Country Report

Azerbaijan upstream summary

27 August 2020

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27 August 2020

Azerbaijan upstream summary

Report summary

Azerbaijan is a key oil and gas producer in the Caspian region. Its upstream industry is dominated by two BP-operated offshore megaprojects: the Azeri Chirag Guneshli (ACG) oil field and Shah Deniz gas-condensate field. They account for the majority of production and investment. Most liquids and gas are exported, chiefly to or via Turkey. This includes the new US$40 billion Southern Gas Corridor to Europe for Shah Deniz Phase Two. SOCAR, Azerbaijan's NOC, participates in all IOC-led projects. It also independently operates mature fields.

Executive summary
Key facts
Location maps
Key companies
- SOCAR
- Majors
- Other operators
  - Turkish operators
  - Asian operators
  - Russian operators
  - Iranian operators
  - Other notable IOCs and operators
Geology
- Introduction
  - Onshore
  - Offshore
- South Caspian basin
  - Structural (tectonic) elements
  - Absheron province
  - Gobustan province
  - Lower Kura province and Baku archipelago
- South Caspian deepwater basin
- Stratigraphy
- Reservoirs and source rocks
- North Caucasus-Mangyshlak basin
Exploration
- Licensing
- Licensing and IOC activity
  - Licensing since 1991
  - 1991
  - 1992
  - 1993
  - 1994
  - 1995
  - 1996
  - 1997
  - 1998
  - 1999
  - 2000
  - 2001
  - 2002
  - 2003
  - 2004
  - 2005
  - 2006
  - 2007
  - 2008
  - 2009
  - 2010
  - 2011
  - 2012
  - 2013
  - 2014
  - 2015
  - 2016
  - 2017
  - 2018
  - 2020
- Drilling
  - Drilling activity
- SOCAR activity
- IOC-led activity
  - Onshore
  - Offshore
  - Future drilling plans
- Onshore
- Offshore
- Offshore drilling overview
  - Offshore PSC drilling commitments
  - Offshore drilling challenges
- Active IOC exploration licences (offshore)
  - Absheron (Deep Water)
  - Ashrafi-Dan Ulduzu-Aypara
  - Bahar 2
  - D230
  - Shafag Asiman
  - Shallow Water Absheron Peninsula (SWAP)
- Potential IOC exploration licences (offshore)
  - Goshadash
- Other IOC exploration licences (offshore)
  - Alov
  - Lerik
- Semi-submersible rigs
- Jack-up rigs
- IOC exploration licences (onshore)
  - Joint Study Agreements (JSA)
  - Southwest Gobustan
  - Muradkhanli Contract Area
Reserves and resources
- Oil and gas reserve classification
  - Azerbaijani reserve classification system
- Reserves by basin
  - Liquids
  - Gas
- Resources by basin
- Reserves by sector
  - Onshore
  - Offshore
- Reserves by report
Production
- Liquids
  - Historical liquids production
  - Future liquids production
- Gas
  - Historical gas production
  - Future gas production
  - Domestic gas balance
Infrastructure
- Introduction
  - Overview
  - Oil infrastructure
  - Oil transit
  - Gas infrastructure
- Oil infrastructure
- International pipelines
  - Baku-Tbilisi-Ceyhan (BTC) pipeline
  - Northern Route Export Pipeline (to Novorossiisk, Russia)
  - Western Route Export Pipeline (Baku-Supsa)
- Transit of Central Asian crude (via BTC)
  - Turkmenistan (current)
  - Kazakhstan (previous) - Tengizchevroil (TCO)
  - Kazakhstan (potential) - Kashagan Contract Area
- Ports and terminals
  - Dubendi (Baku port)
  - Sangachal
  - Storage facilities
- Rail infrastructure
  - Baku-Tbilisi-Kars railway
- Refineries
- Gas infrastructure
- International pipelines
  - Southern Gas Corridor
  - Legacy pipelines to/from Iran
  - Legacy pipelines to Georgia
  - Legacy pipeline to/from Russia
  - Legacy pipelines via Armenia (inactive)
- Proposed gas pipelines
  - Trans-Caspian Gas Pipeline (TCGP)
  - Azerbaijan-Iran
  - Turkey-Nakhchivan
- Gas processing / gas monetisation facilities
  - Existing facilities
  - Future facilities
- Underground gas storage (UGS)
Costs
- Introduction
- Capital costs
  - Capital expenditure by location
- Operating costs
  - Operating expenditure by location
Policy and regulation
- Key legislation
  - Subsoil Law (February 1998)
  - Energy Law (November 1998)
  - Energy Resources Law (May 1996)
  - Foreign Investment Law (January 1992)
- Other legislation
  - Law on Gas Supply (May 1998)
  - Presidential Decree No. 150 (December 2004) and Internal Regulation of the Ministry of Industry and Energy of the Azerbaijan Republic (May 2006)
  - Law on oil and gas export activities
- Regulatory body
  - Gas regulation
  - New Customs Code
  - State Oil Fund (SOFAZ)
- State oil company
  - Southern Gas Corridor Company (SGC)
  - Azerbaijan Investment Holding
- State participation
- International boundaries
- Legal status of the Caspian Sea
  - Overview
  - North Caspian Sea
  - South Caspian Sea
- Licensing
Fiscal terms
- Overview
- Upstream
- Midstream / downstream
- Current fiscal terms
  - Model contract terms (for future licensing)
  - Government equity participation
  - Fiscal stability
- Fiscal terms
  - Bonuses, rentals and fees
  - Indirect taxes
  - Royalty
  - PSC ring-fencing
  - PSC cost recovery
  - PSC profit sharing
  - Corporate income tax (CIT)
  - Fiscal treatment of decommissioning costs
  - Product pricing
  - Summary of modelled terms by development type
- Risk Service Agreements (RSAs)
  - Sample Cash Flow
  - Marginal government take calculation
- Historical background
  - Joint venture contracts (JVs)
  - PSCs