Exxon Mobil and Azeri state energy company SOCAR said on Monday they signed a deal agreeing to explore onshore oil and gas production in Azerbaijan, while BP is expected to buy into new Azeri offshore fields, according to three sources.
Azerbaijan's production mainly relies on mature oil fields in the Caspian Sea and the country is aiming to maintain its oil output at around 582,000 barrels per day over the next five years with investment from Western energy companies.
At the Baku Energy Week conference, SOCAR and Exxon signed a memorandum of understanding for the exploration, development, and production of unconventional onshore oil reserves in Azerbaijan.
Exxon’s experience in developing unconventional oil could help Azerbaijan boost its onshore output, which currently accounts for just 5% of the country's total oil production, and open a new chapter in its oil industry.
Unconventional oil and gas resources often refer to hydrocarbons trapped in porous rock, requiring specialised extraction technologies such as fracking.
"In the years to come, we'll be able to talk about the potential size of the resource and what the economics might look like," said John Ardill, Exxon vice president of global exploration.
Arzu Javadova, vice president for geology at SOCAR, said the agreement was focused on assessing options for the project andthe companies were not planning to drill exploration wells at this stage.
Exxon already holds stakes in Azerbaijan’s largest oil development project, Azeri-Chirag-Gunashli, and the Baku-Tbilisi-Ceyhan pipeline, which transports Caspian crude to Turkey and onward to Europe.
Separately, SOCAR is expected to announce on Tuesday the sale of interests in the Karabakh and Ashrafi-Dan Ulduzu-Aypara offshore oil and gas fields to BP, with BP set to become the operator of the Karabakh development project, according to three sources familiar with the matter.
Last year, BP signed a memorandum of understanding with SOCAR on potentially joining these two projects.
SOCAR previously had a contract with Norway’s Equinor on the Karabakh and Ashrafi-Dan Ulduzu-Aypara fields, but Equinor decided to withdraw from the project in 2017 as it refocused on core assets.
Azerbaijan plans to increase natural gas exports by 8 billion cubic metres by 2030, President Ilham Aliyev said at the conference on Monday. Azerbaijan exported 25 bcm of natural gas in 2024.
BP also announced on Monday it had taken a final investment decision on its 240-megawatt Shafag solar plant project inthe Jabrayil district of Azerbaijan. The company's solar unit Lightsource bp is building the project withjoint-venture partners SOCAR and the Azerbaijan Business Development Fund.
Construction will cost $200 million and be completed by mid-2027, BP said.
(Reuters/Reporting by Nailia Bagirova and Lidia Kelly in Melbourne; Additional reporting by Shadia Nasralla in London; Writing by Felix Light; Editing by Tom Hogue, Guy Faulconbridge, David Evans and Nia Williams)