 percent in Azerbaijan. Last year it was 6 percent. There is inflation for 9 months of this year, it has fallen to zero.

The economic reforms are underway in Azerbaijan. The law was adopted about the land and it provided handing the land over the private property. Now the land is given to the private property. Property is privatized and we see results of this privatization. Foreign trade is liberalized, and turnover of the foreign trade increased 30 percent for 9 months. This year, we are planning a capital investment of capital for the sum of 1 billion 500 million dollars in all our economy on the whole. 1 billion dollars out of this will be the foreign investment.

All these are results of the democratic processes, changes and applying market economy which are underway in Azerbaijan and also the results of rhythmical development of ties of Azerbaijan’s economy with the world economy.

It pleases us. It is natural that today I consider it a duty for myself to share these joyful feelings with you, with the guests participating in this ceremony.

Once again, I congratulate you on the occasion of this significant and historical event. I wish success to Azerbaijan oilmen and all companies, experts, economists in their future activities to everyone, working together with us today in Azerbaijan,. Thank you.