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Thursday, July 23, 1998 Published at 23:37 GMT 00:37 UK


UK firms strike Azerbaijan oil deal

Three UK oil companies have struck billion-pound deals with Azerbaijan.

Foreign office minister Doug Henderson hosted an official dinner for Heydar Aliev, the president of Azerbaijan, at which he hailed the deals as a boost to the Scottish economy.

[ image: Crude oil: Caspian sea expected to hold more than North Sea]
Crude oil: Caspian sea expected to hold more than North Sea
The 8bn contracts ($13bn) mean the three firms will help the oil-rich former soviet republic tap its vast reserves of oil beneath the Caspian Sea.

Speaking at the dinner, Mr Henderson said: "We in the UK believe it is important to build a very strong relationship with Azerbaijan.

"Contracts from the gas sector have brought wealth and jobs to Scotland, and the contracts which you have signed this week in Downing Street will, I believe, bring many more."

BP holds the biggest of the three contracts with the Azerbaijani State Oil Company for the Abikh oil field.

It is expected to be eventually worth 6bn ($10bn) over the next 10 to 15 years.

The two other deals have been struck with Monument Oil and Gas for off-shore development and Ramco for on-shore work.

[ image: Development: Oil companies have flooded Azerbaijan]
Development: Oil companies have flooded Azerbaijan
The Edinburgh-based Morrison Construction Group has also finalised a 93m ($150m) deal for the development of a hotel and office complex in the Azeri capital Baku.

Mr Henderson said: "Azerbaijan is a key country we have been trying to build a political relationship with.

"On the basis of that hopefully an economic relationship can be built.

"Oil reserves in the Caspian sector are double that of the North Sea."

Oil rich state

Azerbaijan's capital Baku was built on the back of oil before falling under the control of the Soviet Union.

In 1901 the area around Baku produced half the world's total oil consumption.

Stalin attempted to increase oil production in the state after the Second World War but the country has been plagued with massive economic problems despite its potential wealth.

[ image: Poverty: Azerbaijan needs foreign investment]
Poverty: Azerbaijan needs foreign investment
Oil industry analysts have estimated that Azerbaijan could have the production potential of some of the Gulf's emirates but has been hindered by its geography, sandwiched between historically stronger powers.

In the early 1990s western oil companies set up offices in Baku as the country began to seek foreign investment.

By 1994 there were 15 British oil companies working in Azerbaijan as hopes grew of being able to extract millions of barrels of oil from deep below the Caspian Sea.

In November 1997 the international oil consortium began pumping the first barrels of crude ashore.

The first batch of 1,000 tonnes per day came online from Chirag, one of the three oil fields developed by the consortium, whose major participants are British Petroleum and Amoco of the United States.

Azerbaijan has faced protests from its neighbours, including Iran, over the pumping of oil from the sea.

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