BAKU, Azerbaijan, June 13. The State Oil Company of the Republic of Azerbaijan (SOCAR), a central player in the country’s energy sector and a key driver of economic growth, has entered a new phase of large-scale transformation. The company is gradually shifting from a traditional oil and gas producer into a modern international energy corporation - one focused not only on ensuring domestic energy security, but also on shaping the global energy agenda.
SOCAR is actively involved in international projects, contributing to energy security both regionally and globally.
This transformation lays the groundwork for long-term, sustainable growth and supports SOCAR’s deeper integration into the global energy landscape. The company’s focus on decarbonization, international partnerships, and value creation through the green transition is positioning SOCAR as a leading regional player in the new energy era.
SOCAR’s strategy is built on three key priorities:
- Improving operational efficiency, despite aging infrastructure and declining output at mature fields;
- Strengthening Azerbaijan’s energy security, while expanding its international presence;
- Fulfilling its social mission, with a strong emphasis on financial sustainability.
1. Operational Resilience Amid Challenging Conditions
Oil production at Azerbaijan’s key fields has been ongoing for decades. The country’s three main assets - Azeri-Chirag-Gunashli (ACG), Shallow Water Gunashli, and Oil Rocks - have each been in operation for more than 25 years, with Oil Rocks having produced oil for over 70 years.
A decline in production at these mature fields was anticipated, yet the actual drop occurred faster than projected due to two primary factors:
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A significant reduction in output from the ACG field under the Production Sharing Agreement (PSA), which accounted for about 90% of the additional decrease.
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Delays in implementing several new projects, including the Karabakh field.
New ACE platform: a milestone at ACG
On April 16, 2024, bp announced the start of oil production from the newly installed Azeri Central East (ACE) platform, part of the ACG block. Output from the ACE platform quickly exceeded expectations, reaching 26,000 barrels per day by the end of 2024, compared to the projected 24,000 barrels per day.
ACE is the seventh platform at ACG and is designed to achieve a peak production capacity of up to 100,000 barrels per day once all 48 planned wells are brought online.
Additionally, gas production from the West Chirag platform is expected to begin by the end of 2025, following the completion of extensive subsea and surface works.
Natural gas: production growth and Shah Deniz Compression project
In 2024, SOCAR recorded a positive trend in natural gas output. Thanks to strong performance at the Shah Deniz and Umid fields, total production exceeded 50 billion cubic meters - well above the long-term forecast of 45 billion cubic meters issued in 2016 (including reinjection volumes).
A major step forward in developing Azerbaijan’s gas potential was the Shah Deniz consortium’s final investment decision on the Shah Deniz Compression (SDC) project - the third stage of development at the country’s largest gas field.
The $2.9 billion SDC project is designed to increase the recovery factor by reducing reservoir pressure. It is expected to enable an additional 50 billion cubic meters of gas production and 25 million barrels of condensate, which will be earmarked for export.
Aging midstream and downstream infrastructure: large-scale modernization underway
Despite their strategic significance, many of SOCAR’s midstream and downstream assets continue to operate under considerable wear and tear. One striking example is the gas transmission network: over 60% of the pipelines managed by Azerigaz have been in service for more than 35 years, leading to excessive gas losses that exceed acceptable thresholds.
Similar issues exist in the refining segment. SOCAR’s flagship downstream facility - the Heydar Aliyev Oil Refinery - has been in operation for more than 70 years.
Until 2022, other strategic priorities limited investment in maintaining and upgrading existing infrastructure. From 2019 to 2021, cumulative capital expenditures aimed at stabilizing production at existing fields amounted to less than $1 billion, just half the average for similar assets globally.
Likewise, investment in the Heydar Aliyev refinery in 2022 stood at just $20 million, whereas global benchmarks indicate a facility of that scale and technological complexity should receive no less than $60 million annually in investment.
Comprehensive transformation across SOCAR’s value chain
To address systemic challenges and prepare for future demands, SOCAR has launched a sweeping transformation covering all core areas of its operations - from upstream production to processing and distribution. Special attention is being paid to modernizing outdated infrastructure, improving efficiency, and sustainably increasing production volumes.
In upstream operations, a reassessment of the ACG field’s potential was the first major step after production fell short of expectations. In collaboration with PSA partners and independent technical consultants, comprehensive studies were conducted, resulting in a strategy to maintain current production levels over the next five years. By doing so, SOCAR expects to recover an additional 5 million tons of oil by 2030, creating long-term value.
Large-scale projects are also
being pursued across other promising assets. For instance, the
KADUA structure (Karabakh and Ashrafi-Dan Ulduzu-Aypara), jointly
developed with bp, is expected to begin producing first oil between
2029 and 2030, with peak output surpassing 3 million tons per year.
Development of the Umid-2 project is progressing on schedule, with
a final investment decision anticipated by the end of 2026 and gas
production planned for 2028. Over the long term, Umid-2 is expected
to yield over 50 billion cubic meters of gas, reaching an annual
production rate of 4.4 billion cubic meters in the early 2030s.
A similar trajectory is seen at the Absheron field, where production began in 2023. Preparations are underway for full-scale development. A final investment decision is expected by the end of 2025, with expanded production to commence in 2028. Peak output is projected at up to 6 billion cubic meters of gas per year. Meanwhile, SOCAR is working to separate the Babek structure from the existing Umid PSA and establish a new agreement. Babek holds over 100 billion cubic meters in recoverable gas reserves, giving the project strategic importance. It has already attracted considerable investor interest. SOCAR is also in discussions with international energy companies, including ExxonMobil, MOL Group, and Eni, about potential involvement in new exploration activities.
Beyond new developments, the company is also focused on optimizing operations at mature fields. At the Azneft production unit, workplace conditions on platforms have been improved since 2023, including refurbishing living quarters. A renovation plan for the Shallow Water Gunashli field has been adopted, featuring water injection enhancements. Pilot modernization projects launched in 2024 have already delivered results, with production at certain sites rising 3% above projections. Broader deployment of these solutions is now under consideration.
Gas distribution reform and digitalization
In the midstream sector, SOCAR has initiated a broad transformation of the gas distribution system. Azerigaz is implementing more than 20 initiatives - from metering cluster upgrades to digital network management systems. These efforts aim to cut gas losses, boost efficiency, and enhance customer service. By 2031, the cumulative annual economic benefit of these efforts is expected to exceed $50 million, with roughly $250 million in gains projected over five years.
Between 2022 and 2024, over 820 kilometers of gas pipelines were repaired or restored. Capital expenditures in 2024 were 17% more efficient than in the previous year. During the same period, 10% of gas meters were replaced with more accurate and reliable devices, and methane leaks were reduced by around 1% thanks to digitalization and global best practices. More than 15 digital tools have been developed and implemented to support field operations, customer services, and billing.
Significant progress has also been made in payment collection. In 2024, collection rates reached 99.2%, up from 94.8% the year before. Over the past three years, more than 55 settlements have been connected to the gas network, bringing energy access to over 91,000 households. More than 160,000 new customers have joined the system, including 3,500 in areas liberated from occupation.
Environmental focus and strategic partnerships
SOCAR is placing special emphasis on environmental responsibility. In partnership with Japan’s Mitsui & Co., the company is developing a carbon credit mechanism aimed at reducing methane emissions and preparing for compliance with international carbon standards. As part of its long-term strategy, SOCAR has engaged partners from the Middle East to help build a smart gas infrastructure. These collaborations focus on improving leak detection, enhancing operational efficiency, upgrading customer service, and optimizing asset management.
In sum, SOCAR’s transformation initiatives are designed not only to stabilize current operations but also to lay a solid foundation for long-term sustainable growth.
Natural gas exports
Azerbaijan’s natural gas exports hit a record high in 2024, reaching 25.3 billion cubic meters. This surpasses the figures from both 2023 (23.9 billion cubic meters) and 2022 (22.4 billion cubic meters).
By 2026, Azerbaijan plans to increase its annual gas exports to Europe by around 18.6%, from 11.8 billion cubic meters in 2023 to 14 billion cubic meters.
Without requiring additional capital investments (CAPEX), Azerbaijan is also supplying gas to 12 countries through SWAP mechanisms.
Downstream (refining and marketing)
A major modernization program is underway at the Heydar Aliyev Oil Refinery. The first phase was successfully completed in 2024, and for the first time, Azerbaijan began producing Euro-5 standard fuel domestically.
This first phase focused on three main goals:
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Producing Euro-5 standard diesel and gasoline;
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Ensuring a more stable and higher-quality supply of feedstock to Azerikimya JSC;
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Reducing the environmental impact of refining operations.
The project was originally expected to be completed in 2021, but due to a significant expansion in the scope of work, it was finalized only in 2024. Initially, only certain units were set to be upgraded. However, extensive stress testing revealed additional issues, including insufficient metal thickness in some units and several columns that were no longer fit for use. As a result, the project shifted from partial upgrades to the construction of entirely new units, mainly to minimize health, safety, and environmental risks. These kinds of changes and delays are typical for large-scale refinery modernization projects.
Throughout the process, all necessary steps were taken to prevent fuel shortages in Azerbaijan and to safeguard the country’s energy security, including signing contracts for importing petroleum products when needed.
Thanks to targeted efficiency programs, the share of light petroleum products (gasoline, diesel, jet fuel) produced at the refinery rose from 63% in 2022 to 69% by the end of 2024. Operational losses were also reduced from 2% to 1.6%.
As a result of process optimization, Azerbaijan’s domestic fuel trade posted a surplus of over $50 million in 2024. This figure is expected to rise to around $250 million over the next five years, driven by lower gasoline imports and higher jet fuel exports.
At the SOCAR Carbamide Plant, output in 2024 reached 652,000 tons, up from 537,000 tons in 2022 - a 21.4% increase. At the same time, natural gas consumption per ton of product was reduced by 24%.
At Azerikimya, the yield of ethylene and propylene rose from 48.6% in 2022 to 55.4% in 2024.
Overall, thanks to process improvements launched in 2023, the economic benefit from value-added projects is estimated at $131 million per year, or roughly $650 million over a five-year period.
As for downstream operations in Türkiye, the STAR Refinery increased its utilization rate from 98.5% in May 2020 to 119% in January 2023. This is among the highest operational efficiency levels for any refinery and delivered strong financial returns, especially amid high refining margins in 2022 and 2023.
Digitalization - a strategic priority across all segments
SOCAR has launched an ambitious digital transformation program and begun implementing digital solutions across its entire value chain. The process began with operations in Türkiye and has since expanded to production sites in Azerbaijan.
In Türkiye, the Petkim and STAR plants became the world’s first petrochemical and refining facilities, respectively, to receive the prestigious Global Lighthouse Network designation from the World Economic Forum, in 2020 and 2021.
In 2023, SOCAR extended its digital transformation efforts to the Carbamide Plant in Azerbaijan, which has now been brought into alignment with the criteria for joining the Global Lighthouse Network.
The Azerigas Production Union, in collaboration with international partners including Italgas, has launched a strategic project to develop a high-precision metering infrastructure and a smart gas metering network. Using advanced leak detection technology, more than 5,000 gas leaks were identified, over 3,000 of which were quickly repaired. These efforts have helped cut annual gas losses by about 2.6 million cubic meters, equivalent to a reduction of approximately 50,000 tons of CO₂ emissions.
In 2025, the Azneft Production Union kicked off a multi-year program to digitally transform its operations and modernize infrastructure, in strategic partnership with leading global technology companies. As part of the first phase, a virtual monitoring system was introduced for the first time, enabling real-time remote tracking of production data and well operations. The system currently covers the Gunashli-8 offshore platform, as well as the oil storage facilities at Oil Rocks and Dubandi.
2. Ensuring Azerbaijan’s energy security and transforming SOCAR into an international energy company
In many countries, national oil and gas companies traditionally focus on two strategic priorities: ensuring sustainable domestic energy security and gradually transforming into competitive players on the international stage. SOCAR is successfully addressing both objectives, relying on a comprehensive approach to developing the entire value chain - from exploration and production to refining, export, and the deployment of low-carbon technologies.
SOCAR plays a central role in guaranteeing Azerbaijan’s energy stability and independence. The company’s operations span the entire spectrum - from oil and gas exploration and production to refining and delivering products to both domestic and foreign markets. At the same time, SOCAR is becoming a driving force behind the country’s green energy transition.
On the domestic market, SOCAR supplies 100% of the crude oil used within Azerbaijan and meets approximately 90% of the country’s demand for motor fuels and jet fuel. A major milestone was the launch of Euro-5 gasoline production - a first in the history of Azerbaijan’s oil refining industry.
From 2019 to 2024, total output at the Heydar Aliyev Oil Refinery increased by 2%, despite limited investment during that period. This growth was made possible by reducing technological losses from 3.6% to 1.6%, and by increasing the share of light petroleum products in the total output from 65.9% to 70.5%.
One of SOCAR’s most significant achievements has been increasing the gasification level across the country to 97% - one of the highest rates not only in the region but also globally.
In the context of the global energy transition and given Azerbaijan’s considerable potential in renewable energy, SOCAR is actively refocusing its strategy toward sustainable development. At the COP28 conference, the company announced ambitious decarbonization targets:
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to achieve carbon neutrality (net-zero) by 2050;
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to eliminate methane emissions in the upstream segment by 2035;
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to reduce corporate carbon intensity by 30% and overall emissions by 20% by 2035.
These targets have acted as a catalyst for a large-scale reallocation of SOCAR’s investment portfolio toward renewable energy. As of the end of 2024, the confirmed project portfolio of the company’s subsidiary SOCAR Green had reached 1.4 GW. It includes:
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a joint project with TotalEnergies called "Mega" with a capacity of 1 GW;
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"Shafag" solar power plant with a capacity of 240 MW, implemented in partnership with bp;
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projects with Chinese partners totaling 160 MW.
At the same time, SOCAR and the UAE-based company Masdar signed an agreement to jointly implement renewable energy and hydrogen projects in Azerbaijan with a total capacity of 4 GW. As part of this collaboration, investment began in 2024 in the construction of solar power plants with a capacity of 445 MW in Bilasuvar and 315 MW in Neftchala. The total investment in these two projects will exceed USD 600 million.
Additional large-scale projects have also been announced:
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together with ACWA Power and Masdar - new renewable energy projects totaling 3.5 GW;
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together with China Datang Overseas Investment and PowerChina - the construction of a 2 GW offshore wind farm in the Caspian Sea.
Among the company’s new priorities is also the exploration of geothermal energy potential. SOCAR has signed a relevant agreement with SLB (formerly Schlumberger), a global leader in energy technologies.
Through these efforts, SOCAR is implementing a consistent strategy to ensure the country’s energy security while at the same time accelerating its green transformation and strengthening its position as a new-generation international energy company.
Transformation into a competitive regional and global player
In recent years, SOCAR has demonstrated stable performance despite the volatility of global energy markets, confirming its ability to effectively leverage strategic development opportunities. The company’s transformation has gone beyond national borders - through active participation in international projects and strategic partnerships, SOCAR has successfully diversified its sources of income and expanded its overseas operations.
Enhancing efficiency and expanding oil and gas export infrastructure
Natural gas exports from Azerbaijan reached a record level in 2024 - totaling 25.3 billion cubic meters (for comparison: 23.9 billion in 2023 and 22.3 billion in 2022). By 2026, the volume of gas exports to Europe is expected to increase from 11.8 billion cubic meters (in 2023) to 14 billion cubic meters - an increase of approximately 18.6%. Azerbaijan supplies gas to 12 countries through SWAP operations, without the need for additional capital investment.
SOCAR has completed the construction of the Igdir-Nakhchivan gas pipeline, 97.5 kilometers in length, in partnership with the Turkish state company BOTAŞ. The pipeline is designed to deliver up to 2 million cubic meters of gas per day. Once in operation, the Igdir-Nakhchivan pipeline will ensure the energy security of Azerbaijan’s Nakhchivan Autonomous Republic for at least 30 years. There is also potential for expanding the pipeline’s capacity.
Furthermore, in 2024, SOCAR and the national oil and gas company of Kazakhstan, KazMunayGas, signed a five-year contract for the transit of 1.5 million tons of oil through the Baku-Tbilisi-Ceyhan pipeline under the framework of the Aktau-Baku-Ceyhan route.
Foreign investments in the upstream segment
SOCAR is actively involved in exploring and developing oil and gas fields abroad through partnerships with leading international energy companies.
For instance, in the United Arab Emirates, SOCAR acquired a 3% stake in the offshore Umm Lulu and SARB fields, operated by ADNOC. These fields hold estimated oil reserves of 2.7 billion barrels. SOCAR’s expected annual production share is around 2.8 million barrels (approximately 400,000 tons) of oil. This represents SOCAR’s first upstream investment outside of Azerbaijan.
In Israel, SOCAR signed an agreement to acquire a 10% stake in the Tamar field, operated by Chevron. Tamar is Israel’s second-largest offshore natural gas field. Additionally, a consortium including SOCAR, bp, and NewMed Energy secured licenses to explore for gas in Israel’s exclusive economic zone.
In Switzerland, SOCAR plans to roll out 100 high-speed electric vehicle charging stations by 2026 and to jointly develop a green hydrogen production facility with local energy companies.
The Binh Son refinery in Vietnam signed a contract with SOCAR Trading for crude oil deliveries in 2025.
SOCAR is also expanding its liquefied natural gas (LNG) supply operations. The company has invested in LNG liquefaction terminals, regasification plants, and cross-border infrastructure projects. A framework agreement was signed between Pakistan LNG Limited (PLL) and SOCAR Trading for LNG deliveries to Pakistan in 2025. That same year, SOCAR entered Romania’s wholesale natural gas market. Since 2023, SOCAR Trading has ramped up its LNG trading activities in Singapore to meet rising demand across Asia.
These moves have boosted SOCAR’s reputation as a reliable global energy partner, strengthened its brand, and laid the groundwork for sustainable revenue growth.
3. Ensuring Strong Financial Resilience While Delivering on SOCAR’s Social Mission
In the face of volatility and rapid change in global energy markets, achieving sustainable development requires robust financial discipline. At the same time, state-owned companies like SOCAR carry important social responsibilities.
To maintain resilience in the cyclical oil and gas sector, SOCAR has made strong financial performance a top priority over the past two years. Key accomplishments from 2023 to 2024 include:
EBITDA growth: SOCAR increased its EBITDA by 8.3% between 2023 and 2024, rising from USD 4.8 billion to $5.2 billion (excluding full consolidation of STAR and SGC).
SOCAR’s recent EBITDA figures:
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2020: $2.4 billion
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2021: $4.6 billion
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2022: $ 8.7 billion
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2023: $4.8 billion
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2024: $5.2 billion
Free cash flow: Free cash flow grew by 46% over 2023–2024, driven by effective cost control and disciplined capital management.
Credit rating upgrades: Building on improved financial performance, Fitch upgraded SOCAR’s credit rating to “BBB-” in August 2024, aligning it with Azerbaijan’s sovereign rating. Moody’s also revised its outlook on SOCAR to positive, citing strong credit metrics and sufficient liquidity to meet debt obligations through 2025.
ESG Rating: In Q4 2024, MSCI assigned SOCAR an initial ESG rating of “BBB”, reflecting its performance on environmental, social, and governance criteria.
Financial optimization: By increasing income from interest on deposits and reducing insurance expenses, SOCAR was able to lower its borrowing costs.
High demand for SOCAR’s green bonds: In Q1 2025, SOCAR issued USD 200 million in green bonds to support renewable energy projects. The first coupon payment of USD 3 million was made on June 10, 2025. Investor interest was high: since their listing on the Baku Stock Exchange on March 7, more than 330 trades worth USD 13.8 million have been executed on the secondary market, significantly boosting domestic capital market activity.
Contributions to the state budget: From 2022 to 2024, SOCAR paid AZN 5.7 billion in taxes (excluding profit and road taxes) and distributed AZN 629 million in dividends to the state.
These achievements demonstrate SOCAR’s resilience to the cyclical nature of the oil and gas industry, as well as its adaptability and financial strength.
Debt reduction: The post-COVID period brought sharp demand and supply shocks to the energy sector, pushing average industry debt-to-EBITDA ratios from 1–1.5x to 2–2.5x. SOCAR’s own debt-to-EBITDA ratio rose from 3.4x in 2020 to 4.2x. Including debt from STAR, Goldman Sachs, and SOFAZ (excluding SGC), the ratio approached 7x.
Despite these pressures, SOCAR responded swiftly through operational improvements and strategic initiatives.
In 2022, SOCAR posted record revenues of USD 70.1 billion and EBITDA of USD 8.7 billion. Roughly half of the increase was driven by high oil and gas prices; the rest came from more efficient trading operations and STAR refinery’s strong performance.
By the end of 2022, SOCAR had lowered its debt-to-EBITDA ratio to below 2x and kept it within the 2–3x range through 2023–2024. Between 2021 and 2024, the company doubled its EBITDA, repaid over 35% of its debt, and reduced its debt-to-EBITDA ratio by 66% — underscoring its commitment to financial stability and discipline.
Balancing financial performance with social responsibility
Over the past three years, SOCAR has invested more than $3 billion in key social projects, including:
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Gasification of the Karabakh and East Zangazur economic regions, energy infrastructure development, and support for regional growth.
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Funding social welfare initiatives to improve living standards in Azerbaijan, reinforcing SOCAR’s role as a pillar of national wellbeing. In 2024, SOCAR also financed environmental projects.
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Helping maintain social stability by keeping fuel prices for Azerbaijani consumers significantly below European levels: diesel at $0.59 per liter (66% lower than in Europe), and AI-95 gasoline at $0.94 per liter (47% lower).
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Supporting employee welfare: According to a labor market analysis by EY, SOCAR allocated roughly over $94 million annually in additional employee-related spending between 2022 and 2024.