365 Days of Climate Awareness 298 – Azerbaijan and the Oil Industry

Azerbaijan now produces slightly less than 900,000 barrels of oil per day, ranking it 24^th in the world . However, like Britain, Azerbaijan’s, and more specifically, its capital city Baku’s current importance to the oil industry lies more in its prominence as a center for the regional Caspian Sea oil industry. Daily production from the Caspian is 2.6 million barrels, which would place it tenth, behind Brazil and ahead of Kuwait, if it were a single country. So Baku might be better known for its place in the history of the oil industry, but it remains important today.

Map of the Caspian Sea.

Petroleum has been known to humans for thousands of years, first in the form of natural oil and gas seeps. The oil was sometimes harvested for fuel and other applications. At least one of these seeps occurred near Baku, and Marco Polo described it. By the late 1500’s manual wells were being dug for it, and had become common by the next century. In the mid-1700’s that Imperial Russia began drilling for oil in modern-day western Siberia. They brought their operations down to modern-day Romania and Azerbaijan, both of which they controlled, in the 1800’s. The first drilled oil well in Azerbaijan was sunk in 1846, to a depth of 21 m.

Azerbaijan historical oil production.

Baku ca. 1909, "where it rain[ed] oil"--literally.

Baku became the region’s oil capital under Imperial Russia, and has remained important for the industry to this day. Under Russian control, Azerbaijan and Romania were two of the world’s early centers for production and refining. Production was centered intensely around Baku, not unlike in the US were multiple wells were sunk very close to each other in an almost desperate rush to extract the oil. The principles of reservoir management were as yet undiscovered, and the Russians faced the same difficulties of well control which their American counterparts did, with frequent blowouts and gushers. At this time Azerbaijan produced more oil than the US did.

Homespun plot of  the Oil Rocks southeast of Baku and the Absheron Peninsula.

The region’s importance remained high throughout the 20^th century. During World War II, the Germans sought to maintain control of the oil fields of Romania and the refineries of Ploiesti, and were intent on capturing Baku (as well as the rich fields of thee Mideast). Foreign companies had entered the scene in Russia (which included Azerbaijan), but all assets were nationalized after the Russian Revolution. But a new dimension was added to the region’s oil production in the 1930’s, when drilling began on long-known oil-bearing structures on the floor of the Caspian Sea—and so the offshore oil industry was born in Asia.

Nautical chart showing the Oil Rocks.

This led to the gigantic offshore installation known as “Neft Dashlari”, the Oil Rocks. After surveys in the 1940’s revealed large oil deposits in the shallow center of the sea 55 km/34 mi from shore, the first platform—and first in the world--was built in 1949. In 1952 a trestle bridge was built, and a community started to support the increasingly large drilling activity. In the late 50’s large-scale construction began, using the hulls of sunk ships as foundations. Through the 60’s as many as 2,000 people lived there, with a school and a cinema. The installation is still in use, now built on piles and imported fill.

Azerbaijani exports.

Modern, independent Azerbaijan’s economy depends fully on the oil industry, which comprises nearly 87% of its exports. The State Oil Company of the Azerbaijani Republic (SOCAR) is run very opaquely. Azerbaijan’s commitment to democracy is questionable at best, so transparency is close to nonexistent in the company’s investment, assets, production and profits. The country’s undiversified economy is subject to the fluctuations of the global petroleum market. Attempts at economic reform since the 2000’s have mitigated but not solved this basic problem, faced by those countries which gain an energy windfall and fail to invest it in their citizens.

Tomorrow: the Caspian Sea and the oil industry.

Be brave, and be well.