The relaxation of foreign economic relations that took place as a result of Gorbachev's perestroika policy created favourable conditions for foreign companies interested in Azerbaijan oil. In the late 1980s, the rich, untapped Chirag, Azeri, and Guneshli oil deposits located in the Caspian Sea bed off Baku received the initial attention of foreign oil companies. In January 1991, the Azerbaijan government issued a decree soliciting bids for the exploitation of the three fields, which were treated as three separate contracts. Amoco won the tender for the Azeri field. Other participants in the bid were Unocal, McDermott, and a British Petroleum (BP) / Statoil alliance. At that time, Pennzoil and Ramco were negotiating for the Guneshli field, and BP / Statoil was bidding for Chirag.

Oil Development Policies of the New Administration
In June 1991, according to decision of the Azerbaijan government, and under the leadership of Amoco, a consortium was formed to exploit the Azeri oil field's deposits. Unocal, BP / Statoil, McDermott, and Ramco participated in this consortium. In October 1992, a feasibility study concerning the formulation of the technological and economic know-how for the project was also completed.

In June 1993, the expansionist circles in Russia who could not tolerate losing their influence in Azerbaijan engineered a revolt in the young republic. To placate Russia, Heydar Aliyev, a new leader of Azerbaijan, promptly stopped all talks with foreign oil companies. Yet, Aliyev soon began meeting with representatives of the companies, assuring them that a contract would be signed soon. During this period, SOCAR lost its authority over the negotiations as a state organization, while another expert group assumed the task.

The endorsement of the contract on 20 September 1994 brought months of negotiations to an end. A few elements in the local press call the agreement the "Contract of the Century" in light of the fact that almost $8 billion were earmarked for investment over 30 years, during which time 511 million tons of oil were expected to be produced from the three offshore fields. The contract is based on "production sharing" principles, with the breakdown of shares as follows: SOCAR, 20 percent; BP, 17 percent; Amoco, 17 percent; LUKoil, 10 percent; Pennzoil, 9.8 percent; Unocal, 9.5 percent; Statoil, 8.6 percent; McDermott International, 2.4 percent; the Turkish TPAO, 1.7 percent; Ramco, 2 percent; and Delta-Nimir (Saudi Arabia), 1.7 percent; respectively. In the spring of 1995, SOCAR gave 5 percent of its share to Exxon and 5 percent to the Turkish TPAO. Exxon and TPAO paid a bonus in the amount of $173 million and accepted the responsibility of making credit available to SOCAR for its remaining 10-percent share. Itochu of Japan jointed the consortium by buying 2.5 percent of American McDermott's share and opening talks with Pennzoil with the intent of buying 5 percent of its share. According to the contractor's terms, the Azerbaijan International Operation Company (AIOC) was created in early 1995 to coordinate the consortium's joint operations.

A comparison between the terms of the contract before and after the June 1993 uprising demonstrates that as far as Azerbaijan's interests were concerned, the "Contract of the Century" was a regression rather than progress. Whereas in earlier negotiations SOCAR retained a 30 percent share, the highest contract share among all of the participating companies, Azerbaijan's share of the "Contract of the Century" was only 10 percent. Nevertheless, the contract helped the Aliyev government to not only stabilize the political situation in the country, but also to finalize a series of other oil contracts in rapid succession.

The Caspian International Operating Company (CIOC), formed in November 1995, was the second international consortium tasked with tapping offshore Azerbaijani oil fields. The project focused on the Karabakh field, believed to contain 80 to 120 million tons of oil within a 427-square-km area situated 120 km offshore. The investors in this $2-billion, twenty-five-year consortium include: SOCAR, with a 7.5-percent share; LUKoil, with 12.5-percent; Agip, with 5 percent; Pennzoil, with 30 percent; and the Lukoil-Agip joint venture, with 45 percent. All parties agreed to begin with the exploration tasks immediately after the signing of the agreement. Furthermore, a three-year timetable was agreed upon for the underrating of geological exploration.

June 1996 saw the formation of the third major consortium, which was established to develop the Shah-Deniz site, covering an 800-square-km area 25 km south of the Absheron Peninsula. The value of the agreement is estimated at $3 billion to 4$ billion and will be in effect for thirty years. The partners of this venture are the BP / Statoil alliance, SOCAR, LUKoil, Elf (France), the National Iranian Oil Company (NIOC), and the Turkish TPAO. The BP / Statoil alliance holds a controlling 51 percent of the consortium's shares, TPAO holds a 9-percent stake, and the other participants own 10 percent each. Shakh-Deniz reserves are believed to include 200 million tons of condensate gas, 500 billion cubic meters of natural gas, and 100 million tons of oil.

In December 1996, the Northern Absheron Operating Company (NAOC) was founded to look into exploring oil and gas reserves of the Ashrafi and Dan Ulduzu fields, which are situated 30 km northeast of the Absheron Peninsula. Both fields together provide an estimated 95 to 100 million tons of oil and 30 to 35 billion cubic meters of gas. The participants in the consortium were Amoco, Unocal, SOCAR, Itochu, and Delta-Nimir (Saudi Arabia), each holding a share of 30 percent, 25.5 percent, 20 percent, 20 percent, and 4.5 percent, respectively. Exploration and development of the two fields is anticipated to require at least $2 billion.

France was the site for signing the fifth major Azerbaijani oil contract in January 1997, the intent of which was to explore and develop the Lenkoran Deniz and Talysh Deniz oil fields. The fields, containing as estimated 80 to 100 million tons of oil jointly, are situated in the southern portion of the sector of the Caspian belonging to Azerbaijan. The $2-billion contract was signed between SOCAR and the French companies Elf and Total. Elf holds a 65-percent share, while SOCAR and total each have a 25-percent and 10-percent share, respectively.

Participants in Azerbaijan's Five Major Oil Contracts of Percentage of Shares

Company	1st	2nd	3rd	4th	5th
Amoco (U.S.)	17	0	0	30	0
Exxon (U.S.)	8	0	0	0	0
Pennzoil (U.S.)	4.8	30	0	0	0
Unocal (U.S.)	10	0	0	25.5	0
British Petroleum (UK)	17.1	0	25.5	0	0
Ramco (UK)	2.1	0	0	0	0
Statoil (Norway)	8.6	0	25.5	0	0
Itochu (Japan)	3.9	0	0	20	0
LUKoil (Russia)	10	1.5	10	0	0
SOCAR (Azerbaijan)	10	7.5	10	20	25
TPAO (Turkey)	6.8	0	9	0	0
Delta-Nimir (Saudi Arabia)	1.7	0	0	4.5	0
LUKAgip (Russia-Italy)	0	45	0	0	0
Agip (Italy)	0	5	0	0	5
Elf Aquitaine (France)	0	0	10	0	40
Total (France)	0	0	0	0	10
OIEC (Iran)	0	0	10	0	10
Deminex (Germany)	0	0	0	0	10
Total	100	100	100	100	100

This trend of constituting new consortium continued with the signing of several other contracts. Three new contracts amounting to $ 10 billion in investment were signed during President Aliyev's official visit to the United States in the summer of 1997. Aliyev's 1998 visit to Great Britain witnessed similarly the signing of several multi-billion dollar oil contracts. Based on official information, the total commitment for the exploration and development of the oil reserves in Azerbaijan amounts to nearly $40 billion.