Azerbaijan Approves BP's ACG Contract

Azerbaijan's parliament has ratified the 25-yr extension to the contract between Baku and the BP-led consortium that operates the Azeri-Chirag-Gunashli (ACG) offshore block, which was signed September 14.

The approval triggers the first $450mn payment the parties must make to the government with seven more to follow, adding up to $3.6bn.

The consortium will spend more $40bn on ACG by 2050, compared with the $43.5bn already spent since 1994, of which $35bn was capital expenditure.

Parliament’s deputy speaker Valeh Aleskerov announced October 31 that the state’s net profit from oil production would be $130bn under the revised contract. Baku will receive a further $15bn in taxes and additionally, state-run Socar will make $5.9bn profit. An Azerbaijani official told NGW in September that collectively the consortium would make $34.5bn.

Aleskerov also said that Azerbaijan’s net profit in the framework of the old ACG-1 contract amounted to $150.9bn and 42bn m³ of associated gas.

The contract for ACG development was signed on September 20, 1994 and entered into force on December 12 that year. Oil production began in November 1997. Azerbaijan received the first shipment of profit oil in December 1999.

The old agreement was set to expire in 2024. However, Socar and partners in the negotiations reached an agreement on extending the existing one and signing the new terms of the contract until 2049, allowing investment to continue and oil output maintained.

Ilham Shaban