Summer 2001 (9.2)
Pages 68-73

Petroleum Section
Azerbaijani Leads Three Projects

Interview with Rashid Javanshir
BP's President for Shah Daniz, Inam and Alov PSAs

by Betty Blair

Rashid Javanshir holds the highest position of any Azerbaijani in a foreign oil company working in his country. He is President of three of BP's major PSAs - Shah Daniz, Inam and Alov.

Not many people know how strong he is academically and how early he began traveling outside of the Soviet Union to develop ties with the West. In a rare interview (Rashid told us he has not granted an interview about his own personal life since his graduate study days in the early 1970s), he shares some of his ideas, especially his concern to attract well-trained, committed Azerbaijanis who have been trained in the West to return home and help develop the country.

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Let's start at the beginning. How did you get involved with oil as a career?

After I graduated from school in 1968, I enrolled in Baku's Oil Academy, which was called the Oil and Chemistry Institute at that time. In the mid-1960s, it was one of the most popular schools in Azerbaijan. My father had graduated from that Institute, and he had a lot of friends in the oil industry. I suppose that I heard about oil quite a lot as I was growing up, and that somehow influenced my decision. I graduated in 1973 with a master's degree in geophysics.



Above: Dedication ceremony for the upgrade of the Shelf-5 drilling rig, now called "Istiglal" (Independence).

In 1976 I went to work for the Academy of Sciences, at the Institute of Deep Oil and Gas Deposits. I received my Ph.D. in geophysics in 1978 and then defended my doctorate in Petroleum Geology in 1988. That same year, I became Deputy Director of the Institute. In 1997 I was awarded the academic title of Professor, especially for supervising five Ph.D. candidates and two doctorate dissertations.

I've spent most of my life doing research, so I have more than 200 publications and seven or eight books. I was probably one of those few scientists who started publishing extensively outside the Soviet Union. I was the regional editor and associate editor of two international energy and oil-related magazines during the Soviet period. They were Energy Sources (USA) and Journal of Petroleum Science and Engineering (the Netherlands). I was proud to see that in each issue, both magazines introduced me as a representative of Azerbaijan. That started in 1988-1989, almost three years before Azerbaijan became an independent state.

You were one of the few young people who traveled outside the Soviet Union in those days.

Yes, in 1981 I was in Italy for six months with Agip. I had applied to Moscow to be selected to do research in the West. When they offered me the possibility of going to Italy, I thought, "What's in Italy that's close to my specialty?" I knew that Agip was there, so I wrote "Agip" on my application, even though I was only supposed to list universities and not any type of business. I don't think the people in Moscow even knew that Agip wasn't a university.

The result was that I spent six wonderful months in Milan. At the time, it was very unusual for a Soviet scientist to be involved with a Western oil company. But because of my experience with Agip, I began to develop an understanding of Western business practices. I had some excellent opportunities with Agip. I even had the chance to spend some time offshore on an oil platform. I used to speak some Italian.

I still remember a lot of words, but it has been 20 years since I really used the language. Of course, English is the international language used in all oil companies, so that's when I really started to use English - on those trips. I had never been involved with studying English seriously before then. We had absolutely no opportunities to communicate in English in the Soviet Union. Nobody seriously used English at that time, you know. But because I had exposure to English on these trips, I really tried hard.

Was your trip to Italy the first time you had ever traveled outside of the Soviet Union?

No, I had been in some Socialist countries before: East Germany, Hungary, Bulgaria and Yugoslavia. Later I also had the chance to visit the States. My first trip there, from December 1984 to March 1985, happened before Gorbachev became the leader of the Soviet Union. It was facilitated by an exchange agreement through the USSR's Academy of Sciences. Relationships between the United States and the Soviet Union were very strained at that time. That was right after the incident over the Korean non-military aircraft, and all Pan-American and Aeroflot flights between the two countries had been discontinued. It was reported here that the Soviet military had shot it down because it was a spy plane.

Left: The Istiglal drilling rig has higher pressure
management capabilities, which is important for the Shah Daniz contract area.

The only way for me to go to the United States was via Canada. So from Moscow, I flew to Montreal and then to New York, and then on to Washington.

Actually, it was quite an interesting experience trying to get into the United States with a very strange visa and an envelope attached to my passport by the U.S. Embassy in Moscow. It said, "U.S. Officer, please open and check."

The Cold War was still very real to us at the time. On that trip I ended up visiting Stanford University for about two months out of the three. My host was the famous scientist Professor John Harbaugh, who is one of the founders of mathematical modeling in geology.

Also I was able to develop a close relationship with some other professors, you know, that were not even from Stanford, but from the neighboring town of Menlo Park. For example, I was very interested in some particular topics in geological science. I decided to attend lectures of the famous Professor-Hydrologist John Bredehoeft. There is a USGS (United States Geological Survey) Department there. We developed a close relationship because he was curious about fluid flow peculiarities in the South Caspian. After one of my presentations, he said, "Oh, this is interesting. Why don't we work together?"

So he invited me to get involved with some of his research. It was an absolutely unofficial type of thing. He didn't care that I was from the Soviet Union. He just said, "Come, I don't care, we will work together."

We worked together for a couple of months and produced a paper published by the Bulletin of American Association of Petroleum Geologists. I think we submitted it in 1985; they published it in 1988. That's a very popular journal in the geological world. It's very difficult to publish there because you go through a very extensive review process. But our paper was published. It was unique for those days for someone from the Soviet Union to publish an article with an American scientist.

When I was leaving, a young American student named Phil Kushner came up to me and admitted that he had been afraid of me at first, just because I was from the Soviet Union. He told me, "Rashid, it's strange, but I was afraid of you, but now I see that you are a normal guy." It's hard to believe it now, but that was the reality. That was less than 15 years ago.



Above: After a $210 million upgrade, the Istiglal semi-submersible drilling rig was ready for drilling in the Shah Daniz contract area.

At that time, were there prospects for very good positions in Azerbaijan in oil?

For the younger generation, one of the best career opportunities was to become a scientist. In the former Soviet Union, scientists were the most respected, distinguished people, and the best paid. The top of the ladder was to become an Academician of the Academy of Sciences.

I had decided to be involved with research, rather than with the industry. At the Institute in the Academy of Sciences, we did a lot of fundamental research in oil science as well as projects for SOCAR and some other industrial companies in the former Soviet Union. The Institute was quite well known at that point. But that was research, which is quite different from what I have been doing the last five years since I was first hired by Amoco.

In the former Soviet Union, the fundamental research was basically done at the Academy of Sciences. Universities were more for teaching. As far as the United States is concerned, most of the research is being done at universities as well, although there are some special laboratories, like the Livermore Lab, which earlier had been involved with the development of nuclear weapons.

At the Institute, we also taught graduate students who were pursuing their Ph.D. and doctoral degrees (two separate stages in Azerbaijan's educational system).

I must say that Azerbaijani scientists are still very active in conducting important fundamental studies in various areas like mathematics, mechanics, chemistry, biology, earth sciences and various disciplines of the humanities as well. BP is cooperating with the scientific community in Azerbaijan in various spheres. For example, within the framework of the Alov PSA, we are supporting multi-disciplinary Caspian deep-water study, which has been and will be conducted by Azerbaijani scientists.

How did you make the transition from academic life to working for a foreign oil company?

As Deputy Director for the Institute of Deep Oil and Gas Deposits, I was interacting with a number of oil companies. In 1995 Amoco invited me to join them. To tell you the truth, it was a very difficult decision for me. I had a high position as a Deputy Director and Doctor of Sciences and was pretty well known in the Academy of Sciences and in the oil industry.

This was an interesting job offer, but it wasn't viewed as a high position. It was a position as an Exploration Representative for Amoco in Baku. I told Amoco, "It's difficult for me. I can't leave my Deputy Director position." I still had Ph.D. students and doctoral students who were preparing to defend their dissertations. Amoco said, "OK, we'll ask your organization to let you go if you wish. But we'll allow you to continue your scientific activity."

Shortly after that, Amoco said, "We want you to go to Houston and work. Would you like to do that?" I accepted and went to Houston in early 1997. I worked in the Worldwide Exploration Business Group on a portfolio analysis and planning team.

That was completely different for me. There I dealt with not just geology or geophysics. We were involved in complex analyses of everything, including economics and various kinds of risks. After a year in Houston, Amoco Eurasia called me and said, "We'd like you to come back to Baku to become an Exploration Manager. Would you consider that?" Sure, why not? Azerbaijan is my country.

Then they decided to expand Amoco's responsibility and presence in Azerbaijan, so they created Amoco Caspian Sea Company and assigned President Karl Arleth in Baku. They appointed me Director of Exploration.

After Amoco signed the Inam contract in London during President Heydar Aliyev's official State visit, they appointed me President and General Manager of Inam Operating Company. That was in the summer of 1998. A month later the merger between BP and Amoco was announced. Then Andy Hopwood, who was the newly appointed BP Amoco Azerbaijan Exploration Business Unit Leader, offered me this new job as President of Shah Daniz, Inam and Alov PSAs.

In addition to my position as President of three PSAs, I'm also a deputy to Gordon Birrell, who has been the Azerbaijan Exploration Business Unit leader for BP since April 2000.

So you've been involved with these projects from the very early stages.

To some extent, yes. For instance, I supported the Inam joint study and agreement between Amoco and Azerbaijan. I've been involved in it from Day One. With the support from my colleagues, I delivered several important milestones. Now I'm glad that we spudded the first Inam exploration well just before Christmas. Everybody was very excited about that. We'll see if we can find hydrocarbons there.

We've suspended this well at 4,356m due to unexpectedly high formation pressures that could be beyond the Dada Gorgud drilling rig's safety capabilities. We expect to re-enter and complete the first Inam well sometime later this year with the Istiglal drilling rig, which has higher pressure-management capabilities.

It's an important project for BP and our partners, but it's even more important for Azerbaijan. We hope we'll find a substantial amount of oil there. It's a difficult well.

What makes it so difficult?

First of all, it's a "wildcat" well, which means that it's the first one in the structure. When we drill a prospect for the first time, we don't really know what's down there. Of course, we have seismic data and reference data from the nearby wells, but we still may have surprises.

It's always difficult to drill wells in the Caspian because of the very difficult geological environment. The wells that we drill have to be very deep. There's also very unusual pressure distribution underground.

And these wells are very expensive. Time is money, so we have to try to be as quick as possible. That's how we manage our costs. And cost is not just important for this particular well's budget, but for the entire economics of the development.

If the wells are very expensive, the economics of the field won't work. That's actually the biggest difference between the way Western oil companies conduct their business and the way we carried out the oil industry in the former Soviet Union.

Azerbaijan has had a lot of experience in oil throughout our history. Azerbaijan's oilmen have successfully drilled a lot of difficult wells; they've developed offshore fields and produced a lot of oil and gas. That work was done by experts, scientists, geologists, geophysicists, engineers and drillers who did an excellent job from the scientific and technical points of view.

Western companies also consider the commercial and economic aspects of the business. Whatever we do in a Western company is not just because we want to find oil and produce it. We want to monetize that oil. We want to make the development economical, not just for the Western companies and contractors, but also for Azerbaijan. The better we are in economics, the better for Azerbaijan, which means more profit oil and profit money will go to the State as well as to the contract parties.

It's possible to spend much more money to produce additional thousands of barrels of oil than the oil is actually worth. For us, this aspect of oil development is in transition. We have to learn how to think about this industry as a business, not just as a technical sphere.

When I talk to friends and colleagues, some of them say, "Oh, we're very glad that you, a scientist, have been selected for doing such a job." They still think that I was chosen because I know a lot about geology or because I understand the technological aspects. They aren't aware of the real business behind the oil industry, which is its driving force.

My job is not just evaluating the geological prospect or interpreting geophysics. That's just one aspect of it. There's much more behind it - the commercial aspects, the legal dimension, economics and partner relations. As operator we have to accommodate the partners' needs and requirements, just as we do for the State Oil Company of Azerbaijan (SOCAR), which is trying to maximize value and profit for Azerbaijan.

It's great to have resources like gas, for example, but it's worthless if it's just under the ground. You can monetize gas only if you have a specific customer on the other end that is willing to buy your gas. That's the only basis upon which you can really develop the gas. Our Shah Daniz gas project is a great example.

You know that BP and its partners in the Shah Daniz PSA were delighted that officials representing Azerbaijan and Turkey signed an Intergovernmental Agreement and Sale and Purchase agreement in Ankara on March 12 , 2001, which will enable Turkey to buy Shah Daniz gas from Azerbaijan. President Sezer and President Aliyev witnessed the execution of the documents. These agreements provide the commercial and legal framework for the South Caspian gas province to be explored and developed, and indeed open up a real opportunity for Shah Daniz investors.

In the Soviet period, funds were provided from the center, from Moscow, to the oil industry. People just drilled wells without having a real understanding of where the money was coming from, where it went or how much Azerbaijan was benefiting from it. We produced a lot of oil, but the money gained from that oil didn't circulate very much inside the Republic.

Over the years, Azerbaijan produced more than a billion tons of high-quality oil - an incredible amount - plus we refined it. I'm not saying that we haven't benefited from that at all, but certainly we didn't benefit to the extent that we might have, considering that we were the homeplace of the oil industry in the Soviet Union.

Since the decisions about money were being made from the center (Moscow), did the people who worked in Baku really know how much the production cost?

They did, but the Soviet Union was organized as a centrally planned economy, and in some cases, there was strange terminology like "planned-loss enterprise." It was clear that whatever you produced was much less than what the government had spent for the production: paying salaries, drilling, putting down casing or whatever. That was a disaster for the economy and resulted in a major social problem for us.

Having a market economy does not mean that there is no planning. The best companies in the world are strong in planning. But planning should be meaningful.

What does it mean to you to be an Azerbaijani holding such a high-ranking position in a foreign oil company?

To me, the term "national employee" is very interesting - it's one that expatriates in Western companies use to refer to the local staff.

In Azerbaijan, I'm considered a national employee. Actually, it was very funny - I was giving a presentation at BP's Leadership Development Program for promising national employees. In my speech, I joked with them that we were all national employees, but that was not a big deal, since now all Americans are "national employees", too, since they're working for a British company.

Some of my colleagues and friends were surprised when I joined a Western company. A few people said, "Why did you do this? It's not right." They can't break out of this mentality that if you work for a Western company, you are not helping your own country. I completely disagree with this.

You can work for a Western company and still deliver a lot of good things for your own country. The better this company will be in the future, the better it is for Azerbaijan.

This is one of the most important enterprises for Azerbaijan. BP is the operator of AIOC, of Shah Daniz, of Inam, Alov and hopefully of pipelines. Working here is a great opportunity to help Azerbaijan. The more Azerbaijanis who work for this company, the better for Azerbaijan.

We have a lot of Azerbaijanis working here. I would like to see even more. I'd also like to see Azerbaijanis work abroad on an expatriate basis as BP employees. It would be great to have 30 to 40 Azerbaijanis working in the United States, Australia or Argentina at BP operations. That way they will gain expertise and have access to different cultures; when they come back, they can make an even greater contribution to our country.

We still need to have some expatriates working in Azerbaijan because we need their expertise. Of course, we have to replace them gradually, and that's under contractual obligations. The Production Sharing Agreement (PSA) states that gradually we must replace expatriates with national employees.

What kinds of job opportunities are out there now for Azerbaijan's younger generation? What do you tell them?

I think it will be much easier for them to be accepted here because they don't carry as much baggage from the Soviet period with them. It's very difficult for older people, who are generally very well-educated and experienced, to change their lives or adjust themselves to a completely new working environment. I'm talking about the young people who have just graduated from universities, who speak English, who are bright and who have a chance to join this company.

By being employed here and being Azerbaijani, a young person has a lot of additional opportunities because there are a lot of jobs for us just because we are from this country.

However, you have to be good. You have to take this opportunity, develop yourself, be aggressive and become a universal employee for this company. We have job postings internally within BP. You have to be as good as anybody else to apply for openings in the Gulf of Mexico, Argentina, Egypt or elsewhere.

It's a good opportunity, but please behave appropriately, try to work hard and achieve it not because you are Azerbaijani, but because you are as good as any expatriate. That requires special skills and an appropriate mentality. You have to believe that this is possible, and it really is.

Recently I visited the United States just to talk to Azerbaijani students that we were able to identify in the universities. The purpose was to go and find them, to create a network for tracking their progress, and maybe help them somehow, actually guide them.

I think the students were pleased to see that someone was interested in their progress. Some young Azerbaijanis say, "My country isn't interested in me."

Another purpose was to explain what kinds of opportunities they will have if they come back to their own country and start their careers here. If you're in the United States, you graduate, you have a good education and some opportunities. It's a "no-brainer" that you would like to stay there and never come back. The more Azerbaijanis who are educated abroad, the better. But somebody should be working here as well.

I tell them, "We will hire you if you are really good. Then we will develop you." There's a challenge program in the company. By placing these young graduates in various expatriate positions, we move them horizontally and they learn a lot. In a few years, they're able to do any job at any location.
We really need more people with a Western education who have something in their hearts to come back and do something for their country. But we should never disregard a lot of young talents who have local education and local experience. So far they have been our main source for hiring.

Let's talk about the responsibility of Azerbaijanis working in the oil company in terms of independence. It seems like oil does have a lot to do with Azerbaijan's independence.

Yes, that's right. It's up to us - the citizens of Azerbaijan - to manage this opportunity.
Some people say, "Why should we produce oil now? We should keep it for the future generations." I can understand these people, and it makes sense. However, I personally believe that we should not delay. It's not possible, and it's not consistent with the state of the world's oil industry. But it doesn't mean that when the oil runs out, the country will collapse.

Let me give you an example. In Japan they don't have oil at all. They don't have that many natural resources, but they are great producers. They produce a lot of steel, a lot of cars, a lot of electronics and have a very strong economy.

The question is not how much oil we have somewhere underground, it's how smart we are in using our wealth and opportunities in order to create a sustainable economy that won't be dependent on the availability of additional oilfields. By having this initial opportunity and a lot of cash coming into the country, if we can be smart and are able to create a base for sustainable economic development, we won't be dependent on oil for our future.

Azerbaijan has had a lot of ups and downs these past ten years. There are always a lot of questions about what the future is going to bring, especially to the majority of people. Are you optimistic about the future?

Yes, I am. I do believe that we can do a lot of good things in Azerbaijan. The opportunities are there and, in fact, it's difficult for me to imagine us not creating a great country here.

Of course, it's not going to be easy. Some people are in a very difficult situation; they've had a difficult life. And let's not forget about the refugees; it's been incredibly difficult for them, just to survive.

Things will depend on us. Many Azerbaijanis have this mentality of waiting for somebody to come and do something for us. That's not going to happen. We should be doing it ourselves.

I think that the last ten years have been very special and yet very difficult for all of us. On the one hand, I'm sorry for the older generation and some of my peers because they have lost so much: their homes, sons, husbands, sisters, jobs, and many other important features of normal life. Times have been so difficult for many of them.

At the same time, when we think about the past, we know that we don't want those days to come back. We have a new generation already on its way. When we gained our independence, some of them were just kids, and now they're already starting their careers. I hope that they will take advantage of their opportunities and go on to make a profound difference for our country.

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From Azerbaijan International (9.2) Summer 2001.
© Azerbaijan International 2001. All rights reserved.

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