Agreement on further development of largest Azerbaijani oil deposit may be delayed

Economy Materials 1 July 2016 19:52 (UTC +04:00)

Baku, Azerbaijan, July 1

By Maksim Tsurkov – Trend:

Exxon Mobil and BP are in disagreement over a giant oil production deal with Azerbaijan, blocking renewal of contract for further development of the country’s largest Azeri-Chirag-Guneshli (ACG) block of oil fields, Reuters has reported citing high-level sources.

The validity of the current contract signed in 1994 expires in 2024. The agreement can be extended through a new contract for further development until 2040.

“BP, which operates the Azeri-Chigar-Guneshli (ACG) fields in the Caspian Sea and relies on them for a tenth of its global output, has tentatively agreed terms with the Azerbaijani government on extending the 30-year contract,” Reuters said. “There have been numerous attempts to find a breakthrough, with BP and Azerbaijan agreeing new terms but Exxon rejecting them time and time again. It has been going on for almost two years, with Exxon insisting on better terms.”

“Exxon, which gets around one percent of its hydrocarbon production through its stake in the ACG consortium, has been holding out for a better deal since the halving of world oil prices in 2014,” said Reuters.

“Exxon wants better terms,” Reuters quoted its sources as saying. “It has its own views of how the consortium should work which are different from the views of the operator BP. Azerbaijan is not giving any ultimatums. We are still hoping for a deal before the end of September.”

None of Reuters’ sources elaborated on the terms under discussion.

Meanwhile, the Baku office of Exxon Mobil, which holds 8 percent share in the ACG development, gave no comments to Trend on the matter.

Speaking to Trend, sources in Azerbaijan’s state oil company SOCAR dismissed the information regarding tensions in negotiations and Exxon Mobil’s blocking the contract.

The sources in SOCAR said meetings have been repeatedly held with Exxon Mobil, citing “a very satisfactory meeting with Exxon within the St. Petersburg International Economic Forum.”

Officials of BP, which owns 35.8 percent in the ACG development contract, were unavailable for comment.

Over 650,000 barrels of oil are daily produced at the ACG block, which has been developed since 1997. Oil is mainly exported via the Baku-Tbilisi-Ceyhan and the Baku-Supsa pipelines. A certain part is transported by rail to the Georgian port of Batumi.


Follow the author on Twitter: @MaksimTsurkov