Baku, Azerbaijan, Sept.20
By Emil Ismayilov - Trend:
Oil and gas sector plays a leading role in Azerbaijan's economy. Following the collapse of the USSR, the country's oil and gas industry fell into decay. However, after gaining independence, Azerbaijan achieved great success in the development of this sector.
And the signing of the Contract of the Century on Sept.20, 1994, to develop the Azeri-Chirag-Guneshli block of oil and gas fields in the Azerbaijani sector of the Caspian Sea, laid the foundation for the revival of the whole industry and created a basis for signing a number of contracts to develop onshore and offshore fields in the country.
This contract and the formation of the modern oil and gas industry determined the further development path of Azerbaijan and provided opportunities to create the country's own economic model.
The influx of considerable investments in the implementation of oil and gas projects in the country, created favorable conditions for the development of all spheres of Azerbaijani economy in order to further reduce its dependence on the oil and gas sector.
With the aim of ensuring the supply of hydrocarbons to the world market, all necessary steps were taken to create transport infrastructure. And the construction of the Baku-Tbilisi-Ceyhan oil pipeline allowed to deliver the Azerbaijani gas to the Mediterranean coast.
Further, the development of the Shah Deniz gas condensate field started and the construction of the South Caucasus Pipeline allowed to supply the Azerbaijani gas through Georgia and Turkey. This created a basis to turn Azerbaijan into one of the gas suppliers to the European market.
Billions of dollars were invested in the country's oil and gas sector in order to achieve good results. BP in Azerbaijan Sustainability Report says that the capital expenditures on the Azeri-Chirag-Guneshli and Shah Deniz projects, as well as Baku-Tbilisi-Ceyhan and South Caucasus Pipeline stood at $43.1 billion from 1995 to 2013.
The efforts brought results. Azerbaijan's production and export indices testify to this. In particular, 345 million metric tons of oil and 100 billion cubic meters of gas have been extracted since the beginning of the development of the Azeri-Chirag-Guneshli (ACG) block. As of September 1, 2014, 185 million metric tons of the total volume of oil sold from the ACG accounted for profit oil of Azerbaijan. This means a billion-worth income for the country.
But the flow of petrodollars and Azerbaijan's full dependence on oil and gas industry do not testify to success. Only the correct model of using the funds from the sale of hydrocarbons can ensure the progressive development of the country's economy in the long term. That's why, the State Oil Fund of Azerbaijan (SOFAZ) was established. This allowed accumulating the funds and placing SOFAZ's assets abroad to minimize the negative impact on the economy, preventing the "Dutch syndrome" from happening, ensuring the accumulation of funds for future generations and maintaining the current socio-economic processes.
According to SOFAZ as of September 1, 2014, the fund has received $105.802 million since early 2001 as part of the ACG project implementation. The fund has received $1.967 million as part of the Shah Deniz project from 2007 to September 1, 2014. However, the volumes of funds in SOFAZ are not limited to these projects.
Thus, the "Contract of the Century", the signing of which is an integral part of the well-thought and competent oil strategy determined by the National Leader of the Azerbaijani people Heydar Aliyev, determined Azerbaijan's economic policy for years to come. The country has fully ensured its energy security and turned into one of the players on the global oil and gas market.
It was possible to ensure the progressive development of Azerbaijan, the various sectors of the economy, the creation of significant infrastructure facilities, the development of non-oil sector, as well as to solve important national problems through the rational use of own natural resources.
Emil Ismayilov, is Trend Agency's staff commentator