By Tural Heybatov
On September 20, we mark the 30th anniversary of the historic "Contract of the Century," a landmark agreement between the State Oil Company of Azerbaijan (SOCAR) and major international oil companies. This agreement, titled "On the joint development of the Azeri, Chirag fields, and the deepwater part of the Gunashli field in the Azerbaijani sector of the Caspian Sea and the production sharing of oil," reshaped Azerbaijan and the broader region. Over the years, Azerbaijan signed 26 agreements with 41 oil companies from 19 countries. However, the "Contract of the Century" remains the pivotal event that drew a new geo-economic map of Eurasia.
The name given to this contract is no coincidence. The 400-page document, drafted in four languages, holds exceptional historical, political, and international significance. It laid the foundation for the oil strategy and doctrine of an independent Azerbaijan. Although oil production in Azerbaijan began more than a century ago, it was only on September 20, 1994, that the country truly gained control over its resources. This project demonstrated to the world Azerbaijan’s resolve as a sovereign state managing its natural wealth and safeguarding its national, economic, and strategic interests. For the first time in the Caspian region, a framework for international cooperation was established. The "Contract of the Century" enabled Azerbaijan to tap into the financial and technological resources of foreign nations extensively.
The agreement was prepared under the leadership of the then-president, Heydar Aliyev, with the involvement of current president Ilham Aliyev , who headed the working group responsible for negotiating the commercial terms. It was a monumental task that led to the signing of a highly favorable contract for Azerbaijan. The Azeri-Chirag-Gunashli (ACG) deal became a reference point for subsequent contracts in the years to follow. Moreover, the realization of the "Contract of the Century" elevated Azerbaijan not only as a full-fledged player on the global stage but also as the owner of significant assets, such as the massive Kulevi oil terminal in Georgia, the Petkim petrochemical complex, and the STAR refinery in Turkey, along with a network of gas stations across Europe and several CIS countries.
Following the contract's signing, a Steering Committee, the Azerbaijan International Operating Company (AIOC), and an Advisory Council were established to manage the technical, financial, and organizational aspects.
On November 7, 1997, Azerbaijan extracted its first oil from the Chirag platform under this agreement . By December 1999, the first two tankers filled with Azerbaijan's "profit oil" reached the global market.
To ensure annual oil production at ACG would reach 50 million tons and that the "black gold" would be transported to world markets, President Heydar Aliyev proposed studying a new project: the main export pipeline. In 1998, the Baku-Tbilisi-Ceyhan (BTC) pipeline routewas selected as the most viable option. The foundation of the pipeline was laid in Baku in September 2002, and by May 2006, the early oil from Azerbaijan began to flow through it. In 2004, recognizing Heydar Aliyev's instrumental role in this project, shareholders of the BTC project decided to name the pipeline in his honor.
In 2010, a resolution was passed authorizing the $6 billion Chirag oil project.
On September 14, 2017, a revised and extended Agreement on the Joint Development of the Azeri-Chirag-Gunashli oiland gas block was signed. The "Contract of the Century" was thus extended until 2050. Initially, the ACG reserves were estimated at 511 million tons of oil, but by the time of the new agreement, it was clear that an additional 500 million tons of untapped oil remained. Importantly, SOCAR's stake in the ACG project increased from 11.65% to 25%, and Azerbaijan's share of the profit oil reached 75%.
Following the ratification of the new deal, the project’s new ownership breakdown is as follows: BP – 30.37%, AzACG (SOCAR) – 25%, Chevron – 9.57%, Inpex – 9.31%, Statoil – 7.27%, ExxonMobil – 6.79%, TP – 5.73%, Itochu – 3.65%, and ONGC Videsh Limited (OVL) – 2.31%.
The investments under the new agreement are estimated at $43 billion through 2050, with a planned extraction of over 500 million tons of oil.
At the contract's signing ceremony, Heydar Aliyev, the President of Azerbaijan at the time, said, "I am very happy to have been part of preparing and signing this contract. I am aware of the responsibility placed on me and hope that future generations will rightfully appreciate the historic significance of the event that took place here today."
Today, the "Contract of the Century" turns 30, and looking at the profound changes that have taken place in Azerbaijan and the region, we give the events of September 20, 1994, the highest possible praise.
