MODERN TECHNOLOGIES AND FORMATION OF HUMAN GOLD
Chapter 3
3.4. Oil and the Formation of Human Gold
Azerbaijan's oil has always been the most important factor of development of the country and of the foundation of its human capital. Oil industry in Azerbaijan, which yielded more than half of the worldwide oil production in the beginning of the 20th century, began its history with wells of only a few dozen meters in depth. The start of the Industrial Revolution in Europe and later in the Russian Empire, of which Azerbaijan was a part of after 1828, called for the increasing demand of oil. In the early 20th century, Azerbaijan's oil extraction had already reached 10 million tons per year.
Oil extraction stimulated the development of relevant technologies for oil refining and transportation. Azerbaijan became the first country in the world where hydrocarbons were delivered via pipelines, a method, that not only was more economic, but also ecologically less damaging.
Developing the oil industry required an appropriate development of the financial market, the transport infrastructure and other kinds of infrastructure.
In addition, the history of Azerbaijan's oil industry is inseparably related to the development of sciences and technologies. Azerbaijani specialists were the first in the world to succeed with offshore oil extraction with Neft Dashlari (Oil Rocks).
The development of the oil sector not only ensured employment with highly paid jobs, but it demanded further scholar and technological innovations, and strengthened the entire national economy and social infrastructure. This was carried out by direct allocations from the budgets of oil-extracting enterprises as well as by allocations from the State budget, in which the share of revenue of oil sector was always significant. Consequently, investments could be made in the development of other industrial branches, such as the economic and social infrastructure.
The demand for machinery and technology stimulated the machine-building industry, which developed a special segment oriented towards the demands in oilfield equipment. Development of this sector also stimulated research related to geophysical methods of oil exploration and the design and creation of appropriate tools and technologies. Research and development of chemical technologies and the petrochemical industry also relate directly to the oil sector. In 1949, a new city appeared on Azerbaijan's map, Sumgayit, which became the center of Azerbaijan's petrochemical industry. The shift toward offshore oil extraction demanded modern technologies, including ICT.
Azerbaijan's deepwater offshore fields, which are considered one of the most prospective fields in the world (in terms of number of undeveloped fields) can only be accessed with the use of the latest state-of-the-art technologies. Mobilization of modern technologies is an important factor in the formation of human capital, which impacts essentially on human development and the formation of human gold. The intensive development of the oil industry and other related sectors of the economy promoted the formation of human capital. The high professional level and qualification of the Azerbaijani specialists facilitated their involvement in oil exploration and exploitation in various countries and continents.
The new birth of the oil industry began when Azerbaijan regained its in-dependence and became an independent nation, subject to the international economic community. Foreign investors came to Azerbaijan again, and the first object of their attention was oil and gas. In 1994, the Azeri-Chirag-Gunashli (ACG) Production Sharing Agreement (PSA) was concluded, followed by more than 20 other contracts in the oil and gas sector alone.
It is expected that by 2010 Azerbaijan will again take its place as one of the largest oil suppliers for international markets. Oil reserves of the ACG have been reassessed from the initial amount of 511 million tons and are currently estimated at 753 million tons, according to SOCAR. Another large multinational project - Shah Deniz - will transform Azerbaijan from a natural gas importing country to a gas exporting country. With the beginning of implementation of the Full Scale Development of the Azeri field and the gas project Shah Deniz, Azerbaijan together with the other shareholders of the projects, started constructing the oil export pipeline Baku-Tbilisi-Ceyhan (BTC) and the gas export pipeline Baku-Tbilisi-Erzerum in 2003. These projects, valued at a total of around $6 billion, with involvement of both foreign and local contractors, as well as professionals and workers with various specialties and skills.
Investors and owners of the BTC pipeline intend to carry out this project in line with the highest international standards and requirements in terms of technologies and environmental impact. The BTC project will accelerate economic development and welfare in the participating countries (Azerbaijan, Georgia and Turkey) and will become the key component of the East-West energy corridor.
The oil sector provides about 1.0 percent of the employment market. The main potential of the sector to influence the development of human resources in Azerbaijan must be displayed through a multiplier effect of financial flux to the country for development of other economic branches and employment rates, in the field of both the production of goods and the development of sciences and technologies.
The goals of the country's economic development in this context cannot be limited solely to the restoration of a diversified profile of a national economy, similar to the one established in the Soviet period, which was destroyed with the collapse of that political-economic regime. In this context, it seems important to use the potential of the oil sector, which is currently developing rapidly under the influence of contracts with multinational oil companies, for achieving qualitatively new diversification for economic profile and human development in Azerbaijan. This means that along with the rehabilitation of traditional economic production and human activity, new production enterprises, reflecting the demands of the coming epoch of information society, should be created. In terms of the impact on human development, this means involvement of people in new, unconventional spheres of employment. The high level of education of the population and the accumulated skills in the traditional forms of activity contain a huge potential for achievement of this goal in Azerbaijan. This will be promoted by such measures of the government as the adopted spread and NICTs.
Despite notable successes in individual sectors since the restart of economic growth in 1996, optimism can be expressed only in some production areas in industry and agriculture. The oil sector currently produces around 90 percent of the country's export revenues, and the country's positive trade balance is due largely to international oil prices. The government has developed special programs aimed at the development of the non-oil sector to diminish regional disparities in economic development.
The solution to this situation is for the government to focus its attention so as to achieve multiple benefits from the development and financial flux of the oil sector and, from this perspective, to strengthen the profile of national human development In such case, this effect will manifest itself in the diversity of human activities for sustainable development, by reducing the risk of "brain drain" and "geen drain" associated with the lack of fields for intellectuals to get involved in and, finally, by accumulating material, as well as intellectual wealth for further progress.
Despite the remaining problems, these processes, stimulated by the im-plementation of oil projects, are already developing in the country. This is manifested, in particular, by the increase of enrollment of students in high schools over the recent years, as well as the enrollment ratio for all three levels of education. Strengthening reasons for getting an education should be a high priority. Oil companies are promoting the development of human gold either through humanitarian involvement or by pursuing policies in the fields of employment, education and upgrading skills, which are associated with the terms and commitments under the concluded oil agreements.
Implementation of oil projects influence the human development process in the country by increasing the education component due to improvement of knowledge and skills of local people engaged in these activities and the increase of their incomes. An illustration of this is the policy, which BP and its partners have been pursuing toward a permanent increase of the percentage being hired local employees.
The increase of the economic component of human development in the country will also occur, at least to a certain extent, due to the expected increase in the share of national suppliers for the oil projects. In addition to the positive economic effect, this policy will also promote the upgrading of the technical and technological level of domestic goods and services to be supplied, bringing them in line with international standards. This, in turn, will contribute to the increase of overall competitiveness of the national economy.
Various international oil companies are supporting the government's effort to defeat poverty and to increase the potential of development of human gold. Since the commencement of their operation in Azerbaijan, they have taken part in many humanitarian, educational and cultural projects. Examples include projects related to health, education, immunization, orphanages and schools, as well as funding cultural programs and competitions among children.
In Azerbaijan, there are about 10 higher-level schools that train students in natural sciences and technologies. The Azerbaijan State Oil Academy (ASOA) established in 1920 occupies an exceptional position among them. An overwhelming majority of the currently operational institutes oriented toward natural subjects were formed as independent educational establishments that were based on individual departments at ASOA. ASOA graduates not only work in oil sector enterprises, but also train people in other institutes and research labs, both inside and outside of the country. Since 1920, ASOA has educated more than 70,000 students. This number includes around 3,400 specialists from 68 countries who received their education at ASOA between 1964 and 2002.
In 2001, the Oil Production Sharing Agreements (PSAs) and revenues earned from them led to the establishment of the State Oil Fund of Azerbaijan Republic (SOFAR). The Oil Fund is based on funds that have already been received, or will be received, from the PSAs. This fund is destined to play a significant role in human development in Azerbaijan's future. According to SOFAR management, there were assets of $723 million as of April 1, 2003. In small amounts, the Fund already provides social support to refugees and IDPs. However, this fund should be primarily used for increasing human potential by investing in the development of the fields, based on knowledge as well as on the renewal of natural resources.
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