The history of Azerbaijan’s oil industry

The history of Azerbaijan’s oil industry stretches back to ancient times, when natural oil seepages on the Absheron Peninsula were already being used by local populations for heating, lighting, and medicinal purposes. Medieval Arab and Persian historians such as Abu Ishaq al-Istakhri and Ahmad al-Baladhuri described the region’s reliance on oil, while travelers like Marco Polo and Evliya Çelebi noted that oil from Baku was exported across the Middle East and widely used as fuel and for healing. Early oil wells, including a 35-meter-deep well in Balakhany, show that organized extraction existed long before the modern industrial era.

In the 18th and 19th centuries, Azerbaijan became one of the world’s pioneers of industrial oil production. Innovations such as steam distillation, mechanized drilling, and the first industrial oil well in Bibiheybat preceded similar developments in the United States. The Nobel brothers played a crucial role in transforming Baku into a global oil center by introducing oil pipelines, railway tankers, and the first oil-carrying steel steamship. By the late 19th century, Baku produced nearly half of the world’s oil and supplied major cities of the Russian Empire.
During the Soviet period, Azerbaijan remained a strategic energy hub. Baku’s oil was vital during World War II, providing the majority of the Soviet Union’s military fuel. In 1949, the launch of Oil Rocks marked the world’s first offshore oil production, opening a new chapter in global petroleum engineering. The development of refineries, gas fields, and offshore infrastructure further strengthened Azerbaijan’s position as a major energy producer.

After gaining independence in 1991, Azerbaijan restructured its energy sector and began modernizing not only oil extraction but also petrochemical production. A key role in this process was played by Azerikimya, the country’s major petrochemical complex, which became the backbone of Azerbaijan’s chemical and polymer industry. The enterprise expanded the production of polyethylene, propylene, and other petrochemical products, allowing Azerbaijan to move beyond crude oil exports and develop higher-value industrial manufacturing. Through modernization programs, new processing units, and integration with global markets, Azerikimya significantly strengthened the country’s non-oil industrial base and supported the development of downstream industries such as plastics, fertilizers, and synthetic materials. At the same time, Azerbaijan signed the landmark 1994 “Contract of the Century,” which brought international investment into large offshore fields such as Azeri–Chirag–Gunashli and Shah Deniz. These projects, along with major pipeline routes like Baku–Tbilisi–Ceyhan and the Southern Gas Corridor, connected Caspian resources to global markets. While the State Oil Company of the Republic of Azerbaijan (SOCAR) coordinated these upstream and export operations, Azerikimya played an equally important role by transforming raw hydrocarbons into refined petrochemical products, increasing export diversity and supporting long-term economic stability.