SOCAR

Soviet era

Azneft, a business that integrated the Azerbaijani oil industry was created after the Bolshevik Revolution through the nationalization of the Azerbaijani oil industry. It was subordinate to different organizations in the former Soviet Union and the Azerbaijan Soviet Socialist Republic, depending on its organizations' characteristics at different times and was known as Azerneftkomite, Azerneftkombinat (later divided into the Azerneft, Azerneftzavodlar and Azerneftmashingayirma syndicates), and Azerneftchikharma syndicates, and so forth. In 1954-1959, the Ministry of the Oil Industry of the Azerbaijan SSR and in 1965-1970, the Ministry of Oil Production Industry of the Azerbaijan SSR were established on the basis of Azerneft. In August 1970, it was renamed back to Azerneft.

Post-independence

As the Republic of Azerbaijan gained independence, Azerineft State Concern was established on December 3, 1991. The State Oil Company of the Azerbaijan Republic (SOCAR) was created on 13 September 1992 by the merger of Azerbaijan's two state oil companies, Azerineft State Concern and Azerneftkimiya Production Association according to the decree of then president Abulfaz Elchibey. In 1994, the Onshore and Offshore Oil and Gas Production Association were established as part of the State Oil Company. In 2003, the Onshore and Offshore Oil and Gas Production Association were merged to form the Azneft Production Union.

Management

In January 2006, the former head of the Baku Oil Refinery and a member of the Azerbaijani parliament, Rovnag Abdullayev, was appointed President of SOCAR. He replaced Natig Aliyev, who had been named Azerbaijan's Minister of Industry and Energy. Ten Vice Presidents directly report to Rovnag Abdullayev each as a head of different functions.

Upstream operations

SOCAR's activities are exploration, preparation, exploitation of onshore and offshore oil and gas fields in the Azerbaijan Republic, transportation, processing, refining and sale of oil, gas, condensate and other related products. SOCAR's exploration activities cover the prospective offshore fields in the Azerbaijani sector of the Caspian Sea. The current largest fields being explored are Shafag-Asiman and Absheron natural gas fields which are being explored together with BP and Total respectively. In December 2014, SOCAR signed SWAP PSA on the joint exploration and development of potential prospects in the shallow water area around the Absheron peninsula together with BP. Besides, SOCAR holds exploration activities in Umid and Bulla Deniz gas fields on its own.

Azerbaijan has 57 oil fields, 18 of which are offshore, in the Azerbaijani sector of the Caspian Sea. The essential part of the company's revenue comes from the giant ACG oil field complex and Shah Deniz gas field. In September 1994, SOCAR entered into a Production sharing agreement (PSA) with the foreign oil companies led by BP for the 30-year development of the ACG oil field which was later known as the Contract of the Century. Two years later Shah Deniz PSA was signed. As of 2014 SOCAR holds 11.6% of the ACG shares and 16.7% of the Shah Deniz shares. Moreover, SOCAR operates a number of onshore fields on its own which is the main source of the domestic supply. In 2013, 43.48 million tons (318.74 mmbbl) of oil was produced in Azerbaijan, of which 8.31 million tons (60.95 mmbbl) belong to SOCAR. In the same period, Azerbaijan's natural gas production reached record high of 29.46 bcm of which SOCAR shares constitute 7.14 bcm of it.

Pipeline operations

SOCAR has a share in two parallel-running major export pipelines of the country; Baku-Tbilisi-Ceyhan pipeline (BTC) and South Caucasus Pipeline (SCP).

The pipelines deliver the ACG and Shah Deniz hydrocarbons from Sangachal Terminal located in 45 km south of Baku to Turkey and Europe. They pass through the borders of three countries: Azerbaijan, Georgia and Turkey. The share of SOCAR in the BTC and SCP is 25% and 16.7% respectively. In addition, SOCAR is the major shareholder with 58% ownership in the Trans-Anatolian gas pipeline (TANAP) and with 20% ownership in Trans Adriatic Pipeline (TAP) which are meant to transmit some 16 bcma of gas produced from the second phase of Shah Deniz gas field with 10 bcma of that going to Europe and 6 bcma to Turkey. The TAP is seen as a competitor to Russia's South Stream because of diversification of gas supplies to Europe.

The company has stakes in the relatively low-capacity Baku-Supsa Pipeline and Baku-Novorossiysk Pipeline. The Azerbaijani part of the Baku-Novorossiysk Pipeline is operated by SOCAR, whereas Baku-Supsa Pipeline's operator is BP. Moreover, SOCAR operates Dubendi Oil Terminal in Azerbaijan and Kulevi Oil Terminal in Georgia which are important for transportation and export.

Refining operations

SOCAR has two oil refineries and one gas processing plant. Azerneftyagh Oil Refinery specializes in the production of fuels and oils, producing gasoline, kerosene and diesel distillates, various oils (industrial, motor, transformer etc.) and asphalt. All fuel distillates produced there are sent to Heydar Aliyev Baku Oil Refinery for redistillation. The refinery processes 21 out of 24 grades of the Azerbaijani crude. It meets the country's entire demand for petroleum products and 45% of its petroleum products are exported. The Gas Processing Plant produces processed gas, liquefied gas and natural gasoline. In 2010, the plant produced 4 bcm of processed gas, 24,800 tons of liquefied gas and 26,700 tons of natural gasoline.

Retail station operations

The first fuel station of the company under the brand name SOCAR was opened in neighboring Georgia in 2008, before any in its home country. The fuel stations in Georgia are operated by the subsidiary of the company SOCAR Georgia Petroleum. As of 2014 there were currently more than 110 filling stations in Georgia making it the largest retail fuel station network of SOCAR. In Azerbaijan, the company operates a few (less than any other country where it operates) filling stations under the brand name SOCAR since 2010. It is the third largest network of retail stations in Azerbaijan after Azpetrol and Lukoil. In 2011, the first retail station of SOCAR was opened in Ukraine. In October 2014 the number of the SOCAR stations in Ukraine reached 40.

In 2011, the company entered into the Romanian market acquiring initially 90% and at a later stage the rest 10% of the stake in Romtranspetrol. In September 2014, SOCAR launched its 30th filling station in Romania. In November 2011, SOCAR bought ExxonMobil's Swiss subsidiary Esso Schweiz for an undisclosed amount. Along with the acquisition SOCAR became the owner of a network of more than 160 filling stations operating under the brand name Esso across the country. The first SOCAR premium fueling station in Switzerland after the rebranding was opened in September 2012 in Zurich. All the operations in Switzerland are managed and led by SOCAR Energy Switzerland.

Other operations

SOCAR Trading, headquartered in Geneva, markets SOCAR crude oil export volumes from Ceyhan, trades third party crude and oil products and assists SOCAR with international investments in logistics, downstream and sales. Alongside its field of activity in marketing and sales, SOCAR Trading assists SOCAR in expanding SOCAR’s assets as well.

Azerigaz Production Union (PU) has been carrying out transportation, distribution and sale of natural gas in the territory of the Republic of Azerbaijan. The Union has also been ensuring transportation of natural gas produced by SOCAR to the Islamic Republic of Iran, Georgia and the Russian Federation.

Main directions of SOCAR Georgia Gas activity comprise import into the Georgian market and sale of natural gas, as well as construction and rehabilitation of gas pipelines. In 2010, the company was honoured with ‘Best Company of the year’ for active participation in ‘Gas provision of all villages’ program of the Georgian President.

Baku Shipyard LLC joint venture was founded on May 10, 2011 under the laws of Republic of Azerbaijan, by the State Oil Company of Azerbaijan (SOCAR) owning 65%, Azerbaijan Investment Company (AIC) 25%, and Keppel Offshore Marine (KOM) 10%, has developed and put into operation the most modern shipbuilding and ship-repair facility in the Caspian Sea.

Locations

Currently SOCAR's head office is located at a three-story building constructed in the French renaissance style, facing the Azneft Square in downtown Baku. Apart from the head office, SOCAR's supporting offices are dispersed across the city. A new office building - SOCAR Tower is under construction since 2010 which will gather all staff under one roof and be used as a headquarter of the company, expected to be the tallest skyscraper in the Caucasus and scheduled to be completed in the first half of 2015.

The first representative office of SOCAR was established in London in 1994. Now the company has offices in London, Frankfurt am Main, Geneva, Vienna, Bucharest, Istanbul, Kyiv, Tbilisi, Astana and Tehran.

Lack of transparency

A December 2013 report by UK-based Global Witness NGO revealed that companies working in Azerbaijan’s oil industry have no transparency and accountability. It has been documented that millions of dollars of revenue disappear into the hands of obscurely owned private companies that cooperate with SOCAR. For example, a certain Anar Aliyev owns stakes in at least 48 deals with SOCAR, with his profits amounting to US$375 million over five years, while no information could be obtained about him.

Global Witness concludes that the opacity of the deals struck by Socar "is systemic" and adds, “These findings should be of great concern to the international community as a whole. Oil and its derivative products are central to the Azerbaijani economy, making up 95% of exports in 2011. It is important for Europe that Azerbaijan keeps the oil and gas flowing and maintains a transparent and well-run energy industry. Yet this briefing shows that much of the oil business in Azerbaijan remains opaque, and corruption is still perceived to be at epidemic levels…"

Azerbaijani journalist Khadija Ismayilova has been investigating the Aliyev deals, says that the Azerbaijani public is concerned about the state oil sector, which is directly controlled by loyalists of the ruling party and deliberately drained of part of its revenues for the benefit of powerful, but unidentified, parties. Ismayilova was arrested and jailed in 2014. On 25 May 2016, the Azerbaijani supreme court ordered Ismayilova released on probation.

SOCAR has been accused of providing the Aliyev family with two luxury yachts costing $59 million. The yachts use $12 million worth of fuel annually with operating costs that are 10% of the cost of the yachts each year. Alongside yachts, SOCAR has also provided the Aliyev family a mansion in London costing $25 million.

SOCAR, contests the Global Witness report as not true and contrary to the facts. On 19 December 2014, SOCAR launched a special website in response to accusations by the 2013 Global Witness report.

In July 2015, SOCAR subsidiary SOCAR Georgia Petroleum was fined by the Georgian Competition Agency for alleged price-fixing.

Accidents

On 17 August 2013, a gas blowout occurred at the platform No.90 of Bulla Deniz field. As a result, the platform burned from 17 August to 24 October 2013. On 23 October 2014, four workers were killed and three workers were in injured when during repair works on the platform No. 441 at the Narimanov field a small wagon-house fell into the sea which damaged a gas pipeline and caused a fire. Altogether, fourteen SOCAR's workers were killed in oil and gas platforms accidents in 2014.

On 4 December 2015, three workers of SOCAR were reported missing after part of the living quarters at Oil Rocks fell into the sea due to a heavy storm. At the same day, seven workers were killed, 23 reported missing, and 33 were rescued and evacuated when a fire broke out on the platform No. 10 at the western section of the Gunashli oilfield. (As of January 2016, a total of 10 bodies have been found, leaving 20 people unaccounted for.)

Sponsorship

Since 2012, SOCAR has sought to avoid U.S. sanctions aimed at Iran, its partner in a 28 billion dollar Caspian Sea natural gas project. SOCAR funded an all-expenses-paid US-Azerbaijan "energy conference" in Baku for 10 members of Congress and 32 staff members which took place on May 28 and 29, 2013. It used two Houston based non profit organizations, the Assembly of the Friends of Azerbaijan (AFAZ) and the Turquoise Council of Americans and Eurasians, both run by Kemal Oksuz as conduits.

In May 2013, UEFA announced that SOCAR is an Official Sponsor of the 2016 UEFA European Football Championship final tournament, and acquires rights in connection with the European Qualifiers, which run from 2014 to 2017, and which relate to the qualification matches for UEFA Euro 2016 and the 2018 FIFA World Cup. SOCAR also becomes an Official Sponsor of the 2016 UEFA European Under-17 Football Championship, which will take place in Azerbaijan.

In September 2014, SOCAR signed an agreement to become an Official Partner of Baku 2015 European Games SOCAR is the sponsor of Association of Football Federations of Azerbaijan and Azerbaijani football club Neftchi Baku.