Set to remain a major force in the region, the State Oil Co. of Azerbaijan Republic (Socar) will continue to rely heavily on foreign investment to increase its oil and gas production from old and new fields.

Socar is involved in all oil and gas activity onshore and offshore Azerbaijan and is the country's single biggest player.
The country, with a population of 8 million, has made steady progress toward the production and marketing of its own natural resources since Socar was established in 1992 following a merger of several petroleum companies.
Socar's production has almost entirely been from the shallowwater Guneshli field and from Chirag field since 1997. However, Socar's production level is set to increase substantially as the Azeri Chirag and deepwater Guneshli (ACG) project is fully developed.
The state company participates in all production-sharing agreements (PSAs) with a 10% share in ACG increasing to a 33% to 50% share in newer PSAs. It also manages Azerbaijan's share of the profit oil.
Under the terms of the PSAs, Socar can collect all associated gas free of charge after required fuel and pressure maintenance needs are met.
It has established an affiliate company with each consortium, and the company negotiates with foreign oil companies to restore and increase the production efficiency in some of the old fields. Management of these fields will be based on the same principles as for new fields.
The company recently announced plans for the future investment, rehabilitation and development of many prospective structures. Results from Inam (BP), Absheron (Chevron), Oguz (ExxonMobil) and Kur Dashi (Agip) are expected in the coming year, with Azeri geologists estimating combined reserves at more than 3.7 billion boe.
The so-called "contract of the century" was signed in 1994 for the ACG project. The country has based its activities on its long-existing oil strategy, technical and scientific infrastructure and labor potential. However, it is relying on the investment, technology, experience and management of foreign companies. The basis for the progress and achievements of the past 8 years lies in the development strategy established by Azerbaijan's President Heydar Aliyev.
His initiatives have paved the way for Azerbaijan to strengthen its geopolitical location and become an international center in the operation and export of the country's natural resources.
Meanwhile, Socar President Natig Aliyev has played a crucial role in implementing and transforming Azerbaijan's petroleum industry in the past decade.
140 years of production
Azerbaijan has a 140-year history of oil production, but the country still has rich onshore and offshore hydrocarbon resources. About 53 fields - 36 onshore and 17 offshore - are under exploitation. The Caspian Sea is rich in oil and gas deposits, but considerable potential also exists for large onshore developments. However, this is contingent upon investment at the exploration stage.
Twenty-eight oil and gas deposits have been discovered in the offshore sector of Azerbaijan. One hundred forty-five prospective structures - including 40 structures up to 197 ft (60 m) deep, 33 structures in 197 ft to 656 ft (60 m to 200 m) of water and 72 structures in water deeper than 656 ft (200 m) - have been discovered and prepared for exploitation and drilling, Socar's Aliyev said.
Some 3.4 billion bbl of oil (including condensate) and 12 Tcf of gas have been produced, with Socar estimating reserves in the Azerbaijani sector of the Caspian to be more than 29.6 billion bbl.
"However, the production level needs to be greatly increased. The production for 2000 was 14.5 million tons (107 million bbl). Taking into account the recoverable reserves, we should be able to increase the production level, and this depends on technological and financial support," the Socar president said at an international oil and gas conference in Baku in 2000.
Azerbaijan's proven reserves are estimated to be 148 million bbl per year with sustainability for 200 years; 296 million bbl per year with sustainability for 100 years; and 444 million bbl per year with sustainability for 70 years.
According to the above figures, Azerbaijan is ahead of other oil-producing countries. However, reserves are mostly found in deep portions of the sea, thus discovery and exploitation will require a great amount of investment and state-of-the-art technology, the Socar president said.
"The policy to increase oil and gas production is the right decision, since the future development of Azerbaijan, whether in political, social or economic spheres, will depend greatly on oil and gas production," he said.
PSAs pave the way
A great deal has been achieved within the framework of the 20 or so production-sharing contracts (requiring US $60 billion in investment) that have been concluded. Early oil production from Chirag has yielded more than 85 million bbl of o il. About $3.2 billion has been invested in oil infrastructure and pipeline construction and refurbishment.
The recent agreement to construct the Baku-to-Ceyhan pipeline through Azerbaijan, Georgia and Turkey will add considerably to Azerbaijan's oil potential.
In addition, the Shah Deniz gas condensate field is finding offset with the recent export agreement signed with Turkey.
"We don't have sufficient expertise and experience to operate such huge projects in the conditions of competition. Therefore, we are trying to solve problems in this area with the help of the steering committee that we set up jointly with foreign oil companies," Aliyev said.
Socar also has been considering setting up steering committees for new projects.
"Since the exploration stage is completely carried out by foreign experts, there is a real need to establish such a committee upon the discovery of a commercially beneficial oil and gas field. Participating in the work of a steering committee, approving an annual budget, clarifying the volume of oil production as well as correctly forecasting this volume depending on the market prices of oil may be considered part of oil production management," the Socar boss said.