The petroleum industry in Azerbaijan produces about of oil per day and 29 billion cubic meters of gas per year as of 2013. Azerbaijan is one of the birthplaces of the oil industry.
The State Oil Company of Azerbaijan Republic (known as SOCAR), a fully state-owned national oil and gas company headquartered in Baku, Azerbaijan, is a major source of income for the authoritarian regime in Azerbaijan. The company is run in an opaque manner, as it has complex webs of contracts and middlemen that non-government watchdog organizations say have led to the enrichment of the country's ruling elites.
Early history
There is evidence of petroleum being used in trade as early as the 3rd and 4th centuries. Information on the production of oil on the Apsheron peninsula can be found in the manuscripts of many Arabic and Persian authors.
The following paragraph from the accounts of the famous traveler Marco Polo "il Milione" is believed to be a reference to Baku oil:
"Near the Georgian border there is a spring from which gushes a stream of oil, in such abundance that a hundred ships may load there at once. This oil is not good to eat; but it is good for burning and as a salve for men and camels affected with itch or scab. Men come from a long distance to fetch this oil, and in all the neighborhood no other oil is burnt but this."
A 1593 inscription in Balaxani commemorates a manually dug well, 35 m deep.
The Turkish scientist and traveller of the second part of the 17th century, Evliya Çelebi, reported that "the Baku fortress was surrounded by 500 wells, from which white and black acid refined oil was produced".
In 1636 Adam Oleary Elshleger (1603–1671), a German diplomat and traveler, gave description of 30 Baku oil wells and remarked that some of them were gushers.
The first detailed description of the Baku oil industry was made by Engelbert Kaempfer, Secretary of the Swedish Embassy to Persia (Iran) in 1683. In his notes he confirms the existence of places where natural gas discharges to the surface. Kaempfer describes "flaming steppe" as follows: it "...constitutes a peculiar and wonderful sight, for some of the fissures were blazing with big, others with quite flame and was allowing everybody to come up; thirds emitted smoke or at any case minimum perceptible evaporation that was sending off heavy and stinking taste of oil. It was occupying the territory of 88 steps in length and 26 in width." (improved translation needed)
Many 18th and 19th century European accounts of the Caucasus refer to the Fire Temple of Baku at Suraxanı raion, where the fire was fed by natural gas from a cavern beneath the site.
Pre-revolution period
Haji Kasimbey Mansurbekov, in 1803 for the first time in the world, began sea oil extraction in Bibi-Heybat bay from two wells in 18m and 30m away from coast line. First offshore oil extraction was abandoned when a strong storm in 1825 destroyed the wells.
In 1806, the Russian Empire occupied Baku Khanate and took monopolistic control of oil production. Later exclusive rights to produce oil were given to individuals, thereby creating the Persian otkupchina lease system. That year all oil sources of Absheron, Guba and Salyan belonging to Baku khanate were requisitioned and declared state assets of Russia; and also, by the time of the joining of the Baku khanate to Russia about 120 wells were placed in the Baku area; the annual extraction from these wells made up about 200 thousand poods of oil.
In 1837, the Russians built an oil-distilling factory in Balaxani.
Oil extraction methods in those times were very primitive —mainly hand-dug wells, drilled to very shallow depths. The production volume of those years can be judged from data provided in 1842 by the Caspian Chamber of the Department of State Property Ministry. It refers to 136 wells around Absheron, which produced per year, and this oil was exported to Persia, where it was used for lighting as well as in ointments and other traditional remedies.