Speech by Ilham Aliyev at the opening ceremony of the 18th international exhibition and conference “Caspian oil and gas”

Dear ladies and gentlemen!

Dear friends!

Let me congratulate you on the opening of the “Caspian oil and gas” exhibition and conference and warmly welcome all the guests to our country.

This exhibition and conference has already become traditional. Such a respectable event has been conducted in Baku for 18 years now. I am very glad that there is an increasing interest in the exhibition every year. This is a great indicator showing that even though major investment projects were implemented in Azerbaijan in previous years, the interest of foreign investors in our oil and gas sector is not abating. The reason is that our oil strategy is a long-term one. As a result of the successful implementation of this strategy, the main goals our country was facing in the oil and gas sector have been met. However, we still look into the future and are sure that extensive discussions of our future plans will be held here in the coming days.

As you know, Azerbaijan is an old oil nation. It was in Azerbaijan that the world’s first oil was industrially produced in the 19th century. First offshore oil production was also registered in Azerbaijan in the 20th century. In other words, we have good traditions. Azerbaijan’s achievements in this sphere are a tangible factor for the world community, and this is perhaps something worth discussing in detail.

I would like to touch upon an interesting issue – Azerbaijani oil workers have played a huge part and contributed a lot to the victory over fascism in World War II. Ninety per cent of the Soviet Union’s fuel was produced by Azerbaijani oil workers in Baku at the time.

When our country gained independence, of course it was faced with new challenges. The first years of our independence proved very difficult for our country. Azerbaijan started making its first steps as an independent country when the situation here was unstable, there was civil war and total crisis. Of course, proper measures were required for the future of our country. Azerbaijan was lucky that the outstanding statesman and great leader Heydar Aliyev came to power at a crucial moment for the country. The foundation of our state and statehood emerged as a result of his policies. The foundation of Azerbaijani statehood was laid and the process of construction of a law-governed state began. Political and economic reforms in the country were launched. Specific steps started to be taken to achieve economic independence. The most important event of historic significance was the signing of the Contract of the Century in 1994.

As a result of the signing of this contract, Azerbaijan invited foreign investors to the Caspian Sea for the first time. Foreign oil companies started operating in the Caspian Sea for the first time. Major investments were injected in the national economy. I can say that the investment in the oil sector paved the way for investment into other sectors as well. All in all, investments totaling $97 billion have been made in the national economy since 1995, including $42 billion in the oil and gas sector. The bulk of it is foreign investment.

Although Azerbaijan was known as a high-risk state in 1994, the invitation of major foreign companies, creation of favorable conditions for them and adoption of necessary measures to protect their investment, including those in the legislative field, helped Azerbaijan to ensure its own energy security. Today, Azerbaijan is stepping up its role in the energy security of other countries.

The Contract of the Century was a historic event also because our first experience of cooperating with foreign companies proved successful. After the first contract was signed, the interest in Azerbaijan increased. Azerbaijan managed to introduce itself in the world as a reliable partner, a country honoring its commitments. Since 1994, there has been no serious argument, stand-off or desire to revise the contracts between Azerbaijan and foreign oil companies. The reason I am saying this is that certain countries revise or take steps to revise the earlier signed contracts. We have a totally different approach. We have earned the confidence and appreciate it. I think that the most important factor for investors is the confidence that their investments are properly protected by the state, and this policy remains unchanged.

The attraction of investments as a result of the Contract of the Century certainly gave the first impetus to our work. After that, major steps started to be taken to deliver oil to foreign markets. Of the very important work done to that end I would like to point out to the construction of oil pipelines. At present, Azerbaijan transports oil to world markets by three routes. We have fully met our diversification goals in this sphere. Our oil, which is transported in three directions today, is taken to world markets through very safe routes.

The construction of oil pipelines, especially the Baku-Tbilisi-Ceyhan pipeline, was a historic event too. And not only because Caspian oil was delivered to Mediterranean markets for the first time, but also because this pipeline opened a new way, a new corridor. There was a very complex geopolitical situation in our region at the time. Despite that, foreign investors attracted major funds and international financial institutions provided support. Azerbaijan also met all its commitments in a worthy and successful manner.

Therefore, as a result of the commissioning of the Baku-Tbilisi-Ceyhan oil pipeline we not only accessed new markets and opened a new corridor but also paved the way for a large revenue flow into our economy. We have used these funds very prudently. The State Oil Fund established in Azerbaijan in 1999 is one of the most transparent entities of this nature in the world. The activities of the fund have received good feedback from international organizations – the United Nations and others. The Oil Fund is an absolutely transparent entity. This has enabled us to use the revenue rationally and fairly. It is thanks to this that the number of people living in poverty has dropped from 49 to 9 per cent in the last seven years. If it hadn’t been for such a transparent and modern entity as the Oil Fund, we couldn’t have achieved such success. It is evidence that the funds flowing into Azerbaijan are distributed fairly, the accumulation and spending are carried out transparently. This also has a positive impact on Azerbaijan’s standing in the world.

At a certain stage, especially after the commissioning of the Baku-Tbilisi-Ceyhan oil pipeline, one would have thought that we had met our goals, that now we only had to manage the revenues, that Azerbaijan had realized its policy of diversification and could be content with its achievements, so to speak. However, our approach is completely different. And not only in this sphere, but also in all others. Our successes are only a certain stage, a step for us. We always look ahead and plan our steps within the framework of a long-term program to ensure a successful and sustainable development.

So the second important issue we were facing was to introduce Azerbaijan to the world not only as an oil but also as a gas nation. Especially given the fact that the implementation of the contract on the Shah Deniz gas field signed in 1996 had commenced and very major gas fields were discovered in Azerbaijan. I can say that the discovery of the Shah Deniz gas field did not attract so much attention at the time because the gas factor was not in the spotlight in the world, especially in Europe. Subsequently, only several years ago, we started realizing the impact of the gas factor on energy security of countries. Nonetheless, Azerbaijan took all the measures necessary, and I can say that the discovery of Shah Deniz became a very momentous event for global energy markets. We are now building our energy policy on the gas factor because, as I mentioned, all our oil projects have been implemented. From now onwards we will continue our policies by maintaining production at a stable level.

Our work in the sphere of gas markets is goal-oriented. The diversified export infrastructure we have created is serving the interests of Azerbaijan and provides support to neighboring markets. The construction of the Baku-Tbilisi-Erzurum gas pipeline was also a historic event. I want to reiterate that if the Baku-Tbilisi-Ceyhan oil pipeline hadn’t been built and this corridor hadn’t been opened and tested, then the opening of the gas corridor would have certainly faced great difficulties.

In other words, we built the gas pipeline in the already existing corridor, and the Baku-Tbilisi-Erzurum gas pipeline is a major factor, a serious factor on regional and continental scale today. After that, we refurbished the gas pipeline infrastructure that existed earlier. Today Azerbaijani gas is delivered to world markets in four directions. We are exporting gas to neighboring countries, and the number of our oil and gas pipelines has already reached seven.

Of course, in order to rationally use our rich gas fields we need major and reliable markets. The markets regulated by law, the markets that need our gas. Azerbaijan is pursuing a consistent policy in this direction. We have been following a policy on the Southern gas corridor for several years now. Serious discussions have been under way for several years and, at the same time, specific steps are being taken. Back in 2006, the European Union and Azerbaijan signed a memorandum on energy cooperation. That was a first step that largely reflected the intentions of both sides. Subsequently Azerbaijan managed to demonstrate its gas resources at various international forums. Today, we have confirmed gas reserves of 2.2 trillion cubic meters.

In January this year, the European Union and Azerbaijan signed another important document – the Joint Declaration on the Southern Gas Corridor. This declaration is not just an expression of intention. It is a specific document. We are working on this document. A working group has been established between the European Union and Azerbaijan, and it is working very fruitfully. I hope that all the necessary documents will be signed in the near future. We will thus have a foundation for the development of the second stage of the Shah Deniz project.

I have no doubt that all our tasks will be fulfilled. Our past, our history, the experience gained and the political will show that even in a more difficult situation we successfully managed to implement more complex projects. Therefore, I believe that the future of the Southern gas corridor will be fine.

As you know, Azerbaijan and Turkey are currently in talks over transit issues. The negotiations are in the final stages.

Exactly a year ago, in June last year, Turkey and Azerbaijan signed a protocol on gas transit. The protocol covers all the necessary issues. We simply hope that the articles listed in the protocol will soon turn into a final document. Thus, after the signing of the transit agreement, all obstacles in the way of major Azerbaijani gas will be eliminated.

I want to repeat: we have enough gas reserves. They will be sufficient for us and consumers at least for another 100 years.

If we consider that we are producing perhaps twice as much oil as was initially predicted, I can confidently say that our natural gas reserves of 2.2 trillion cubic meters are, as they say, a modest figure. According to forecasts, there is even more gas, and I am sure that larger volumes of gas will be discovered as a result of drilling operations.

There have been several important developments in Azerbaijan’s energy policy since the last exhibition. I want to point to two of them. The first, as I said, was the signing of the Declaration on the southern gas corridor between the European Union and Azerbaijan in January, while the second was the discovery by Azerbaijani oil workers of a major gas field Umid. This, above all, is an indication that we have other large reserves in addition to Shah Deniz. Our oil workers and geologists always emphasize that. On the other hand, the significance of the Umid field lies in the fact that it was discovered by Azerbaijani oil workers, by the State Oil Company of Azerbaijan. The experience of our oil workers and the experience gained from cooperation with foreign companies have already produced concrete results. In the Umid project, the State Oil Company of Azerbaijan is both the investor and operator. The discovery of Umid suggests that there are sufficient reserves of gas in the adjacent prospects. We are sure of that. I do hope that the exploration of Azerbaijan’s gas fields will be continued at the following stage.

Currently, the issue of energy security is one of the most important issues on the global agenda. In order to ensure the energy security of our partners, Azerbaijan performs the tasks assigned to it consistently and with a great will. I believe that the current collaboration between consumers, transit countries and producers will produce good results, because it is only through the interaction of these three parties that we can succeed.

This is why I want to say again that a working group has been established between the European Union and Azerbaijan. This group includes potential investors, consumers and producers.

Thus, while celebrating the 20th anniversary of our independence this year, we can say with full confidence that the successes achieved in the oil and gas sector and in energy security have significantly strengthened our country. Azerbaijan is a fully self-sufficient country. Our foreign exchange reserves are growing. Currently, their level has reached almost $35 billion. Our economy is growing, and our gross domestic product has grown three times over the past seven years. In 2003, our budget expenditure amounted to $1.2 billion dollars, while in 2011 it reached $20 billion.

Our country is pursuing a very strong social policy, stepping up struggle against unemployment and reducing poverty. Our industrial capacity and the non-oil sector are developing. I can say unequivocally that the foundation of all these successes was laid by the signing of the Contract of the Century in 1994. So today, at the opening of this exhibition and conference, I want to express my appreciation to the foreign oil companies which, in 1994, believed in us and in the future of Azerbaijan. I can say that SOCAR and foreign partners have established a very good business relationship in recent years. This relationship has a bright future because, I want to say again, the successful implementation of the southern gas corridor project will only be another stage for us. We have great plans, we look forward to the future and our achievements reinforce these expectations.

Dear friends, please accept my congratulations again on the opening of the exhibition and conference. I wish the exhibition and conference success. Thank you.