Opening address by Heydar Aliyev, President of the Republic of Azerbaijan at the meeting devoted to the results year activities of AIOC within two years held in the Presidential Palace - October 10, 1996

Today`s meeting has been devoted to the implementation into life of the contract signed by the State Oil Company of the Azerbaijani Republic and the Consortium of foreign oil companies in September 1994, to the discussion of the results of the activities in this sphere in the past two years.

After the signature of the Contract an International Operating Company was founded by the Consortium to implement the contract into life. The founded International Operating Company is located in Azerbaijan and functions to realize the signed contract.

The contract has been ratified by the parliament of the Republic and signed by the President of the Republic of Azerbaijan as a law in December 1994. After gaining force the contract began to be implemented into life. I have controlled the performed work all this time. Mr. Terry Adams, president of AIOC, and others have always informed me on the realization of the contract regularly.

Lately several meetings of AIOC have been held. High officials of oil companies in the Consortium have taken part in these meetings, they have discussed their work and drawn up the working plan of 1997, defined the budget. As a result, yesterday I met the representatives of AIOC and oil companies which form the Consortium.

At the same time it was in work plan some months ago to hear the report of AIOC and SOCAR. When we put into function the installation "Dede Korkud" and opened the office of AIOC, I decided to fulfill my plan and convened this meeting. The purpose of the meeting is to discuss the previously formed work, to appreciate it and determine the tasks facing us. These tasks have been determined by AIOC and SOCAR, but I want to hear their reports, get acquainted with the situation. At the same time to solve the problems together with the government and state officials.

Now we shall first hear Mr. Natig Aliyev, President of SOCAR, then Mr. Terry Adams, president of AIOC. 

Concluding speech


Ladies and gentlemen!

Today`s discussion devoted to the realization of the contract signed by the State Oil Company of the Azerbaijan Republic and the consortium of the big oil companies of the world two years ago was very substantial and important.

I think that we got comprehensive information on the realization of the intended program, on the achievements gained during its realization and on the future plans. I am very pleased with the discussion, given information and the reports.

Two years ago when I issued a decree on the signature of the contract and later when I signed the contract I was sure that it would be a success and give its positive fruits.

At the same time I have always been interested in the realization of the contract and its program within these two years and I have always kept it under my control. Proceeding from information and report I was sure that the contract will be successfully implemented into life.

But despite that, the comprehensive, detailed and broad information of today pleases me and gives me assurance.

Now after four hours discussion and broad information we can say that the contract is being implemented into life and giving its positive fruits.

Mr. Natig Alijev, president of SOCAR, Mr. Terry Adams, president of AIOC and his vice-presidents gave very comprehensive, interesting and significant information here.

When listening to this information I come to the conclusion that two years ago when we signed this contract we were full of enthusiasm and now after the lapse of two years the information on the realization of the contract pleases us ever more, and I think that we may feel happier than ever.

I want to stress the fact that SOCAR and AIOC in particular have made preparations for this discussion with great responsibility; they have introduced very convincing documents and information to the discussion.

AIOC reflects the composition of the consortium; it is a very complicated body consisting of the member of the consortium. I say it because this consortium consists of eleven companies. Each company has its work style and interests and manner. The harmonious joint collaboration of the representatives of the companies and the successes that they have achieved together are rejoicing. Just from this point of view I think that we all must use the experience of AIOC.

When I asked Mr. Terry Adams about today`s discussion I thought that he would prepare long information. But never imagined that the information will be so brief and detailed. Not only Mr. Terry Adams, but his vice-presidents in charge of various spheres of AIOC were very concrete and convincing. They broadened our imagination on the realization of the contract and illuminated different aspects of their work very clearly.

Such an organization of the work is praise worthy. I appreciate it very highly and thank the speakers for the detailed information, explanations, for the displayed diagrams, schemes and tables.

Now I want to express my own view about the performed work. First I want to note the fact that the program of realization of the contract has been implemented into life consistently and in its due time. Some things there have been delayed, but not unreasonably, they have their objective reasons, therefore they can not affect the general results of the work.

I want to draw the attention of the representatives of foreign oil companies to such a thing that we have always planned our work, our whole life. In the Soviet economic system there were five-year plans, yearly plans, there were various plans for the realization of various thing. We are used to make plans and implement them into life, and we have great experience in this sphere- just because of this the socialist economic system was named as "a planned economic system". Then people thought that there was not any plan in the capitalist economy. But you see that there are plans everywhere, they exist now and will exist in future. The thing is in what way the plans are made and how they are implemented into life.

In the past, for example especially in the seventies we had great achievements in the fulfillment of plans in Azerbaijan. For instance, we used to fulfill the five-year plans, five-year plans on the development of economy ahead of schedule. It was a reality. And I want to note it once more as a truth today. Therefore in the frames of that system the economy of Azerbaijan used to develop more rapidly in those years.

But also there were cases in Azerbaijan, as well as in other republics, in the Soviet Union, in general, the intended plans were not fulfilled and people in charge of them gave various reasons for it. I want simply to stress that we have experience to fulfill plans successfully, also experience not to fulfill them.

Now, in the transition period of our economy, in the transition period of our state in general, we can not fulfill many of our intended plans in time. It has objective reasons, but subjective reasons, too.

I think that after some period we shall reach a certain, necessary level in this sphere, too. Implementation of the program of the oil contract into life is a good example for us.

It is true that in the course of these two years everything connected with the contract was under my control, but sometimes I worried about it. But today`s discussion pleased me very much and now I can firmly say that AIOC has worked very successfully in these two years and it is necessary to appreciate its work.

The speakers told about the performed work, I do not want to say concrete things now. But preparation of the drilling installation "Dede-Korkud", its exploitation, drilling of the well in the "Chirag" deposit and now that the drilling has reached a 1200 meter depth are all the results of concrete works. I shall take into regard the information and the promises given here today. I take it into consideration that the Northern route of the pipeline will be ready by the end of 1996. I take it into consideration as well as that in August 28, 1997, the early oil will be extracted in the "Chirag" deposit in conformity with the program of the Consortium. I take it into consideration, though with delay, in March 1997 the construction of the Western oil pipeline will begin and by the end of 1998 it will be given to exploitation.

I accept all this information, all the above said today and take them into consideration. Of course, I want to express my assurance that all these promises and words will be fulfilled.

I asked a question concerning the completion of the Northern oil pipeline. The works in the territory of Azerbaijan will be completed but we must be sure that it will also be completed in the territory of Russia by the end of this year as well, we must be fully convinced that it will be finished.

Therefore I charge Artur Rasi-zade, Prime Minister, and Natig Aliyev, President of SOCAR, to contact immediately with the government of Russia and the "Transneft" company, I repeat it once more, to arrange the discussion of this problem. We propose to discuss this issue in Azerbaijan. It is necessary to invite them here and discuss the problem. I shall myself control this matter. We must have a clear program that beyond our borders up to the port of Novorossiysk the oil pipeline will be ready by end of the year.

I want to inform you that through the Northern pipeline we want to export a part of oil produced by us, that is, produced by Azerbaijan, beginning from the start of 1997. Therefore the completion and repair of this oil pipeline acquires a special importance for us.

I think that the consortium must examine this pipeline in August 1997 when it produces the early oil, it must be fully tested and be ready that the consortium may export the produced oil at once. Therefore I attach a special importance to this problem and I have already charged the concerned persons with necessary missions.

While listening this information today I viewed the changes, like in a movie, that have taken place in Azerbaijan connected with the realization of the contract in these two years. I think you feel the same, and I note with a sense of satisfaction that in these years, though it is a short period, much have done, much have changed. It is doubtless that the economy of Azerbaijan will feel the positive impact of the contract when the oil is produced, it will help the development of economy and improve the welfare of population.

Now you know the amount of foreign investment to the oil industry of Azerbaijan. The investments continue to come and they will increase year after year. It, of course, will bring profits to Azerbaijan and to the participants of the consortium. It also changes the face of the oil industry of Azerbaijan.

New technology is arriving in Azerbaijan, quite modern technology, not connected only with the oil output, not connected only with drilling, but technology connected with all forms of industry. Having relation to oil production, and I repeat once again, quite modern technology. This is also a great achievement for us as well.

How many local people have been employed by the consortium?! Most of them have undergone training abroad, improved their qualifications, learned languages, got acquainted with modern technology and learned to work with it. It is also a great achievement. How many ships are being repaired, how many production spheres are being modernized?!

Undoubtedly our production opportunities are growing. All this are of great importance.

Now oil pipelines, onshore and off-shore lines, terminals are being constructed. All this are production funds of the industry of the Republic of Azerbaijan, especially the production funds of the oil industry.

How many changes are there in the infrastructure of Baku, of Azerbaijan?! If we have witnessed so many changes only in these two years, imagine, how many changes there will be in future?! They will multiply, gain speed and grow.

One of the things that makes me happy is the idea sounded in the speech of Mr. Terry Adams and those of his deputies when saying that as a result of the contract the developed countries of the world display great interest Azerbaijan, desires and tendencies to invest into the industry of Azerbaijan are growing. It is also an important factor for us.

After the first oil contract we have signed two others. Now when developments have already begun we receive many other appeals. For example, Mr. Terry Adams said that one of the greatest American oil companies "Exxon" entered the consortium after the signature of the contract, in the summer of 1995. But I have got a new letter from the president of that company. They are working in new deposits in the Azerbaijan sector of the Caspian Sea and want to get our consent for joint developments.

The "Itochu" company of Japan has entered the consortium, opened its representative office and submitted many proposals doing work in oil industry and other spheres of our industry. Yesterday I got a letter from Mr. John Major, Prime Minister of Great Britain. He informs me that the representatives of "Ramco" of England, of "Total" of France, of "Mobil" of America will arrive in Baku in these days. Mr. John Major asks me to consider their proposals carefully and help to realize them. It was impossible to give a share in this contract to the French company "ELF-Aquitaine", but it has already its share in the contract on "Shahdeniz" and this company has applied to get shares for joint developments in other oil deposits, too.

All this is the result of the contract which we signed two years ago, all this events, benefits proceed from that contract. And if this contract had not been concluded and realized today we should not have had the present socio-political stability in the republic. If democratic changes had not taken place, if the process of democratization had not taken place in the life of our state, economy and society, very popular and great oil companies of the world would have not displayed interest in Azerbaijan.

I think that one of the best features of our joint work, of the work that we have been doing for two years, is that we have been discussing it already over four hours.

We have held many and various discussions, sessions, international conferences in Azerbaijan. But it is the first time that we are discussing our joint work, with these persons. It is a very happy event. I want to tell you that I am very pleased with the content, participants of the discussion.

I said many praises, and I suppose that all this is just and grounded. But it must not lesson our efforts, but help us to pull our efforts together and speed our work on the basis of the gained achievements. It is very important, because along with successes we have also omissions and drawbacks in our work; in the process of discussion I told you my view. Solution of some problems has been delayed, not fulfilled in its time; therefore we must try in future not to repeat the shortcomings.

For instance, despite the explanations given now I think that the construction of the Western oil pipeline is being delayed, because we have been dealing with it for a long time. It is true, decision on this route was adopted at the beginning of this year, but there were discussions on this route and on a second route last year and some preparatory work was also performed. Therefore to prolong the term of its construction till the end of 1998 is not expedient, to my mind. Of course, everything is not in my power now, I tell you my own opinion, but it should be hastened and I think it is possible to speed it up, because the consortium is also interested in it, the government of Georgia are also interested in it, so we are. It was possible to construct it much before. But now it appears that it is impossible to complete it before the indicated time. Therefore I say that the end of 1998 must be a deadline, there should not be a delay, a new deadline.

The thoughts which were said here concerning the platform "Chirag-2" are also very interesting, I think it is necessary to give a serious attention to it. I shall charge SOCAR to ask AIOC to consider this issue concretely and inform me on the ways of its solution.

Yesterday during our discussions there appeared such an idea, it was proposed by the consortium, I accepted it with great pleasure, that is, the idea of producing oil more than it is intended in the contract, in the frames of opportunities of the consortium. Am I right? It was said yesterday, I immediately grasped the meaning, and I think that it is very important and I suppose that it is worth of paying a serious attention to its future realization.

Today for several times I asked questions concerning the construction of the main pipeline. Finally Mr. Terry Adams answered that it all depended on the commerce. That is, if the oil output is great, then this oil pipeline will be built, if it is not great, it will not be constructed.

I think that oil output will be as much as it is intended in the contract, this is the first. Just proceeding from it the contract provided the construction of the main pipeline and its completion within 54 months.

Secondly, we must also take it into consideration that we have signed two other contracts after the first one, the contract on "Shahdeniz" and then on "Garabag" deposits. We have other deposits, we are working on them and the members of the consortium are well aware of it, many of oil companies of the consortium display great interest in these deposits. We have reserves there, and finally, you know that the "Chevron" company wants to transport a part of its oil output in Kazakhstan through the territory of Azerbaijan, if I am not mistaken, tomorrow the president of "Chevron" is coming here to meet us. All this creates even more foundations for the construction of the main oil pipeline than it was intended two years ago. Therefore, it is necessary to deal with the construction works in this field.

Mr. Terry Adams said that there were several variants of oil pipeline route. It is true, these variants exist long ago and have been discussed for several times. Even not depending on us they are being discussed in some financial centers and various countries. For instance, some days ago the delegation of the European Union was here. They also were discussing this issue. It is being discussed also in Washington by the World Bank. The European Union displays great interest in the oil deposits of Azerbaijan in the Caspian Sea and in the construction of this pipeline, so do other Western countries. Therefore, I ask Mr. Terry Adams to submit concrete proposals. I now charge Natig Aliyev to deal with this problem and tell me when we shall get concrete proposals for our discussion.

It is my opinion that there is a need for the construction of such an oil pipeline. This need is growing day by day and we must not delay with it. It is doubtless that all the performed works depend on commercial principles. Nothing can be done now which does not suit commercial principles. There is no doubt about it.

As I understood from the words of Mr. Mc Hafin that the office of the Consortium is small for AIOC. I think that they have already found a new building. I tell you in advance that I am supporting the proposal of AIOC and help then in future in order to enable them to create good work conditions.

In general you know that the contract is for 30 years, in these 30 years we shall be together. Let nobody doubt it. The experience of the past two years showed that things are moving forward successfully. I am sure that our work will grow by and by. But I think that 30 years is the term of the first contract. We shall be together after the expiration of these 30 years for tens of years again. I am sure in it.

I declare it once more that I consider the principle of joint development of the oil deposits of the Azerbaijani Sector in the Caspian Sea with foreign oil companies very successful for Azerbaijan, for the economy of Azerbaijan, and in future I shall try to continue our joint work on this principle.

I have said it several times and repeat it today for the public of Azerbaijan that this is a fruitful road for the economy of Azerbaijan, for the geographical-political position of Azerbaijan, for strengthening the statehood of Azerbaijan and we shall follow this road in future, too.

I think it is necessary to adopt a document for the realization of some problems, for concluding the discussions. I shall sign an instruction in connection with the conclusion of the discussion. I charge now Artur Rasizade, Vahid Akhundov, Natig Aliyev and chief of the department Shahin Aliyev. There are many problems here, I have already given instructions on the problems discussed here, some problems became evident in the discussion, please assemble all of them and make a draft instruction for my signature. I shall reflect there my own proposals, too.

I thank AIOC for the work performed in these too years. I wish successes both to AIOC and SOCAR in speeding the work.

All the republican agencies, ministries, committees, various institutions, Cabinet of Ministers, administration of President must help the implementation of these issues.

Thank you! See you soon.