Major goal of Oil Fund is to serve
present and future generations.
Heydar Aliyev

National leader Heydar Aliyev signed a decree on the establishment of the State Oil Fund of the Republic of Azerbaijan on December 29, 1999.

The cornerstone of the philosophy behind the Oil Fund is to ensure intergenerational equality of benefit with regard to the country's oil wealth, whilst improving the economic well-being of the population today and safeguarding economic security for future generations.

The experience of a number of countries, the advice of the international financial organizations were used in the establishment of the State Oil Fund of Azerbaijan and at the same time the local characteristics and existing demands were also taken into account.

It should be noted that one of the main objectives of the Government of Azerbaijan is to ensure the optimal balance between the funds used for the needs of the present generations and those accumulated for the future generations.

The State Oil Fund has received 13 655,9 mln. manats or USD 16 135,8 million since establishment up to September 2, 2008 and the revenues from asset management were 337,2 mln. manats (approximately USD 343,7 million). At that period 4 851,8 mln. manats (approximately USD 5 627,5 million) or 35,5% of revenues were used for the financing of different investment or socially important projects including transfers to the state budget. Moreover, 33,0 mln. manats were transferred to the state budget as the profit tax and other taxes.

On the basis of the wise decision of national leader Heydar Aliyev the first money from SOFAZ has being allocated for building housing and the improvement of socio-economic conditions of refugees and internally displaced persons (IDPs) who were forced to flee their native lands as a result of Armenian-Azerbaijan-Nagorno Karabakh conflict. In the frame of SOFAZ’s budget execution and according to the decrees of the President of Azerbaijan 450 065,2 thousand manats were allocated for building housing and the improvement of socio-economic conditions of refugees and internally displaced persons during 2001-2008 years. 716,7 thousand manats in 2001, 37 767,8 thousand manats in 2002, 19 962,6 thousand manats in 2003, 14 990,5 thousand manats in 2004, 40 389,6 thousand manats in 2005, 110 031,5 thousand manats in 2006, 154 116,7 thousand manats in 2007 and 72 089,8 thousand manats in the first 8 months of 2008 (02.09.2008) were allocated to this project. The Fund’s assets were utilized for buildings and infrastructure in order to settle those in the districts of Aghdam, Fuzuli, Bilasuvar, Goranboy, Sabirabad and Aghcabadi regions. In addition, housing and social facilities were constructed for refugees and IDPs in different regions of Azerbaijan, including Shamkir, Aghstafa, Ismayilli, Oghuz, Shaki, Gadabay, Nakhchivan Autonomous Republic, Baku, Sumgait, Yevlakh and also in Mehdiabad and Ramani districts. 14 642 houses were built, related infrastructure, including social and cultural facilities, 15 electric power stations, 417 large and smaller transformers, 6 fire-fighting centres, 30 water pumping stations, 31 administrative buildings, 36 schools, 4 music schools, 3 hospitals, 21 medical stations, 4 primary healthcare units, 3 ambulance stations, 4 veterinary stations, 26 communications centres, 30 kindergartens, 30 bath houses, 25 community clubs were constructed. At the end of 2007 the last Galagayin tent camp for refugees and IDPs located in Sabiradad region was eliminated.

During 2003-2008 years the total amount of transfers by SOFAZ to the state budget were 3 400 000,0 thousand manats. 100 000,0 thousand manats in 2003, 130 000,0 thousand manats in 2004, 150 000,0 thousand manats in 2005, 585 000,0 thousand manats in 2006, 585 000,0 thousand manats in 2007 and 1 850 000,0 thousand manats in the first 8 months of 2008 (02.09.2008) were transferred to the state budget.

During 2002-2006 years 297 868,8 thousand manats had been directed towards the financing the politically, economically and strategically important project of Azerbaijan's equity share in Baki-Tbilisi-Ceyhan (BTC) oil export pipeline. In the frame of implementation of this project enhancing of Sangachal terminal was ensured, 8 pampers and a new modern terminal at the Ceyhan port were built. The length of the BTC pipeline route is 1, 767 km, of which 443 km are in Azerbaijan, in Georgia - 248 km, in Turkey - 1,076 km. The capacity of the BTC pipeline is 1 billion barrels (50 mln. tones) of oil per annum. 1 million barrels per day or 50 million tones per year.

During 2006-2008 years 326 457,0 thousand manats were directed for financing of the project of constructing a water pipeline from Oguz-Gabala region to Baku city from SOFAZ. The project is designed to elevate underground waters located between the Dashaglichay and Tikanchay rivers in Oguz region to a height of 410 meters using up to 100 wells to be drilled in this area and to transport the waters to the water reservoirs in Baku city. Pressure regulators will be installed all along the route and two water reservoirs will be built with a holding capacity of 10 thousand cubic meters. The flow rate of water to be transported to Baku will reach 19 cubic meters per second and will allow for 24 hour uninterrupted water supply of Baku city. The length of this pipeline will be 267 km and diameter 2 m.

During 2006-2008 years SOFAZ allocated 176 135,8 thousand manats for financing of the project of reconstruction of the Samur-Absheron irrigation system. This strategically important project is designed to build a new Takhtakorpu-Djeyranbatan water canal, 111.4 km long, with a throughput capacity of 40 cubic meters per second, and a 142.5 meter high water reservoir with a holding capacity of 268 million cubic meters and capable of providing 2•12.5 MW power generating capacity. The project will improve the drinking and technical water supply of Baku and Sumgayit by 2 times. One of the part of the project allocations is for preparing the territory of water ponds, included in the preparation works on “construction of Takhtakorpu water pond”, building a new settlement for evacuation of the IDPs settled there, relocation of existing roads, main gas and oil pipelines from this area. Other part of allocations is expending for the preparation of the worker project for the “construction of takhtakorpu water pond” and building the dike, implementation of design works and construction works of Takhtakorpu-Jeyranbatan canal. About 1200 workers were involved in the works of construction of Takhtakorpu.

In 2006 the Oil Fund allocated 90 000.0 thousand manats to form up the statutory capital of the Azerbaijan Investment Company established under Presidential Decree of March 30, 2006. The ultimate objective of the Company’s investment activity is to ensure long-term investment of resources by acquiring equity investments as well as shares in joint-stock companies and other commercial entities operating in the non-oil sectors of the country’s economy.

During 2007-2008 years 23 260,0 thousand manats were directed for financing of “Baku-Tbilisi-Kars New Railway” Project. In accordance with the Bilateral Agreement signed between the Government of the Republic of Azerbaijan and the Government of Georgia these allocations were directed to the account of the Ministry of Transport of the Republic of Azerbaijan through the state treasury for implementation of design, rehabilitation-renovation and operational works of Marabda-border of the Republic of Turkey (Kartsakhi) Railway Section and proper infrastructure objects.

From 2008 as per the Ordinance of the President of the Republic of Azerbaijan No.2090 dated 16.04.2007 SOFAZ started financing “The state program on the education of Azerbaijan youth abroad in the years 2007-2015”. 463,9 thousand manats were directed to this project in January-September 2008. To this day 91 students study abroad in the frame of this state programme.

SOFAZ is closely involved in the Extractive Industries Transparency Initiative (EITI). Azerbaijan joined EITI in 2003.

The Executive Director of the State Oil Fund is the Chairman of the National Committee on EITI. The EITI Implementation mechanism was established by EITI stakeholders – National Committee on EITI, local and foreign extractive industry companies and NGO’s Coalition for Increasing Transparency in Extractive Industries and according to this mechanism Azerbaijan regularly discloses EITI reports.

Being a first country in implementation of EITI Azerbaijan was selected as EITI Board member at the 3rd EITI conference held in October 2006 in Oslo, Norway. The multi-stakeholder Board was established to manage EITI at the international level and to oversee the future operation of EITI.

State Oil Fund won the 2007 UN Public Service Award for Improving Transparency, Accountability and Responsiveness in Public Service for EITI implementation. The United Nations Public Service Awards are the most prestigious international recognition of excellence in public service. Established in 2003 it rewards the creative achievements and contributions of public service institutions to a more effective and responsive public administration in countries worldwide. The State Oil Fund is the first governmental agency among the governmental institutions of the Eastern Europe and CIS countries that are awarded the UN Public Service Award. About 200 countries applied for the 2007 awards competition only 14 of them were eligible through several stages of the online procedures to win the 2007 UN Public Service award.