Azerbaijan has partnered with a consortium led by BP to develop a newly discovered natural gas field in the Caspian Sea. This new reserve, found earlier this year, lies beneath the existing Azeri-Chirag-Gunashli (ACG) oil field. It is expected to significantly boost Baku’s gas export capacity to Europe.
BP estimates that the reserve holds about 4 trillion cubic feet of gas, or roughly 113 billion cubic meters (bcm). This figure represents the total gas volume in the reservoir, but not all of it will be recoverable.
The agreement was formalized through an addendum to an existing production sharing agreement (PSA) that the consortium has for the ACG oil field. This PSA was renewed in 2017 and is set to last until 2049.
In early 2023, the consortium drilled an appraisal well, confirming the presence of “deep-lying gas reservoirs” in July. The ACG consortium, working alongside Azerbaijan’s state oil company, Socar, is now developing a plan for the new gas reserve. Production from the appraisal is projected to begin in 2025. Under the terms of the addendum, Socar will purchase all the gas produced. However, details about the expected annual production volume remain undisclosed.
Socar President Rovshan Najaf emphasized the importance of this project, stating, “We are once again proving that Azerbaijan is a reliable partner in global energy markets. This project will bolster Azerbaijan’s role as a key supplier of energy to Europe, contributing to the energy security of our partners.”
This agreement comes at a critical time for Baku, which has been striving to meet its commitment to double gas exports to European Union states to 20 bcm annually by 2027. In July, Azerbaijani President Ilham Aliyev indicated that the goal is to export 16 bcm to Europe by that year. Last year, Azerbaijan’s gas exports to Europe via the Southern Gas Corridor reached 11.8 bcm, a rise from 10 bcm two years prior.
Concerns about Azerbaijan’s ability to reach the 20 bcm target by 2027 have created hesitation among buyers. This reluctance makes it harder for operators of the Southern Gas Corridor pipelines to secure the investment needed to expand capacity.
In a separate development, BP and Socar have also signed an agreement to jointly explore for hydrocarbons in two additional blocks in the Caspian Sea, named Karabagh and ADUA.
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