Extra time for BP and partners at Azeri-Chirag-Guneshli

BP and Azerbaijan today signed a deal extending a production sharing contract for the super-giant Azeri-Chirag-Guneshli (ACG) field, the largest field in the Azerbaijani sector of the Caspian Sea, until 2050.

Commenting on the extension, Laura Bennie, research analyst with Wood Mackenzie’s upstream Caspian team, said: “Finalizing the contract extension is fitting recognition of the value that ACG represents – not only for BP and its partners, but also the Azerbaijani economy. The combination of the extension, bonus payment and increased SOCAR stake looks like a balanced outcome.

"For the international partners, it's all about moving down the cost curve and securing long-life assets. Finalizing the ACG contract extension is right on trend for BP and partners – the fruits of many years of talks."

Ms. Bennie added: "For Azerbaijan, this reaffirms the wider commitment to its oil and gas industry and the future revenues it will bring.

"ACG production may now be below 600,000 barrels per day, but there are still billions of barrels to recover and billions of dollars to invest.  Attention will now turn to a brand-new production platform [Azeri Central East], which will be commissioned in the 2020s." 

The production sharing contract extension is pivotal for the post-2024 outlook for Azerbaijan's oil sector. ACG currently produces 75% of Azerbaijan's liquids production, and is the lifeblood of its economy.

The existing PSC is due to expire in 2024. The new deal sees SOCAR increase its stake in the ACG consortium to 25% from 11.65%, while BP, which remains operator, sees its interest drop from 35.8% to 30.37%.

The other consortium partners have also seen their stakes reduce. Chevron now holds 9.57%, Inpex 9.31%, Statoil 7.27%, ExxonMobil 6.79%, TPAO 5.73%, Itochu 3.65% and ONGC Videsh 2.31%.

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