The Oil Road

by James Marriott

  It is this consortium that controls the forbidden zone and the platforms. The membership of the AIOC has fluctuated over time as fortunes have changed. When the contract was signed, BP held a 17.1 per cent stake. Within a few years, after merging with Amoco, the combined company owned a controlling 34.1 per cent. Since the project’s outset, BP has been the main player, known as the Operator. BP Exploration Caspian Sea Ltd oversees the corporation’s endeavours in Baku. The president of BP Azerbaijan, Bill Schrader, is also the president of AIOC.

  From the dockside we gaze at the city around the curve of the bay. To the south, we can see buildings clustered on the headland of Bayil. Hidden among them is Villa Petrolea, the headquarters of BP in Azerbaijan, where Schrader’s office is located. The steel structures offshore in the Caspian did not rise from the seabed by some force of nature but through the actions of people – mostly men – and through a myriad of decisions taken over a twenty-year period. The construction of the platforms was driven by geopolitical power and capital, and these forces engulf individuals such as Frazer or Schrader; although that is not to say that those individuals could not have acted differently, or made different decisions that would have altered the course of events. Our intention as we journey along the Oil Road is to meet those who have helped to create it. But, as with the platforms in the forbidden zone, it is difficult to gain access to some of these actors, so we will build a picture of their role in events through newspaper reports, company publications, memoirs, histories and official documents obtained through Freedom of Information requests.

  Central among those who helped create the road was John Browne, chief executive of BP. His autobiography describes his first visit to the Azeri capital in July 1990:

  I drew back the thin curtains in a grim Baku hotel room to watch the sun rise over the grey Caspian Sea. Hundreds of feet below that still water, in a stretch called the Absheron Sill, lay the promise of billions of barrels of premium oil. Azerbaijan had been lost behind the Iron Curtain for many years. Many assumed Caspian resources had dried up because the Soviets had abandoned drilling almost completely. I had come to find out how BP could secure a deal to extract what promised to be a sizable prize. I had little idea what twists and turns the venture would take. And I would become embroiled in the formation of a strategic East–West energy corridor: even Washington would become involved. The venture would even loosely inspire a James Bond film.8

  The previous year, in March 1989, Browne, then chief executive of US BP subsidiary SOHIO, was promoted. He was moved to BP’s head office in the City of London, becoming chief executive of Exploration and Production – the most profitable wing of the company. With him came trusted lieutenants, including Tony Hayward, who would later lead BP into the Deepwater Horizon spill disaster.

  By the time of this appointment, Browne was already renowned as an ‘eighteen hours a day man’, and had built up a strong reputation as a financial mind in a company dominated by engineers. As commercial manager at BP North Sea in Aberdeen, he had marked himself out as exceptionally talented by overseeing a tax coup that gained the company a windfall of £200 million at the expense of the British government. Between 1984 and 1986 he was BP group treasurer, during which time he established BP Finance, known as ‘the bank within the company’. Later the former CEO, David Simon, said ‘Browne . . . is very strong on the numbers side, financially extremely astute, but the same also goes for the technological side. He understands geopolitics and has got a nose for a deal.’9

  On arriving in his new post at Head Office, Browne was at the helm of an exploration division facing severe challenges. In the aftershocks of the 1973 oil crisis, OPEC oil regions previously vital to the West had finally been nationalised, following decades of Western control of resource extraction. Increasingly, the private oil companies were relying on a dwindling number of ‘safe’ fields in home countries.

  The situation was particularly acute for BP, which had become known as ‘a two-pipeline company’, reliant on its North Sea and Alaskan fields. So Browne engaged geologist Tom Hamilton, an old colleague from the US, to make a study of the entire 130-year history of global oilfield discoveries and to suggest new opportunities. Hamilton’s team concluded that BP was following a doomed strategy, with its daily extraction rate of 1.5 million barrels in danger of halving in coming years. Browne proposed that the corporation needed a being halved plan to break into ‘frontier zones’ – those that were politically or technologically difficult to reach.

  While Hamilton’s team was at work, Browne met Margaret Thatcher, then British prime minister. Thatcher had been engaged in a long round of dialogues with the Soviet Union and had concluded that ‘we can do business together’ with Mikhail Gorbachev. She urged Browne to ‘start some investment rolling’ in the Soviet Union. He in turn instructed Hamilton’s subordinate, Rondo Fehlberg, ‘to get to Moscow and make something happen’.10

  Soon after, BP and Chevron became the first Western oil majors to expand into the Soviet Union since the late 1920s, although their initial target was not Azerbaijan. Fehlberg, a Mormon all-in wrestler, began work on the Soviet Oil Ministry in Moscow, but increasingly focused on key politicians in the Soviet Socialist Republic of Kazakhstan, east of the Caspian.

  Eventually BP was outplayed in Kazakhstan by a team from Chevron, but the Oil Ministry in Moscow softened the blow, suggesting that Fehlberg turn his attention to Baku. Several important lessons had been learned by BP from the Kazakh experience: that the Soviet Union was rapidly disintegrating, and the tension between the increasingly independent states and Russia could be exploited; that the distinctions between the Soviet nationalised industrial structure and the Western private model would allow for a fluidity in which great gains could be made; that the Soviet industry, like the USSR itself, was starved of capital; and that Westerners could impress officials with the technological capabilities of the oil majors. BP had taken a team from the Soviet Oil Ministry to visit rigs in the North Sea, and another group from Kazakhstan to see its Alaskan fields. Both events showed BP that these ministers and officials were open to inducements, and some were planning for what life might be like after the Soviet Union.11

  When, in July 1990, Browne made his first visit to Baku and peered out of his hotel window, Azerbaijan and Armenia were at war over the region of Nagorno-Karabakh, the city was under curfew, and Soviet armoured personnel carriers patrolled the streets. Accompanied by Fehlberg, he visited the Azerneft Oil Ministry, on the Baku seafront, to meet Qurban Abbasov, the oil minister of what was still the Soviet Socialist Republic of Azerbaijan.

  Abbasov – nicknamed ‘Neftci Qurban’ or ‘Oily Qurban’ – was a legend in Baku. He had begun working in the industry at the age of eighteen, forty-six years previously, and was involved in the pioneering offshore Neft Dashlari project, where he earned a Stalin Prize First Class and a Hero of Socialist Labour award Gold Star. By the time he met Fehlberg he had been a director general within the Azeri state oil companies for ten years.

  In 1980 Soviet engineers had discovered four extensive offshore fields and, following geological surveys, named them ‘28th April’, ‘Chirag’, ‘26 Commissars’ and ‘October Revolution’. All of these fields were interlinked and effectively formed one large reservoir, the Absheron Sill. Thus the Soviets had already completed the geological mapping of the oilfields long before the West arrived. By the late 1980s Azerbaijan’s oil industry had stagnated due to limited investment, and Abbasov was eager to rebuild it. He was prepared to negotiate, but with the Soviet Union collapsing, his bargaining position was weak.

  BP was most interested in the ‘26 Commissars’ field, named after the Baku Soviet leaders executed in 1918 with the collusion of a British expeditionary force. As discussions progressed, Fehlberg felt confident enough to raise the idea that BP investors might be unhappy about the name. Abbasov obliged, and the field was renamed ‘Azeri’. It was a significant gesture towards the company, but also a move that fed the mood of late-Soviet nationa
lism, a trend that BP seemed keen to stimulate.

  By October 1990, Fehlberg had made such progress that Hamilton came to join him in Baku. A month later, it appeared that they had won BP an exclusive deal for the Azeri field, with no competitive bidding process. Details would be negotiated later, but BP’s success would be announced at the First Baku Oil Exhibition, opening in November. In August the Armenian parliament had passed a resolution declaring itself a sovereign republic within the USSR; in October Kazakhstan passed a similar resolution, and it was clear that Azerbaijan would follow suit. With the Oil Exhibition and the deal on the offshore field, the Azeri state was asserting its growing independence by opening its arms to the Western oil companies.

  But, contrary to what both Fehlberg and Browne expected, what was announced at the exhibition was not a deal but a competition. Fehlberg loudly protested, but the American corporation Amoco had the ear of Azeri President Mutalibov. The slow disintegration of the Soviet Union made for a political fluidity in Baku in which the Western oil companies alternated between fragile alliances and bitter competition. Browne stepped up the pressure, dispatching BP executive Eddie Whitehead to the Caspian and further strengthening the team by signing up Steve Remp’s tiny Ramco Energy. Remp had been the first Western oil man in Baku since the 1920s. He had arrived in the city to explore for deals in May 1989, and consequently had very good connections.

  After six months of bids and negotiations, in June 1991 the announcement came that Amoco had now won exclusive rights to negotiate terms on the Azeri field for a full year. The BP staff who had been fighting for the contract were shattered, and gathered in a meeting at Heathrow Airport to consider the news. Through Whitehead, Browne insisted: ‘If we don’t have a deal in three months, we’re out of [the Soviet Union].’ Possibilities of getting something easier in West Siberia were discussed, but that was not the real prize. ‘That’s not good enough’, declared Whitehead. ‘It has to be the Caspian.’12

  Two months later, the August 1991 failed coup attempt against President Gorbachev left Boris Yeltsin firmly in power in Moscow, and the USSR drew to a close. Azerbaijan declared independence from the Soviet Union two months after the coup failed. Qurban Abbasov was replaced as oil minister. But Browne was still determined to try to forge ahead in Azerbaijan, and his hand was strengthened in September when he was appointed managing director of BP Group, gaining a place on the board.

  On the dockside, only a few hundred metres from the old Intourist Hotel that Browne must have stayed in on his first visit to Baku, we study the sea maps and consider the history that led to the construction of those invisible towns in the Caspian where Frazer and his colleagues work.

  50 KM – NEFT DASHLARI, AZERBAIJAN

  The heat of the day is coming on, so we settle down at one of the many tables under the trees in Bulvar Park, which runs along the dockside. A waiter appears with a chrome tray loaded with small glasses and sells us tea sweetened with sugar lumps.

  Unfolding the maps, we begin our narrative again, progressing along the first 187 kilometres of the Oil Road. For running along the seabed are the four pipelines that come from the ACG platforms to the terminal at Sangachal, on the coast south of Baku. They are part of a skein of pipes from the wellheads, 829 kilometres in all, that are like train tracks laid from the coal mines to the metropolis. The hidden veins of the oil economy.

  Were we sailing, the horizon before us would be punctuated by Soviet rigs built in the 1970s and 1980s: Shallow Water Gunashli, producing 120,000 barrels of oil a day for SOCAR. And the sea would be becoming shallower – 150 metres deep, 100 metres, 50 metres. Soon the famed Neft Dashlari would come into view.

  Operational since 1951 and a source of engineering pride in the Soviet Union, Neft Dashlari still manages 400 working wells. Standing on steel stilts above the water are high-rise tenements that accommodate 5,000 shift workers. This immense industrial installation has 200 kilometres of roads, a cinema, a bakery and a park named after President Heydar Aliyev.

  It had long been understood that there were oil seepages on the seabed of the Caspian. In 1949, as part of the USSR’s 4th Five Year Plan, workers began to construct the world’s largest offshore oil installation. Seven ships were towed out and sunk to create a reef. Platforms were built upon them to provide the structures for the drilling rigs. A generation of Soviet engineers, such as Qurban Abbasov, was trained at Neft Dashlari. Khoshbakht Yussifzadeh, vice-president of SOCAR from the mid 1990s, began his career here: ‘For us, it was a brave new era. We were pioneers, explorers. After work we went to the cinema or bars. There were also many women who worked in the laboratories or the canteen. Then I was allowed to go to the university, and . . . I earned 2,900 roubles, with benefits even 5,000 roubles. At the time, that was fantastic!’13

  When Neft Dashlari was inaugurated, on the thirty-second anniversary of the October Revolution, the Soviet Union, Great Britain and America were no longer the Allies they had been in World War II, and General Secretary Joseph Stalin was no longer ‘Uncle Joe’. Winston Churchill had declared that an Iron Curtain had fallen between Gdansk and Trieste, and the West had placed an embargo on technical equipment exports to the USSR. The Soviets innovated, despite this isolation. They not only built offshore platforms, but created a ‘turbo-drill’ which dramatically increased the speed of sinking oil wells. This enabled ‘horizontal drilling’ to take place – a technique that the West would only catch up with twenty years later.

  Throughout the 1950s and 1960s oil extraction around Baku steadily climbed, reaching a peak in 1969. At the same time Azerbaijan underwent a fundamental energy shift. Gas became the main fuel for all domestic heating. Of all the countries in Europe, Azerbaijan’s economy became the most intense user of gas.14 The entire Soviet Union was experiencing an economic boom, and Nikita Khrushchev, who succeeded Stalin as general secretary, promised that the planned economy would deliver an age of plenty in which Communism would beat Capitalism at its own consumerist game.

  Khrushchev visited Neft Dashlari in 1960, and a banquet was held on Platform 408. According to legend, the general secretary became drunk and ordered the construction of a nine-storey apartment block on the platform to reflect the stature of the project. It was duly built, and housed 2,500 workers. In Baku itself he declared of the new Soviet apartments that were being constructed: ‘Don’t worry, these are only temporary homes! In twenty-five years, when the Soviet Union is the richest country in the world, these buildings will be torn down and replaced with real palaces for working people.’15

  But as we look up from the café table at the skyline of Baku, we can see Khrushchevki, as the apartment blocks were nicknamed, still lining the horizon.

  110 KM – ABSHERON PENINSULA, AZERBAIJAN

  After sixty kilometres of sailing from Central Azeri, we would round the point of Suiti Barnu. The swell of the open sea would begin to ease as we entered the shelter of the Absheron Peninsula – a long low purple landmass to starboard. On a beam reach with a constant breeze, we would relax a little as we headed for Baki Buxtasi – Baku Bay, the finest natural harbour on the western side of the Caspian, sheltered from the prevailing wind by the peninsula.

  Shaped like an eagle’s beak protruding into the sea, Absheron continues the line of the Greater Caucasus Mountains out towards the east. Despite the barrier that it provides, Baku is still renowned for its winds. The city’s name may be derived from the ancient Farsi bad kube, ‘blown by winds’, or bad kiu, ‘town of winds’. There are two blasts that batter the town – the Khazri from the north, and the Gilavar from the south. Although many curse the dusty heat or the bitter cold that they bring into the city, these forces have been the motive energy for millennia of seafaring on the Caspian. We think of the ships that headed to and from Baku, struggling with storms or becalmed in the exhausting heat.

  Baku is jammed between the sea and the desert, drawing sustenance from both. Like Venice, it was built as a point of transition between water and land – between boats
and camel trains, between the ships of the sea and the ships of the desert. The city has long been dependent upon what comes in from the water and what passes out through the land.

  Passage, trade and war by water on the Caspian may have begun 10,000 years ago. The Mesolithic petroglyphs carved on the rocks of the Gobustan National Park, sixty kilometres south of Baku, include an image of a reedboat. In the mid-seventh century CE, the troops of the Umayyad Caliphate swept through the Caucasus and Arab ships sailed to Baku. The Scandinavian Rus pillaged along the western coast of the Caspian, venturing up the River Kura in 943 CE, into the midst of what is now Azeri territory.

  We look out from the park at the shimmering waters of Baku Buxtasi and watch an oil service vessel bound for the distant platforms. In the lethargic haze we imagine it to be a vessel of the Tsarist Caspian flotilla, seizing this Persian city for the Russian Empire. Or Ludvig Nobel’s Zoroaster, the world’s first oil tanker. Or the steamship Nicholas I, boarded by Bolshevik activists in Baku harbour. Or the steamer Kursk, commandeered by the British Expeditionary Force in 1918. Or one of the seven ships sunk to create Neft Dashlari.

  For centuries the Absheron Peninsula was a place of pilgrimage, a shrine of fire. Burning gas had leaked from the ground since the last Ice Age. This was the most sacred site of Zoroastrianism which, prior to Islam, was the dominant faith in the region. The oil-bearing rocks drew people to this place, not to extract petroleum and carry it off to some other site of burning, but to worship it here in the sheets of flame among the rocks. As other faiths arrived – Sunni and Shia Islam, Russian Orthodoxy, Marxism and Capitalism – the holy fire of this peninsula was transformed into a material to be extracted and exported.