Azerbaijan's recent find boosts chances of fulfilling 2027's EU natural gas export quotas by Baku.
A Fresh Spin on Azerbaijan's Gas Boost
In a cool turn of events, Azerbaijan's cooperation with a BP-led consortium could pave the way for a significant expansion ofAzerbaijan's natural gas reserves. This exciting discovery occurred beneath the colossal Azeri-Chirag-Gunashli (ACG) oil field, promising to elevate Baku's gas exports to Europe significantly.
According to the consortium, the newly discovered reserve is estimated to harbor approximately 4 trillion cubic feet of gas, equivalent to around 113 billion cubic meters (bcm). It's essential to note that this "gas in place" refers to the overall volume held within the reservoir, not all of which is recoverable.
Fueled by a recent agreement between Azerbaijan's state oil company, Socar, and the consortium, the ambitious project aims to materialize through an addendum to an existing production sharing agreement (PSA) for the ACG oil field. This long-lasting PSA was renewed in 2017 and continues until 2049.
In an official statement, the consortium revealed that they detected the presence of "deep-lying gas reservoirs" through an appraisal well in early 2023. ACG consortium members are now working hand-in-hand with Socar to design a development plan for the promising new gas reserve, with production from this appraisal projected to commence in 2025. However, specific details about the anticipated volume of annual production from the new reserve have yet to be disclosed.
A statement from Socar further emphasized, "We are reaffirming Azerbaijan's role as a dependable player in global energy markets. This project reinforces Azerbaijan's position as a critical supplier of energy to Europe, bolstering the energy security of our partners."
This latest agreement may offer a fortunate boost for Baku, which has experienced a degree of uncertainty regarding its pledge to doublegas exports to European Union states to 20 bcm annually by 2027. In July, Azerbaijan President Ilham Aliyev announced aiming to export 16 bcm yearly to Europe by 2027 instead. Last year, Azerbaijan's exports to Europe through the three pipelines constituting the Southern Gas Corridor totaled 11.8 bcm, marking an increase from 10 bcm two years ago.
Apprehension surrounding Baku's ability to meet its 20 bcm by 2027 export target has created a perplexing situation for buyers who hesitate to commit to purchasing more gas from Azerbaijan. In turn, this has made it challenging for operators of the Southern Gas Corridor's three pipelines to attract investments necessary for widening pipeline capacity to accommodate 20 bcm per year.
Outside this development, BP and Socar also sealed an agreement to jointly explore for hydrocarbons in two Caspian Sea blocks, known as Karabagh and ADUA. But it remains to be seen how these regional developments will contribute to the broader gas market dynamics and Azerbaijan's gas exports to Europe.
[1] https://www.petronas.com/en/investors/strategy-performance/operations/organisation/projects/turkmenistan[2] https://www.adnoc.ae/en/media/press-releases/2021-09-14-adnoc-acquires-38-percent-stake-in-the-block-i-gas-and-condensate-fields-of-turkmenistan[3] https://www.anadoluagency.com/business/turkmenistan-to-start-gas-exports-to-turkey-via-caspian-sea-in-five-years-4016563[4] https://www.worldoil.com/news/2021/9/14/adnoc-acquires-stake-in-turkmen-gas[5] https://www.reuters.com/world/iran/iran-resumes-exploratory-oil-drilling-caspian-sea-2021-11-17/
- The discovery of deep-lying gas reservoirs within the Azeri-Chirag-Gunashli (ACG) oil field, worth approximately 4 trillion cubic feet of gas, is expected to enhance Azerbaijan's role in the global financial sector, significantly impacting the energy and oil-and-gas industry by bolstering Europe's gas imports from Azerbaijan.
- Amidst concerns about Baku's ability to meet its pledge of doubling gas exports to European Union states to 20 bcm annually by 2027, the recent partnership between Azerbaijan's state oil company, Socar, and the ACG consortium could potentially reposition industry players and provide a strategic advantage in the energy market, as the new gas reserve promises production from 2025.
