BAKU, Azerbaijan, September
20. September 20 marks Oil Workers’ Day in
Azerbaijan—a date of both professional and historical significance
for the country. It was on September 20, 1994, that the Contract of
the Century was signed—an agreement on the joint development of the
Azeri, Chirag, and deepwater Gunashli (ACG) fields, which served as
the starting point for independent Azerbaijan’s modern oil
strategy.
The document was signed at the Gulustan Palace in Baku,
involving 13 major oil companies from eight countries: Azerbaijan,
the US, the UK, Russia, Türkiye, Norway, Japan, and Saudi Arabia.
The agreement’s historical importance lay not only in attracting
international capital and technology but also in laying the
foundation for integrating Azerbaijan’s oil industry into the
global energy system.
The next key milestone was the creation of export
infrastructure. In September 2002, the foundation for the
Baku-Tbilisi-Ceyhan (BTC) oil pipeline was laid at the Sangachal
Terminal, and the inauguration ceremony took place on July 13,
2006, in Ceyhan, Türkiye. The launch of the BTC provided
Azerbaijani oil with direct access to global markets and marked one
of the most significant achievements of the new oil strategy.
ACG: 30 years of production and new development
phase
Today, the ACG remains the central asset of Azerbaijan’s oil
industry, though its role is gradually extending beyond traditional
oil extraction. From the start of commercial production at ACG in
November 1997 through the end of the first half of 2026,
approximately 4.6 billion barrels of oil were produced at the
block. Additionally, 63 billion cubic meters of associated gas were
supplied to the state.
As the giant field transitions to a more mature stage of
development, the industry faces the challenge not merely of
increasing production, but of maximizing the efficient use of
remaining reserves.
In 2026, bp launched two pilot enhanced oil recovery (EOR)
projects at ACG: BrightWater and IWAG. Their objective is to tap
into additional oil reserves remaining in the reservoir. Seismic
data, well data, production metrics, and geological models are
utilized to manage the natural decline in production.
Another significant milestone is the commencement of free
natural gas production operations at ACG in June. Consequently, the
country’s largest oil asset is gradually taking on an increasingly
pronounced oil-and-gas character. Recoverable free gas reserves at
ACG are estimated at approximately 4 trillion cubic feet, with the
potential to increase to 6 trillion cubic feet.
Development continues on the oil front as well. April 2026
marked two years since the start of oil production at the new ACE
platform. By April 15, the platform had produced 2.1 million tonnes
of oil. The project cost is approximately $6 billion, with a
production capacity of up to 100,000 barrels per day; total
production over the operational lifespan could reach 300 million
barrels.
In the first half of 2026, ACG operations incurred approximately
$268 million in operating expenses and $733 million in capital
expenditures. Compared to the same period in 2025, capital
expenditures rose by 31.4%, while operating expenses increased by
3.5%. Revenues for the State Oil Fund of Azerbaijan from the ACG
fields are projected at $4.236 billion for 2026.
From oil to an integrated oil and gas
system
Azerbaijan’s energy sector has undergone significant changes
over the past decades. The country, once primarily associated with
oil, is now also a major producer and exporter of natural gas.
In the period from January through August 2026, Azerbaijan
produced 17.692 million tonnes of crude oil, including gas
condensate. During the same period, exports of crude oil and
petroleum products totaled 14.67 million tonnes, valued at $9.28
billion. Concurrently, the importance of the gas sector is growing.
In the first eight months of 2026, natural gas production reached
33.4 billion cubic meters, while exports amounted to 16.37 billion
cubic meters, valued at $5.7 billion. Natural gas accounted for
26.18% of Azerbaijan’s total exports during the reporting
period.
Today, Azerbaijani gas is exported to 16 countries—predominantly
in Europe—via the Southern Gas Corridor. The volume of gas
transported through the Trans-Adriatic Pipeline (TAP) has reached
60 billion cubic meters.
Thus, the initial oil-focused strategy has gradually transformed
into a broader energy model in which oil, gas, pipeline
infrastructure, and new energy projects have become interconnected
elements of the economy.
The Shah Deniz gas-condensate field plays a pivotal role in this
transition. From the start of development in 2006 through the end
of the first half of 2026, approximately 278 billion cubic meters
of gas and 54 million tonnes of gas condensate were produced at the
field. In the first half of 2026 alone, operating expenses for the
project amounted to approximately $1.39 billion, while capital
expenditures totaled $712 million. Compared to the same period last
year, operating expenses rose by 8.7%, and capital expenditures —
by 50.8%.
The current production capacity of the existing Shah Deniz
infrastructure stands at approximately 76.8 million standard cubic
meters of gas per day, or roughly 28 billion cubic meters per
year.
Simultaneously, the $2.9 billion Shah Deniz Compression project
is underway, aimed at developing low-pressure gas reserves and
increasing the hydrocarbon recovery rate. The project is expected
to enable the additional production and export of approximately 50
billion cubic meters of gas and around 25 million barrels of
condensate.
New fields and new
opportunities
Azerbaijan’s oil and gas history extends beyond the ACG and Shah
Deniz fields.
Since the launch of the early production phase at the Absheron
field, about 4.8 billion cubic meters of gas and 1.8 million tons
of condensate have been produced. Currently, a single well yields
about 4 million cubic meters of gas and 12,000 barrels of
condensate per day. Full-scale gas production is scheduled for
August 2029.
Plans for the second development phase include drilling three
new wells. Each is expected to produce around 40,000 barrels of oil
equivalent per day, with the project’s initial production
level—including the early phase—projected to reach approximately
120,000 barrels of oil equivalent per day.
Prospects also exist for other assets. Geological oil reserves
at the Karabakh field are initially estimated at over 60 million
tonnes, and a final investment decision regarding its development
is expected soon.
A new development phase has also begun at the Bahar and
Gum-Deniz fields. According to Bahar Energy, operations carried out
at the Bahar field have resulted in a 50% increase in gas
production.
Resource base remains
crucial
At the same time, Azerbaijan’s energy potential is defined not
only by current production volumes but also by the scale of its
resource base.
According to OPEC estimates, Azerbaijan’s proven crude oil
reserves stood at 7 billion barrels in 2025, while proven natural
gas reserves amounted to 2.6 trillion cubic meters. OPEC data
indicates that these figures have remained unchanged since
2021.
Moody’s projects that SOCAR’s proven hydrocarbon reserves will
reach 1.48 billion barrels of oil equivalent in 2026–2027. This
figure rose from 1.42 billion barrels of oil equivalent in 2023 to
1.48 billion in 2025.
These figures demonstrate that the key issue for the industry is
no longer merely the availability of resources, but the ability to
extract them efficiently—both technologically and economically—over
the long term.
President of Azerbaijan Ilham Aliyev highlighted this
perspective—viewing natural resources as a tool for national
development—during his speech at the official opening ceremony of
Baku Energy Week this June.
“Azerbaijan was the first country to open the Caspian reserves
to international oil companies. Since that time, a lot has
happened. If we look at Azerbaijan today and see this
transformation, how we used this wealth, how we reinvested in
social infrastructure, education, healthcare, and energy
development, we will see that this is how countries should develop.
And this is the way forward for many other countries that today
suffer from more or less the same problems that we suffered from at
the beginning of the 1990s,” the head of state said.
In this context, the head of state emphasized Azerbaijan’s
principled position regarding the role of oil and gas in national
development.
“Countries should not be blamed for having oil and gas because
oil and gas are commodities like any other. And every country uses
what it has under its soil or on the seabed in order to develop.
And that was the case for Azerbaijan in the beginning of our
independence. Oil and gas were the only way for us to survive as an
independent country. So countries should be judged not by whether
they have oil or not, but by how they use the revenues, how they
invest the funds they accumulate from energy development to develop
their countries, provide better living conditions for their people,
and invest in green agenda issues. And I think the example of
Azerbaijan can be very illustrative. It can demonstrate that when
you open your country to international investment and conduct a
wise policy based on national interests, you achieve success,”
stated President Ilham Aliyev.
This assessment effectively reflects the logic underpinning the
country’s oil strategy since the 1990s: attracting international
companies and capital, establishing export infrastructure, securing
revenue inflows, and channeling a portion of the proceeds into the
development of other economic sectors.
Azerbaijan’s role in global oil
cooperation
Today, the country’s significance extends beyond the mere
extraction and export of hydrocarbons.
In an exclusive interview with Trend, OPEC Secretary General
Haitham Al Ghais highlighted Azerbaijan’s role in strengthening
cooperation among participants of OPEC+.
“Under the wise and able leadership of President Ilham Aliyev,
Azerbaijan has been instrumental in promoting and supporting the
cooperation between OPEC+ producers for ten years now,” he
said.
At the same time, OPEC’s stance demonstrates that the oil
industry retains its long-term significance, even amidst the global
energy transition. According to Al Ghais, OPEC’s core message
remains that oil will continue to be a fundamental element and a
key pillar of the global economy.
“It has been for so many years and decades, and it will continue
to be. We just launched our updated World Oil Outlook to 2050,
which shows clearly that oil will still remain dominant in the
energy mix until 2050, at around 30% of the energy mix. When you
add gas to that equation, we are talking about oil and gas combined
accounting for nearly 55% of the global energy mix,” he said.
Concurrently, OPEC opposes interpreting the energy transition
solely as a move away from oil and gas. This position is
particularly significant for countries whose economies have
historically been linked to the hydrocarbon sector.
Azerbaijan’s oil industry looks vastly different 32 years after
the signing of the Contract of the Century.
Over this period, the country has established export routes,
forged international partnerships centered on major fields,
transformed oil and gas revenues into a funding source for
large-scale infrastructure development, and simultaneously built a
gas export system linking Azerbaijan to the European market.
At the same time, the current phase is characterized not only by
the continuation of oil production but also by the industry’s
increasing technological sophistication—including enhanced oil
recovery at mature fields, the development of gas resources at the
ACG field, the ACE and Shah Deniz Compression projects, and the
development of the Absheron and Karabakh fields, alongside the more
efficient use of existing infrastructure.
That is precisely why Oil Workers’ Day today is not merely an
occasion to reflect on the history of the Contract of the Century.
It’s an opportunity to assess the journey the industry has
traversed: from the initial international agreements and the
construction of export pipelines to the establishment of a modern
oil and gas system integrated into the global energy landscape.
For Azerbaijan, oil served as the starting point for a
large-scale economic transformation. Its role is now defined not
only by production volumes but also by how the accumulated
technology, infrastructure, capital, and international partnerships
are leveraged for the next stage of the country’s energy
development.
