Petroleum industry in Azerbaijan
The petroleum industry in Azerbaijan produces about 873,260 barrels (138,837 m3) of oil per day and 29 billion cubic meters of gas per year as of 2013.[1] Azerbaijan is one of the birthplaces of the oil industry.
The State Oil Company of Azerbaijan Republic (known as SOCAR), a fully state-owned national oil and gas company headquartered in Baku, Azerbaijan, is a major source of income for Azerbaijani government.[2] The company is run in an opaque manner, as it has complex webs of contracts and middlemen that non-government watchdog organizations say have led to the enrichment of the country's ruling elites.[2]
Post-war period[edit]
Beginning of offshore exploration[edit]
Oil production from the existing fields started to decline after World War II, as a result of catastrophic over-production and under-investment. However real potential for new discoveries was felt to be present offshore.
As far back as 1864, a German mineralogist and geologist
Otto von Abich surveyed and reported structures present on the seabed of the Caspian.
In the early 1930s, engineers proposed construction of offshore wells from timber piles, connected by a causeway. The first such well was laid in the open sea on the depth of 6 m to the east from filled Bibi-Heybet bay.
In 1945, oil engineers S.A. Orujev and Y. Safarov proposed a method of tubular collapsible constructions for offshore bases. This construction enabled quick installation under oil-rig at any season. In 1947, a group of oilmen developed the trestle method of linking development rigs and processing facilities. Average height of trestle above sea level is 5–7 m, and width of causeway was about 3.5 m. In 1948, construction of trestles and other causeways started on Pirallahi and Oil Rocks.
The State Oil Fund of Azerbaijan was founded at the decree of former president Heydar Aliyev on 29 December 1999 and started to operate in 2001.[40] It is a sovereign wealth fund where surplus revenues of oil industry is saved.[41] The main purposes of the Fund are to maintain macroeconomic stability and through decreasing dependence on oil and gas revenues and to foster the development of non-oil sector, to save revenues for future generations and to finance principal projects.[42] Approximate amount of the Fund's financial reserves is 34.7 billion dollars. Fund's assets may be used for strategically important infrastructure projects but not for government borrowing. The strict target asset allocation of the Fund decreases investment risks. Funds flow mainly from the State Oil Company of Azerbaijan (SOCAR).[43] The company has been described to run in an opaque manner, as it has complex webs of contracts and middlemen that non-government watchdog organizations say have led to the enrichment of the country's ruling elites.[2]
SOFAZ lacks transparency in its finances and in its contracting, which has raised questions about corruption.[44][45] Critics have described projects funded by SOFAZ as useless, and noted that contracts have been awarded to companies owned by the ruling Aliyev family in Azerbaijan.[44]
Main projects financed by the Fund