Azerbaijan is rich in natural resources, primarily oil and gas. Extraction takes place mainly in the Caspian Sea. In recent years, oil production has decreased while the extraction of natural gas is increasing.
The extraction of oil, gas and other minerals accounts for close to 40 percent of GDP. More than three quarters of the oil is exported, but just over one quarter of the natural gas.
COUNTRYAAH: Major exports by Azerbaijan with a full list of the top products exported by the country. Includes trade value in U.S. dollars and the percentage for each product category.
Domestic gas demand is growing, and gas has to be imported from time to time, as export contracts are fixed and the majority of gas supplies have not yet been exploited.
Azerbaijan is considered to be the first oil-producing country in modern times. At the beginning of the 20th century, half of the world’s oil came from Azerbaijan. Today, energy accounts for about 90 percent of the country’s exports and more than two-thirds of government revenue.
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The extraction of oil mainly occurs in the Azeri-Chigar-Guneshli (ACG) fields some 12 miles off the coast of the Caspian Sea.
In 2010, a peak was reached in oil production, when more than a million barrels per day were extracted. Subsequently, production fell, but in recent years it has remained fairly stable at about 80 percent of the listing during the peak year. In 2016, gas production had tripled in a decade and expansion continues.
The huge gas field Şah Deniz (King of the Sea) under the Caspian Sea, southeast of Baku, has been listed as the world’s eighth in size. The production there began in 2006 and made Azerbaijan a major gas producer internationally. The second phase of the field, in which the British oil giant BP with partner companies began the extraction in 2018, is expected to more than double the country’s exports of gas.
The second large gas field Abşeron, lies a few miles out to sea. It is still under development and is expected to start producing by 2020 according to the operator, French Total.
Azerbaijan has tried to interest western companies to take over the Neft Daşları (Oily Rocks) facility, known from a Bond film and closest to a city, built on platforms, piles and sunken ships five miles from shore. In Neft Daşları – also known for the world’s first offshore oil platform – oil has been mined for seven decades, but the plant is decaying.
The export of Azerbaijan’s oil and gas to the Western European market is politically sensitive. First, the oil was transported from Baku north and west across Russian territory, through Dagestan and Chechnya to Novorossiysk on the Black Sea. But Azerbaijan has been anxious to get past Russia, and today there are two other lines – one from Baku west through Georgia to the Georgian Black Sea port of Supsa and another from Baku through Georgia and Turkey to the Turkish Mediterranean port of Ceyhan. Most of the Azeri oil is exported through the latter.
In 2016, construction of the so-called Southern gas corridor was started, a pipeline to transport gas from Denah Deniz through Azerbaijan, Georgia, Turkey, Greece, Albania and under the Adriatic to Italy. From there gas will be distributed in the rest of Europe.
In Azerbaijan, gold, silver, copper, iron and other minerals are also extracted. The Iran-owned company, Anglo Asian Mining, operates two gold mines and has agreements for the exploitation of four additional gold deposits.
More than 90 percent of the country’s electricity comes from gas-fired power plants, and the rest mainly from hydropower.
The oil reserves will eventually run out. Since 2009, there is an authority responsible for renewable energy development. The Government hopes that renewable energy sources will meet one tenth of the country’s energy needs by 2020. In addition to hydropower, the hope is to expand wind and solar power. There are also prerequisites to use biomass.
Environment
The abundant use of fertilizers and pesticides in the Soviet era led to severe environmental damage in agriculture. Since then the situation has improved. On the one hand, there is now a greater awareness of the dangers, and on the other hand, many farmers cannot afford to buy the funds needed.
Oil and industrial emissions have caused pollution along the country’s coasts, especially around the Abşeron Peninsula with the cities of Baku and Sumqayıt. In the district of Baku, the state-run oil company Socar has made efforts to clean up oil spills.
The Caspian Sea is the world’s largest lake. Along the beaches, seals used to be a common sight. An estimated one-tenth of the stock that existed about 100 years ago now remains. The species is considered endangered by hunting and industrial emissions, not least from oil recovery. The UN environmental program Unep has warned against large quantities of uncontaminated wastewater, but also radioactive substances from nuclear power plants. Much of the pollution reaches the lake from the Volga River in Russia, which flows into the Caspian Sea. Also, the stocks of the valuable deer, which are fished for caviar, have decreased dramatically.
Most of the wastewater of Azeri households goes into the rivers and seas. However, a certain element of oil in the water belongs to the Caspian Sea’s natural environment due to leakage from oil layers beneath the seabed.
FACTS – ENERGY AND ENVIRONMENT
Energy use per person
1,502 kilograms of oil equivalent (2014)
Electricity consumption per person
2202 kWh, kWh (2014)
Carbon dioxide emissions in total
37 488 thousand tonnes (2014)
Carbon dioxide emissions per inhabitant
3.9 tonnes (2014)
The share of energy from renewable sources
2.3 percent (2015)
2012
December
Suspected assailants are imprisoned
Four men are sentenced to prison for between 12 and 14 years. They are found guilty of terrorism and treason for having planned attacks in connection with the European Melo Festival in Baku in May and for having had contacts with the Iranian Revolutionary Guard.
November
Stricter punishment for protests
Parliament tightens the penalty for participating in illegal gatherings; The fine for those arrested for participating in an unapproved demonstration is increased from a maximum of about SEK 100 to around SEK 9,000. Anyone caught carrying weapons or explosives during an illegal meeting can be sentenced to imprisonment for up to three years. An average monthly salary is around SEK 3,000.
October
Prison sentence for spies convicted
The 22 Azerbaijanis who have been facing trial for espionage on behalf of Iran (see March, August 2012) are sentenced to prison for between 10 and 15 years. They are found guilty of planning terror attacks on US and Israeli embassies in Baku.
September
The promotion of murderers is rioting in Armenia
An Azerbaijani officer sentenced to life imprisonment in Hungary for murdering an Armenian colleague during a 2004 NATO-led course is transferred to Azerbaijan to serve the rest of his sentence in his home country. However, the Baku government, which guaranteed that the punishment would be respected, pardons him immediately after returning home. He is also promoted, assigned a new home and received outstanding salary for the eight years he has been incarcerated. The measures upset the government of Armenia threatening war. Internationally, too, there is great concern that the decision will prevent opportunities for further peace negotiations on Nagorno-Karabakh. Both NATO and the European Parliament regret the decision.
August
Trial against suspected spies
The trial opens for closed doors against the 22 Azerbaijani citizens arrested at the beginning of the year for espionage on behalf of Iran (see March 2012). During the arrests, they were accused of planning attacks on US and Israeli embassies in Baku.
June
The president grants opposition
President Aliyev pardons nine opposition prisoners sentenced to up to three years for demonstrations in April 2011. Among those released are the party Müsavat’s Deputy Chairman Arif Hacılı.
Fighting at the Armenian border
Border battles with Armenia erupt on a couple of occasions and a total of five Azerbaijani soldiers are killed. Both sides blame the violence on the fact that forces from the other side have tried to cross the border. Struggles also occur in the disputed area of Nagorno-Karabakh, which is located in Azerbaijan but is largely populated by Armenians.
May
Demonstration in connection with Eurovision
A few days before the finals of the European Melody Festival, the opposition is conducting a non-sanctioned demonstration near the mayor’s office in Baku. A number of protesters are said to have been beaten and arrested.
April
Legal demonstration is carried out
For the first time in a year, an official demonstration against the regime will be held on April 8. According to the opposition groups that organized the manifestation, about 10,000 people stand behind the demand for President Aliyev’s departure. The police state the number of participants to around 1,200.
March
Suspected Iranian spies are arrested
The Ministry of Security announces that 22 people have been arrested on suspicion of spying on Iran’s behalf. They are accused of being linked to the Iranian Revolutionary Guard. The arrests must have taken place in January and February. In February, the Azerbaijani authorities must have averted planned attacks on the Israeli embassy and a Jewish center in Baku.
The governor is kicked for a rally
The governor of Quba in northeastern Azerbaijan is dismissed the day after the city is shaken by rattles. One thousand people attack government buildings in protest of the governor calling city dwellers “traitors” because they sold land they had been allocated but could not afford to keep in condition. The unrest is described as the most difficult outside Baku in many years.
