Azerbaijan - introduction
BP and a behemoth
Lack of modern technology, outmoded project management techniques and poor
business development are probably the greatest weaknesses in developing local
content in Azerbaijan.
Perhaps to a greater extent than almost anywhere in the fomer CIS, the country's
oil industry is characterised by its domination by the state oil company (SOCAR), which has yet to shake its reputation as a post-Soviet behemoth - and is
attended by all the typical attributes of such an organisation: byzantine
practices, cronyism and opacity - despite Azerbaijan being a signatory to the Extractive Industries Transparency Initiative.
While such a state of affairs is not immediately conducive to a developed local
content policy or program, the scale of controversy surrounding the Baku Tblisi Pipeline, has ensured that BP and its partners have paid particular attention to sustainability issues,
amongst them local content and community development, with a focus on capacity
building, microfinance, and encouraging local entrepreneurs to participate in
local oil economy.
For its part, the government has at least signalled a special interest in
developing and encouraging private sector investment in improving capacity in
agriculture, communications and IT, tourism and non-oil sectors generally.
Local content provisions are most meaningfully enshrined in Azerbaijan within
production sharing contracts (PSAs). Legislation remains problematic in many
instances. The speed with which much of it has been drafted means that in many
instances, key issues are left unresolved, with legislation either yet not
contradictory, or premised on the implementation of regulations that have
Conflicting interpretations, overlapping jurisdictions between government
bodies and ministries and substantive gaps, compound this muddled backdrop,
the absence of definite interpretations of many of the provisions of these new
laws, and the absence of a tradition in Azerbaijan of a judiciary independent
current political or other considerations, make the application of law
Local Enterprise Development Strategy presentation
Ministry of Taxation
State Oil Fund of Azerbaijan
State Statistics Committee of Azerbaijan