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The Contract of the Century

Azerbaijan is now a strategic energy supplier.

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Location of Baku–Novorossiysk pipeline. (Image: Winipedia.org)

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After Azerbaijan gained independence in 1991, a new oil strategy was developed by then President Heydar Aliyev in order to have a strong and stable economy. The basis of the new oil strategy, which includes the involvement of foreign shareholders, was the development of Azerbaijan’s oil fields, the diversification of crude oil transportation routes, the effective management of oil revenues, and Azerbaijan’s entry into a new stage of development.

On September 20, 1994, between a consortium of 11 foreign oil companies from 6 countries and SOCAR, a large-scale agreement on the joint development and production sharing of three oil fields located in the Azerbaijani sector of the Caspian Sea – the “Azeri”, “Chirag” and “Gunashli,” an international agreement was signed. The agreement was called the “The Contract of the Century ” due to its historical, political and international importance. It was reflected in approximately 400 pages and in 4 languages. This agreement later led to the signing of 27 more agreements with 43 oil companies representing 21 countries.

Initially, the contract was signed for 30 years. In 2017, the term of the contract was extended to the middle of the century after the profit and success achieved by the development of the “Azeri”, “Chirag” fields and the “Gunashli” field.

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After the agreement was ratified on December 12, 1994 and entered into force on December 14, the Azerbaijan International Operating Company (AIOC) was established to carry out the work on behalf of foreign shareholders cooperating with SOCAR and the government of Azerbaijan.

The initial oil production started in November 1997 as part of the “The Contract of the Century.” In the same year, oil was transported to the Black Sea through the Baku-Novorossiysk pipeline. In 1999, the pipeline from Baku to another port on the Black Sea – Supsa – was commissioned. The first tanker carrying Azerbaijani oil was sent to world markets in December 1999. The annual transmission capacity of the pipeline is 50 million tons, which can be increased to 60 million tons in the future.

Since June 1999, BP has taken over the operator function for AIOC. At present, the participation shares in ACG are as follows: BP (30.37%), SOCAR (25%), MOL (replaced “Chevron” from April 16, 2020 (9.57%), “Inpex” (9, 31 %), “Equinor” (7.27 %), “ExxonMobil” (6.79 %), TPAO (5.73 %), “Itochu” (3.65 %), “ONGC Videsh Limited” (OVL) (2.31 %).

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So far, more than 43 billion US dollars have been invested in ACG. After that, it is planned to spend the same amount on investment. Thanks to ACG, Azerbaijan began to play a more important role as a strategic energy supplier.

According to the information provided by the Azerbaijani Ministry of Energy, more than 560.2 million tons of oil have been extracted and more than 199 billion cubic meters of gas have been produced since the “Azeri-Chirag-Gunashli” fields were put into operation until September 1 of this year. From 2001 to September 1 of this year, the amount of income from the sale of oil from the ACG field was 159.6 billion US dollars.

Taking into account bonus payments of USD 2.4 billion, total revenues are USD 162 billion. From the beginning of this year to September 1, 6,629,000,000 US dollars were earned from the ACG field.

Rachel Avraham is a political analyst working at the Safadi Center for International Diplomacy, Research, Public Relations and Human Rights.  She is the author of “Women and Jihad: Debating Palestinian Female Suicide Bombings at the American, Israeli and Arab Media.”  

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Thank you for choosing TheJ.Ca as your source for Canadian Jewish News.

We do news differently!

Our positioning as a Zionist News Media platform sets us apart from the rest. While other Canadian Jewish media are advocating increasingly biased progressive political and social agendas, TheJ.Ca is providing more and more readers with a welcome alternative and an ideological home.

We revealed the incursion of anti-Israel progressive elements such as IfNotNow into our communities. We have exposed the distorted hateful agenda of the “progressive” left political radicals who brought Linda Sarsour to our cities, and we were first to report on many disturbing incidents of Nazi-based hate towards Jews across Canada.

But we can’t do it alone. We need your HELP!

Our ability to thrive and grow in 2020 and beyond depends on the generosity of committed readers and supporters like you.

Monthly support is a great way to help us sustain our operations. We greatly appreciate any contributions you can make to support Jewish Journalism.

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