New gas discovery boosts Azerbaijan’s EU export potential

Azerbaijan and a consortium led by BP reached an agreement regarding the development of a new natural gas field in the Caspian Sea. The new reserve, found earlier this year, lies beneath the massive Azeri-Chirag-Gunashli (ACG) oil field and could significantly increase the volume of Baku gas available for export to Europe.

According to BP, the reserve is expected to remain 4 trillion cubic feet of gas “in place”, or about 113 billion cubic meters (bcm). “Gas in place” refers to the total volume held in the reservoir, which will not all be recoverable.

The agreement between Azerbaijan’s state oil company, Socar, and the consortium was formalized through an addendum to an existing production sharing agreement (PSA) that the consortium holds for the ACG oil field. This PSA was renewed in 2017 and runs until 2049.

BP said in a statement that the consortium drilled an appraisal well in early 2023 and in July confirmed the presence of “deep gas reservoirs”. ACG consortium members are now working with Socar to formulate a development plan for the new gas reserve; production from the existing appraisal is expected to begin in 2025. The statement added that under the terms of the addendum, Socar will purchase all the gas produced. Details on the volume of annual production from the new reserve have not been made public.

“We demonstrate once again that Azerbaijan is a reliable partner in the global energy markets. This project will strengthen Azerbaijan’s role as a key energy supplier for Europe, contributing to the energy security of our partners,” said Socar President Rovshan Najaf, quoted in the statement.

The new agreement is good news for Baku, which has recently made good on its promise to double gas exports to European Union states by 2027. Speaking in July, Azerbaijan’s President Ilham Aliyev said Baku aims to export 16 billion cubic meters per year to Europe by 2027. Last year, Azerbaijan’s exports to Europe through the three pipelines that make up the Southern Gas Corridor totaled 11.8 billion cubic meters, up from 10 billion cubic meters two years ago.

Uncertainty over Baku’s ability to meet its export target of 20 billion cubic meters by 2027 has created a chicken-or-egg scenario where buyers are reluctant to commit to buying more gas from Azerbaijan, making it difficult, in turn, for the operators of the three pipelines. comprising the Southern Gas Corridor to attract the investment needed to expand pipeline capacity to handle 20 billion cubic meters per year.

Separately, BP and Socar signed an agreement to jointly explore for hydrocarbons in two blocks in the Caspian Sea, called Karabagh and ADUA.

By David O’Byrne via Eurasianet.org

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