BP has signed a series of deals in Azerbaijan covering oil, gas and renewables that will deepen its ties to the Caspian state that have already lasted more than 30 years.
Among the agreements inked on the sidelines of the Baku Energy Week in the Azeri capital was a final investment decision on the next development phase of the giant Shah Deniz gas field in the Caspian Sea, which BP operates with a 29.99% stake and is a key source of gas for both Turkey and Europe.
The UK major said the deals marked “progress” in the company’s strategy “to grow long-term shareholder value, contributing to its goal of growing its upstream business, as well as underlining BP’s continuing commitment to Azerbaijan.”
Southern Corridor
The $2.9 billion Shah Deniz gas compression project will maximize the recovery of low-pressure gas reserves, allowing BP and its partners to produce an extra 50 billion cubic meters of gas and 25 million barrels of condensate from the offshore reservoir.
The plan is to start construction on the new project by the end of this year and to complete the work in 2029, with first gas earmarked for later that year.
Shah Deniz Compression is one of 8-10 major projects slated for start-up between 2028 and 2030, as outlined at BP’s 2025 capital markets update. The company expects it to contribute to a higher production goal of 2.3 million-2.5 million barrels of oil equivalent per day by 2030, with capacity to increase further to 2035.
Shah Deniz came into production in December 2006 and last year produced around 28 Bcm of gas and 90,000 barrels per day of condensate.
Most of the gas is exported via the Southern Corridor pipeline network that runs across Turkey to Southeast Europe. Over 10 billion cubic meters per year of gas is transported to Europe via the Trans Adriatic Pipeline that runs to southern Italy. Additionally, 8 Bcm-9 Bcm/yr of gas is supplied to Turkey through the Trans-Anatolian Gas Pipeline.
The majority of condensate is exported from the Turkish Mediterranean port of Ceyhan via the BP-operated Baku-Tbilisi-Ceyhan oil pipeline.
Besides BP, the other shareholders in the Shah Deniz consortium are Russia’s Lukoil (19.99%), Turkey’s TPAO (19%), Azerbaijan’s SGC (16.02%), Iran’s Nico (10%) and Hungary’s MVM (5%).
The UK major is also in charge of the Azeri-Chirag-Guneshli (ACG) oil development, where production has declined from a high of more than 850,000 b/d in 2010 to around 330,000 b/d now.
In 2017, BP and its partners extended the production sharing agreement (PSA) with the government until 2049. Last year, the BP-led consortium signed an addendum to the ACG PSA to develop the project’s extensive nonassociated gas reserves over the next 25 years.
New Alliances
BP and Azerbaijan’s state oil company, Socar, also inked an agreement to tap two more blocks in the Caspian Sea: the discovered Karabagh oil field and the Ashrafi-Dan Ulduzu-Aypara area. BP will operate both blocks with a 35% interest, while Socar will hold 65%.
The deal will support BP’s strategy to access discovered resources and reload its exploration hopper with the aim of increasing its reserves replacement ratio to around 100% by the end of 2027, the company said.
Both tracts were previously assigned to Equinor in a 50-50 agreement with Socar. But the Norwegian firm sold its share to Socar in 2023 as part of a wider withdrawal from the country where, like BP, it had been active since the early 1990s.
Separately, BP and Socar confirmed an agreement, revealed by Turkey’s energy minister at the conference on Monday, for Turkish state oil company TPAO to acquire a 30% interest in the Shafag-Asiman Block in the Caspian Sea.
BP operates the block in a 50-50 alliance with Socar. When the agreement is finalized in the third quarter, BP and Socar will each hold 35%, with BP remaining as operator during the exploration period.
On the renewables side, the UK major will oversee a new project to electrify the Sangachal terminal, 55 kilometers south of Baku. The facility receives, processes, stores and exports oil and gas pumped ashore from ACG and Shah Deniz, as well as third-party oil shipped across the Caspian Sea from Kazakhstan and Turkmenistan.
The project will be built in two phases in 2027 and 2028 and will use electricity generated by a new solar plant to displace the gas that is currently used to power the Sangachal terminal, thus freeing up the gas for export.
