The extension of the contract on the development of Azerbaijan’s Azeri-Chirag-Gunashli block of oil fields is pivotal for the post-2024 outlook for Azerbaijan's oil sector, said Laura Bennie, research analyst with Wood Mackenzie’s upstream Caspian team.
“Finalizing the contract extension is fitting recognition of the value that ACG represents – not only for BP and its partners, but also the Azerbaijani economy. The combination of the extension, bonus payment and increased SOCAR stake looks like a balanced outcome,” she added.
Bennie noted that for the international partners, it's all about moving down the cost curve and securing long-life assets.
“Finalizing the ACG contract extension is right on trend for BP and partners – the fruits of many years of talks,” she said.
“For Azerbaijan, this reaffirms the wider commitment to its oil and gas industry and the future revenues it will bring. ACG production may now be below 600,000 barrels per day, but there are still billions of barrels to recover and billions of dollars to invest. Attention will now turn to a brand-new production platform [Azeri Central East], which will be commissioned in the 2020s,” noted Bennie.
She pointed out that ACG currently produces 75 percent of Azerbaijan's liquids production, and is the lifeblood of its economy.
The signing ceremony of a new contract on development of the Azeri-Chirag-Gunashli (ACG) block of oil and gas fields was held with participation of Azerbaijani President Ilham Aliyev in Baku Sept. 14.
The Azerbaijan government and the State Oil Company of the Republic of Azerbaijan (SOCAR), together with BP, Chevron, INPEX, Statoil, ExxonMobil, TP, ITOCHU and ONGC Videsh have today signed the amended and restated agreement on the joint development and production sharing (PSA) for the Azeri, Chirag fields and the Deep Water Portion of the Gunashli Field (ACG) in the Azerbaijani sector of the Caspian Sea until 2050.
The contract is now subject to ratification by the Azerbaijani parliament.
BP will remain the operator in accordance with the amended and restated ACG PSA.
As part of the contract, the international co-venturers will pay a bonus of $3.6 billion to the State Oil Fund of the Republic of Azerbaijan (SOFAZ) and SOCAR will increase its equity share in the ACG PSA from 11.65 percent to 25 percent. During the next 32 years, there is the potential for more than $40 billion to be invested in the ACG oil field.
Following the completion of the contract, the new ACG participating interests will be as follows: BP - 30.37 percent; AzACG (SOCAR) - 25.00 percent; Chevron - 9.57 percent; INPEX - 9.31 percent; Statoil - 7.27 percent; ExxonMobil - 6.79 percent; TP - 5.73 percent; ITOCHU - 3.65 percent; and ONGC Videsh Limited (OVL) - 2.31 percent.
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