The construction and further development of the first railway in Azerbaijan is connected with the development of the oil industry. After the industrial production of oil in 1847, as well as the abolition of the oil obligation system in 1872 on the decision of the tsarist government, the Baku oil industry entered a period of prosperity. The oil industrialists were concerned about the safe and timely transportation of crude to refineries, as well as delivery of their products to buyers. During this period, the demands of entrepreneurs for the construction of a railway between the mines and refineries were completed. At a meeting of the Committee of Ministers presided over by Tsar Alexander II on the 16th of June 1878, the project for the construction of a railway in the oil field was approved. The construction of the 25.2-verst (26 km) railway was entrusted to the Poti-Tbilisi Railway Company. A public commission headed by philanthropist Haji Zeynalabdin Tagiyev was tasked with carrying out the process of the privatisation of the territories in the Balakhany and Surakhany zones and assessing these lands.
Construction of the railway started in 1878 and was finished in 1879. It was officially launched on the 20th of January 1880. For the first time in the world, oil began to be transported in rail tanker cars via this railway. After that, the reconstruction for the electrification of the Baku-Sabunchu railway began, and on the 26th of July 1926, the first electric cars began to run to the famous oil regions of Absheron, Sabunchu and Surakhany.
The ever-increasing oil production in Azerbaijan, as well as the expanding number of refineries, raised the issue of exports of oil and oil products. The transportation of oil to Baku refineries, through the Caspian Sea to the central regions of Russia, as well as to Near and Central Asia, and even to India, was carried out in a very primitive way, by the caravan method in wooden tanks and barrels. This method was expensive, risky, and most importantly, accidents were inevitable. In addition, it took a long time (about 6 months) to ship oil and oil products across the Caspian Sea to Astrakhan and from there to the Russian market. In 1880-1882, so much crude oil was accumulated in Baku that the oil industry, which did not have the necessary tanks to transport it, was forced to suspend production and refining for some time and burn or run the extracted oil off into the sea.
The integration of the Baku oil industry into Europe and the transportation of oil to Europe became a topical issue. Therefore, it was necessary to connect Baku, already a major industrial centre, with the railways and the Black Sea. Although the idea was first put forward in the 1930s, practical work in this direction began only in the mid-1950s. However, due to financial pressure, Tsarist Russia decided to build the railway in parts. In 1865, unlike all previous projects, the construction of the railway in the South Caucasus began not from Baku, but from the opposite direction - from Poti. The 294 km long Poti-Tbilisi railway was put into operation in 1872. In 1879, Tsar Alexander II authorised the construction of the 548 km Baku-Tbilisi railway.
Simultaneously with the Baku-Tbilisi railway, a 105 km railway line was built from Samtredi station on the Poti-Tbilisi railway to the port of Batumi. In May 1883, direct transportation from Baku to Batumi began. A small settlement, Batumi soon developed into one of the world’s largest ports due to Baku’s oil. Thus, in 1901, 74.4 million pounds (1 pound = 16.38 kg) were exported from the port of Batumi, and in 1902, 78.3 million pounds of oil and oil products were exported. However, a small part of the oil and oil products reached the European part of Russia. Therefore, in 1897, the Russian government decided to extend the railway from Port Petrovsk (now Makhachkala) to Derbent, and then to Baku. Construction work began in March 1897 and was completed in 1900. Thus, Baku was connected to the entire Russian railway network. In the 1880s and 1890s, Baku oil took a worthy place in the general freight traffic of Russian railways. Azerbaijani railways, which had long been a Baku part of the South Caucasian Railway, continued to operate as an independent railway under the USSR Ministry of Roads in 1955 on the decision of the USSR Council of Ministers.
After Azerbaijan gained independence, the export of oil, gas and oil products fell on the railways at that time. After the Baku-Novorossiysk pipeline was commissioned in late 1997, the Baku-Batumi pipeline in early 1999, and the Baku-Tbilisi-Ceyhan main export pipeline in mid-2005, crude oil was mainly exported via pipelines. However, rail transport has maintained its profitability. ExxonMobile transported its share of oil under the ACG project to the port of Batumi by rail between 2005 and 2015. Iran’s NICO exported its share of condensate from the Shah Deniz field to world markets via the Baku-Batumi railway in 2010-2018. Although crude oil is not currently transported by rail, transit oil from Kazakhstan and Turkmenistan has long been exported to the Georgian market in this way. Over the past period, more than 38.7 million tons of Kazakh and Turkmen oil have been delivered to world markets by rail through Azerbaijan’s railway infrastructure.
At the same time, 22.8 million tons of Azerbaijani oil and condensate were transported by rail in 2005-2018. At present, the country continues to export oil products by rail. Only Middle East Petroleum FZE oil products are shipped from the Dubendi Oil Terminal to Georgia. So far, more than 14.8 million tons of transit oil products, including fuel oil, jet fuel, petrol, diesel and gas oil, belonging to the company have been transported to Georgia and exported to world markets.