The new contract is effective until 2050 and provides for more favorable conditions for Azerbaijan
The State Oil Company of Azerbaijan (SOCAR) and British Petroleum (BP) have signed a new contract on the extension of the Production Sharing Agreement (PSA) on joint development of the Azeri-Chirag-Deepwater Gunashli (ACG) oil field.
The contract will be in effect until 2050. The ACG is the largest oil-field development in the Caspian, covering an area of more than 432 sq.km. According to the Azerbaijani side, there is an estimated 500 million tons of oil reserves remaining at the ACG.
Azerbaijan concluded its first oil contract in 1994, for a period of 30 years. Oil extraction at the ACG started in November 1997. More than 3 billion barrels of oil have been produced from the ACG and about USD 33 billion has been invested in the project to date.
There are six production platforms operating at the ACG oil field. Oil is exported to world markets mainly through the Baku-Tbilisi-Ceyhan (BTC) pipeline and the Western Route Export Pipeline (WREP) via the Georgian Black Sea port of Supsa.
The Azerbaijani President, Ilham Aliyev, addressed the participants at the signing ceremony.
“Today is a remarkable day in the history of Azerbaijan. It marks the beginning of a new era in the development of the ACG oil field,” said President Aliyev.
In his words, the new contract has been concluded under more favorable conditions for Azerbaijan.
“In particular, under the new contract, the Azerbaijani State Oil Company’s share will be 25% (the current contract provides for 11.65%). Also, after signing the contract, Azerbaijan will receive USD 3.6 billion in bonus payments from foreign investors, while the country’s share of profitable oil will be 75%,” the Interfax news agency cited President Aliyev as saying.
The UK Prime Minister, Theresa May, sent a congratulatory letter to the participants of the contract signing ceremony.
The letter was read by Alan Duncan, the UK Minister of State for Europe and the Americas.
“I apologize for not being able to participate in the ceremony. However, I’m sure that this contract will further develop our cooperation,” reads the letter.
Natiq Jafarli, an expert in economics and the Executive Secretary of the ‘Republican Alternative’ (REAL) opposition movement, termed the signing of the new oil contract as ‘yet another positive phenomenon for the country’. “BP has introduced new technologies and new management techniques in Azerbaijan. New jobs have been created and local specialists have been trained.” However, Jafarli criticized the atmosphere of secrecy around the contract.
“No one has seen the text of this contract. No one is familiar with the contractual conditions. In a country with a standard, democratically elected parliament, BP would have had to seek approval for the contractual terms from each and every parliamentary faction. However, in our country, the parliament will unanimously approve the contract and will grant it a constitutional status. It’s certainly beneficial for BP itself, since it’s easier and probably cheaper to ensure the interests of a single person,” said Jafarli.