SOCAR Trading News

Celebrating the 20th Anniversary of Contract of the Century

Released: 30 April 2014

Following declaration of the Constitutional Act of the State Independence of the Republic of Azerbaijan dated 18 October 1991, America and the leading countries from Europe and Asia focused their attention on the rich subsurface and surface resources of Azerbaijan.

President of Azerbaijan Heydar Aliyev, who won national elections of 3 October 1993, declared willingness of the Republic to collaborate with foreign countries interested in oil reserves on a mutually beneficial basis as one of the fundamental principles of the country’s foreign policy and in line with national interests and benefits of foreign states. The main objective was aimed at improving social welfare and strengthening Azerbaijan position on the international area through the ownership of existing natural wealth, including rich oil and gas reservoirs and their effective exploitation respectively.

On the 20 September 1994, a solemn ceremony dedicated to the execution of the “Agreement on the Joint Development and Production Sharing for the Azeri and Chirag Fields and the Deep Water Portion of the Guneshli Field in the Azerbaijan Sector of the Caspian Sea” took place in the Gulustan Palace in Baku. That event embarked a new milestone in the history of Azerbaijan petroleum industry.

Due to its historical, political and international importance the Agreement has been called "Contract of the Century" and consisted of about four hundred pages and executed in four languages. Thirteen first class oil companies, such as Amoco, BP, SOCAR, LUKoil, Statoil, Exxon, TPAO, Itochu, representing eight countries worldwide participated in the “Contract of the Century”. Thus, a “New Oil Strategy” and doctrine started to be successfully implemented. On 12 December 1994, the “Contract of the Century” passed through ratification by the Azerbaijani Parliament (Milli Majlis).

Following execution of the Agreement and, thereafter production of Early Oil from the Chirag platform the number of foreign companies willing to engage with the development of offshore fields in Azerbaijan grew up considerably.

Since then, there have been thirty two Production Sharing Agreements (PSAs) signed by the world leading companies involved in our country from all over the world. The amount of total investment made in the petroleum sector approximates USD 50 billion.

SOCAR has been effectively strengthening its position on the international markets. Today, SOCAR is regarded as global oil and gas company, which has made fundamental achievements extending its activities both in the region and throughout the world, including Europe, CIS, Asia, Africa and America.

One of the biggest subsidiaries of SOCAR is Swiss-based SOCAR Trading S.A., a marketing and trading arm of SOCAR. Headquartered in Geneva, SOCAR Trading has offices in Singapore, UAE, Nigeria, Turkey, Monaco, Egypt, employing approximately 170 people globally.

Commencing its direct sales of Azeri Light crude oil to final buyers worldwide in April 2008, SOCAR Trading has played significant role in enhancing the value and expanding geography of Azeri Light distribution and has delivered the crude to major oil companies and refineries in Europe, Middle East, America and South East Asia.

Efficient marketing efforts of SOCAR Trading led to increased valuation of Azeri Light crude oil, which according to international industry experts resulted in cumulative additional revenues of USD 1.1 billion for Azerbaijan during 2008-2013 (click here for the experts report). SOCAR Trading also trades significant volumes of third party crude and oil products (approximately 46% of 2013 traded volumes) and assists its parent company with international investments in logistics and downstream. Some of third party trading businesses of SOCAR Trading has generated transit revenues for Baku-Tbilisi-Ceyhan (BTC) pipeline consortium (estimated USD 350 million transit revenue during 2010-2013, click here for report).

Azerbaijan’s energy potential continues to strengthen with proven hydrocarbon reserves currently standing at 4 billion metric tons. Such magnitude of oil and gas reserves will have a great impact on energy security throughout Eurasia. As of year-end 2013, cumulative amount of investments in the Azerbaijan petroleum sector by the major oil companies such as BP, Exxon, Statoil and others involved in the development of the ACG field approximated USD 34 billion.