STATE OIL COMPANY OF AZERBAIJAN REPUBLIC



History of SOCAR

State Oil Company of Azerbaijan Republic (SOCAR) was established in base of 'Azneft' State Concern and 'Azerneftkimya' Production Unit in order to carry out use of oil resources of Azerbaijan Republic in base of sole state policy, improve management structure of oil industry, ensure development of fuel-energy complex due to increasing the effectiveness of use of production power of oil producing and oil processing enterprises. SOCAR was established by Decree 200 dated 13 September 1992 of President of Azerbaijan Republic. New management structure of SOCAR was confirmed by Order 328 dated 26 February 1993 of President of Azerbaijan Republic.

After this new management structure of SOCAR was confirmed by Order 50 dated 26 January 1994 of President of Azerbaijan Republic. Production units having right of enterprise, trust and departments having right of enterprise and departments having right of individual structure unit were included in its management structure.

By Decree 844 dated 24 January 2003 of President of Azerbaijan Republic 'On improvement of structure of State Oil Company of Azerbaijan Republic' Regulations and structure of State Oil Company of Azerbaijan Republic was confirmed.

By mentioned Decree SOCAR shall:

- merge Offshore Oil and Gas Production Unit with Onshore Oil and Gas Production Unit and establish 'Azneft' Production Unit in their base;

- merge Foreign Economic Ties Department with 'Azernefttejhizat' Unit and establish 'Marketing and Economic Operations' department in their base;

- establish 'Oil lines' department in base of Main Oil Lines Production Unit;

- establish 'Baku Deep Water Jacket Plant' in base of 'Shelflayihetikinti' Production Unit;

- establish 'Azerneftyagh' Oil Refinery in base of 'Azerneftyagh' Production Unit;

- establish 'Azerneftyanajag' Oil Refinery in base of 'Azerneftyanajag' Production Unit.

Then trusts 'Khezerdenizgazmatikinti', 'Khezerdenizneftsosialtikinti' and Auto transport bureau of SOCAR were announced open to privatization.

Duties and object of activity of SOCAR

Activity of SOCAR consists of assurance of effective activity and development of oil and gas industry as a sole complex, meeting the demands of consumers to energy resources in a reliable manner.

SOCAR is consisted of implementation of exploration, preparation, exploitation of oil and wells within territory of Azerbaijan Republic, including offshore and onshore areas, transportation, processing and sale of oil, gas, condensate and products getting from them, meeting the demands of consumers to energy resources in stable and constant manner, other works and services, and gaining revenue.

To fulfill its major duties, Company carries out following types of activity in a manner set by legislation:

- elaborate long-term forecasts on development of the sphere, purposeful and complex scientific technical, economic and social programs;

- increase effectiveness of production, carry out policy of saving energy and material resources, create effective production-technological and economic ties among field enterprises;

- ensure mutual ties between Company and state agencies with respective authorities in determining the future development of the sphere;

- develop production and social base of the sphere, modernize, enlarge, reconstruct the enterprises of Company, for ensuring them with new technique and technologies implement investment activity according to legislation;

- implement geological-exploration works by using modern building technologies and technical means, increase effectiveness of exploitation of wells, accelerate construction of oil and gas wells, as well lift quality and speed of preparation of wells to exploitation by observing the legislation existing in field of use of underground and environment;

- improve household methods and forms, apply scientific achievements in production;

- involve credits of banks, as well foreign banks and other sources to implement economic and production-technical programs;

- organize implementation of personnel policy, preparation of personnel in republic and overseas and raising the qualification;

- create effective possibilities due to consolidation of material base of social field for social progress of enterprise collectives;

- establish mutual cooperation with state agencies, foreign companies and businessmen;

- ensure elaboration and confirmation in respective manner of geophysical, geological search-exploration works;

- adopt decisions on exploitation of newly discovered wells, prepare and confirm in respective manner practice-industry exploitation projects, technological schemes of wells exploited by enterprises, projects on exploitation of oil, gas and gas-condensate wells;

- confirm annual working plans of oil and gas production enterprises and according to these programs determine their annual budget funds;

- organize transport of produced crude oil and natural gas and pay transport fee determined for the service to transport enterprises;

- organize processing of crude oil and natural gas, pay processing costs determined for by Company for services to oil and gas refining enterprises;

- organize sale of crude oil, natural gas, oil and gas products and pay in respective manner their supply costs;

- take necessary measures for restoration of lands and protection of environment;

carry out foreign trade ties according to legislation and etc.

Duties and object of activity of SOCAR

Activity of SOCAR consists of assurance of effective activity and development of oil and gas industry as a sole complex, meeting the demands of consumers to energy resources in a reliable manner.

SOCAR is consisted of implementation of exploration, preparation, exploitation of oil and wells within territory of Azerbaijan Republic, including offshore and onshore areas, transportation, processing and sale of oil, gas, condensate and products getting from them, meeting the demands of consumers to energy resources in stable and constant manner, other works and services, and gaining revenue.

To fulfill its major duties, Company carries out following types of activity in a manner set by legislation:

- elaborate long-term forecasts on development of the sphere, purposeful and complex scientific technical, economic and social programs;

- increase effectiveness of production, carry out policy of saving energy and material resources, create effective production-technological and economic ties among field enterprises;

- ensure mutual ties between Company and state agencies with respective authorities in determining the future development of the sphere;

- develop production and social base of the sphere, modernize, enlarge, reconstruct the enterprises of Company, for ensuring them with new technique and technologies implement investment activity according to legislation;

- implement geological-exploration works by using modern building technologies and technical means, increase effectiveness of exploitation of wells, accelerate construction of oil and gas wells, as well lift quality and speed of preparation of wells to exploitation by observing the legislation existing in field of use of underground and environment;

- improve household methods and forms, apply scientific achievements in production;

- involve credits of banks, as well foreign banks and other sources to implement economic and production-technical programs;

- organize implementation of personnel policy, preparation of personnel in republic and overseas and raising the qualification;

- create effective possibilities due to consolidation of material base of social field for social progress of enterprise collectives;

- establish mutual cooperation with state agencies, foreign companies and businessmen;

- ensure elaboration and confirmation in respective manner of geophysical, geological search-exploration works;

- adopt decisions on exploitation of newly discovered wells, prepare and confirm in respective manner practice-industry exploitation projects, technological schemes of wells exploited by enterprises, projects on exploitation of oil, gas and gas-condensate wells;

- confirm annual working plans of oil and gas production enterprises and according to these programs determine their annual budget funds;

- organize transport of produced crude oil and natural gas and pay transport fee determined for the service to transport enterprises;

- organize processing of crude oil and natural gas, pay processing costs determined for by Company for services to oil and gas refining enterprises;

- organize sale of crude oil, natural gas, oil and gas products and pay in respective manner their supply costs;

- take necessary measures for restoration of lands and protection of environment;

carry out foreign trade ties according to legislation and etc.

Joint international projects of SOCAR

To assure more fruitful production of oil and natural gas on and off shore, SOCAR performs joint projects with foreign companies. So far, SOCAR has signed 26 deals on joint development of Azerbaijan’s oil-gas fields with over 30 companies of more than 20 countries. Azeri-Chirag-Guneshli, Shah Deniz, Baku-Tbilisi-Ceyhan and South Caucasian Gas Pipeline projects are of huge global importance.

Azeri-Chirag-Guneshli and Shah Deniz projects are implemented in the Azerbaijan sector of Caspian. According to the agreement, a complete development of fields is carried out in 3 phases: Phase I - development of the Central Azeri platform; Phase II - development of the West and East Azeri field; Phase III - development of the Azeri and Chirag fields and deep-water Guneshli platform.

Oil produced in frame of the Azeri-Chirag-Guneshli project is transported to the global markets via the Heydar Aliyev Baku–Tbilisi–Ceyhan main export oil pipeline. The 1770-km line, which begins from Baku, reaches Ceyhan terminal of Turkey on the coast of Mediterranean Sea through several mountain ranges at altitudes to 2,830 metres, 1,500 watercourses, 7 seismic zones. Oil flows through the pipeline at the speed of 2 metres per second. The economically useful pipeline is of great strategic significance for the region too. The first oil that was pumped from the Baku end of the pipeline on 10 May 2005 reached Ceyhan in the Republic Day of Azerbaijan, on 28 May 2006. July 4, the first tanker containing the oil of Azerbaijan left Turkey. The inauguration ceremony was held at the Ceyhan terminal and Istanbul on 13 July 2006 with participation of top delegates from 98 countries. Presidents of Azerbaijan, Turkey and Georgia added a golden end to the model of the pipeline as the symbol of its exceptional significance. Because of its high economic advantage, some states want to transport their oil via BTC pipeline. Azerbaijan and Kazakhstan have signed a deal on transportation of Kazakh oil via BTC.

June 4, 1996, SOCAR and participants of the project - BP, Lukoil, NICO, Statoil, TPAO, TOTAL signed an agreement on exploration, development of Shah Deniz perspective field, one of the world’s hugest gas and gas-condensate fields in the Azerbaijan sector of Caspian, and production sharing. The field’s natural gas resource totals over 1 trillion cubic meter, condensate resource more than 300 million ton. Production of 8 billion cubic meter natural gas is forecasted in the first phase of development of the field that is called ‘the phase of plateau’. Gas to be produced will be supplied upon the respective agreements to Turkey (nearly 6 billion cubic meter annually), Georgia (nearly 0.3 billion cubic meter annually) and Azerbaijan (nearly 1.5 billion cubic meter annually). In Phase I, the Azerbaijan Gas Supply Company was established to manage gas sale and marketing. Operator of the Company was Statoil. Gas to be produced from the field will be used to meet the domestic need of Azerbaijan first. Deals were signed on sale of gas, which will be produced in Phase I, to Turkish company BOTAS and International Operating Company of Georgia. Agreements signed between Azerbaijan-Turkey, Azerbaijan- Georgia, Azerbaijan-Turkey-Greece will assure delivery of the Shah Deniz gas to Europe. Production of 12 billion cubic meter natural gas per year is forecasted in the second phase of development of the field. By 2015, 20 billion cubic meter gas is to be produced annually from Shah Deniz field.

Production in Shah Deniz began in December 2006, and 18,8 billion cubic meter gas was produced from the field till April 1, 2010. From February 2007, gas produced from Shah Deniz field is transported to Georgia via Baku-Tbilisi-Erzurum pipeline. July 3, 2007, the Shah Deniz gas entered the gas pipelines system of Turkey via South Caucasian Pipeline of 20 billion cubic meter yearly. The length of the pipeline, diameter of which is 42 inch, in Azerbaijan is 442 km, in Georgia 248 km and in Turkey 280 km. The last delivery point of the pipeline is in the Georgia-Turkey border. Part of the pipeline from the Georgia-Turkey border to Erzurum belongs to the BOTAS gas pipeline network.

Kazakhstan and Turkmenistan plan to transport gas via South Caucasian Pipeline in future. Deal was signed between Greece and Turkey on construction of gas pipeline from Ankara to Komotini, which will assure transportation of the Shah Deniz gas to Greece, Italy, Balkan states and other European countries.

Structure of SOCAR

I. Managing structure

1. Management

- President
- First Vice President on geology, geophysics and field development issues
- Vice President on economic issues
- Vice President on processing
- Vice President on investment and marketing
- Vice President on social affairs
- Vice President on ecology
- Vice President on human resources, regime and information technologies
- Vice President on strategic development
- Vice President on oil-gas production and transportation
- Vice President

2. Apparatus

II. Attached enterprises

1. Azneft Production Unit
2. Azerigaz Production Unit
3. Azerikimya Production Unit
4. Geophysics and Geology Department
5. Oil Pipelines Department
6. Marketing and Economic Operations Department
7. Investments Department
8. Azneftyagh Oil Refinery
9. Heydar Aliyev Baku Oil Refinery
10. Heydar Aliyev Baku Deep Water Jacket Factory
11. Social Development Department
12. Security Department
13. Ecology Department
14. Gas Export Department
15. IT and Communications Department
16. Caspian Oil Fleet
17. Neftgaztikinti Trust
18. Complex Drilling Works Trust
19. Neftgazelmitedgigatlayihe Institute
20. Gas Refinery
21. Labor Condition Norms Development Department
22. Editorial of ‘Azerbaijan Neft Tasarrufaty’ magazine

Address of SOCAR

Address: 73, Neftchilar Ave., AZ 1000, Baku city
Tel.: 492-06-85
Fax: 497-11-67
E-mail: info@socar.az
Web site: www.socar.az
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