POINT OF REFERENCE

Azerbaijan's wealth of oil and gas resources has been known for centuries. It was in 1848 that the first oil well was sunk in Azerbaijan, a century later what was then the unique development of the offshore Neft Daslari [Neft Dashlary] field began, and a little after that the world's only city on stilts was created.

But by the end of the century the former glory of Azerbaijan and its oil started to wane. New life was breathed into it by the signing on 20 September 1994 of an agreement to develop the Azeri-Chirag-Guneshli field in the Caspian Sea, which was immediately dubbed the "Contract of the Century".

In order to comprehend the significance of this contract for Azerbaijan, one need only refer to one fact - several years later (2001) on 20 September Oil Worker's Day was declared in the country.

This agreement, which was signed by President Heydar Aliyev at a particularly difficult time at the dawn of Azerbaijan's independence (just a couple of months before this a truce was signed with Armenia, 20% of the country's territory was occupied by the Armenian armed forces, armed formations subordinate to individuals terrorized the country and immense pressure was exerted by external forces who opposed the signing of the "Contract of the Century", and so on), became the locomotive of the development of the whole country in subsequent years.

First and foremost, the "Contract of the Century" opened up Azerbaijan to foreign investors. The participation in the ACG of world giants such as Exxon, BP, Statoil, Unocal and others convinced investors of the permanency of the course of the country's leadership towards stability and integration into the progressive world community.

After this another over 30 agreements were signed on the development of potential sections, including the Shah Deniz field, the importance of which has increased many times over in the new millennium.

In all, over $30bn have been invested in the development of ACG in the 19 years since the signing of the "Contract of the Century". Extraction is now being carried out in full measure at all three fields - Chirag, Azeri and the deep-water section of Guneshli - and work is under way to set up platforms in the western part of Chirag, which will enable the overall level of extraction to be stabilized. In the whole period of development here a total of 2.3bn barrels of oil (about 310m tonnes from reserves of 900m tonnes) have been extracted. Overall oil extraction in the country has increased from 9m tonnes in 1994 to 43m tonnes in 2012.

Income from the marketing of the government's share of the oil at ACG, however, has exceeded $90bn, which have become the basic part of the reserves accrued in the State Oil Fund. To date about $35bn have been accumulated in SOFAR and another large amount has been spent on socio-economic projects.

The removal of tented communities for refugees and the construction of comfortable townships for them, providing Baku with a new source of drinking water from Qabala, the construction of the Baku-Tbilisi-Kars railway and the state-funded training of young Azerbaijanis abroad are just a short list of the projects that have been carried out using funds from oil. The State Oil Fund is an indispensable shareholder of all main economic projects carried out both in the country and abroad - the construction of a new shipyard and a new oil refinery complex in Turkey and in Baku's Qaradag district, the Trans-Anatolia gas pipeline (TANAP) and hundreds of other projects.

Generally speaking, the revenue from oil has enabled the Azerbaijani government to fully update and replenish the whole country, resolve problems with the development of the transport infrastructure and give a boost to the accelerated development of the non-oil sector. Furthermore, the State Oil Fund has begun to extensively buy up gold, which is helping to stabilize the country's reserves, and also to acquire real estate throughout the world - its assets include buildings in central London, Paris and Moscow, and there are also plans for property in South-East Asia.

All these factors play a definitive role in improving the country's image in both the economic and political sense. Azerbaijan is already being recognized by the world community as an exporting country of major volumes of oil. In this connection the Baku-Tbilisi-Ceyhan pipeline, which provides an outlet of the Caspian's oil resources to the world's markets, is of primary importance.

Let us repeat: the "Contract of the Century" has drawn foreign investors to Azerbaijan's oil sector and enabled new fields to be opened, Shah Deniz being the most important. This huge field by world standards, with reserves of 1.2 trillion cu m of gas, has in a short period of time changed Azerbaijan from an importer into an exporter - the country is already supplying gas to Georgia and exporting it to Turkey and Russia. But this is merely the prelude, an aperitif to the main dish - gas supplies to Europe. It is Azerbaijani gas that is due to make a big contribution to ensuring the energy security of the Old World. Discussions have been in progress for several years on projects for Azerbaijani gas supplies to Europe, in which the main role has been played by Nabucco. But the European countries were unable to transfer the discussion from paper to real construction sites. So, on the basis of its own experience in financial resources, Azerbaijan instigated a project for the construction of the Trans-Anatolian gas pipeline (TANAP), which is designed to deliver Azerbaijani gas from the western part of Turkey to its eastern borders. The choice in the summer of the Trans-Adriatic pipeline project (TAP) as the future route removed all the questions on such a crucial problem as the EU's energy security.

And, finally, the implementation of the "Contract of the Century" has enabled SOCAR to stand alongside the world giants of the oil and gas industry. Yet it was only in 1994 that SOCAR was a very moderate company even on a regional scale. Now, however, it is ready to implement the TANAP project independently, is building a shipyard near Baku, owns a major petrochemical complex - Petkim - in Turkey, has oil reservoirs in South-East Asia and a network of petrol stations in Switzerland, Georgia, Romania and Ukraine. During Russian President Vladimir Putin's recent visit to Azerbaijan SOCAR, by signing an agreement on cooperation with the Rosneft company, showed it was ready for equal partnership relations with this major world player in the oil industry. And in this instance the scope of the agreement was much broader than simply the development of Azerbaijani fields. It included swap supplies of oil and the development of fields in third countries, and also marketing operations. In the opinion of experts, Rosneft might be interested in oil supplies to world markets via the Novorossiysk-Baku and Baku-Tbilisi-Ceyhan pipeline system, and also in the use of SOCAR's oil reservoirs in Singapore. The Azerbaijani company, for its part, would like to obtain and develop fields in Russia. Twenty years ago such a scale could not even be imagined.

But what did the "Contract of the Century" mean for the ordinary Azerbaijani citizen? To answer this question one has only to take to the streets of Baku, to see a completely transformed city with trendy high-rise buildings, magnificent illuminations and re-designed historical buildings. In the past decade over 150,000 new apartments have been handed over in Baku alone. In this same period the number of vehicles in the country has doubled to 1.1 million. These two figures illustrate more precisely the increase in the prosperity of Azerbaijan's citizens.

To sum up, 20 September 1994 may rightly be described as the point of reference when the full-scale and long-term development of our country began. And even a century hence, when oil and gas reserves may be running out, Oil Worker's Day will remind future generations of the day when the contract that defined the country's destiny for centuries was signed.