INTERVIEW: BP builds Caspian oil, gas hub with multi-project Azeri deals

BP has unveiled a raft of investments in Azerbaijan aimed at consolidating its Caspian oil and gas business and potentially expanding into Central Asia -- outlined by regional president Gary Jones in an interview with Platts.

BP on June 3 finalized an agreement to join the long-stalled Karabagh oil project, taking a 35% stake alongside state-owned Socar, and aiming to start up production in 2029.

It also announced an investment in a new gas compression project designed to boost output at the giant Shah Deniz gas field, which supplies the EU and Turkey. It has also agreed a deal for Turkish Petroleum Corp. to join it in appraising the ultra-deep gas condensate discovery Shafag-Asiman.

This follows a final investment decision June 2 on providing a virtual low-carbon power supply for the Sangachal processing plant, which sends oil and gas through the Caucasus Mountains to Turkey and Europe by pipeline.

The plant is to take power from the grid in exchange for BP developing a 240 MW solar project in the Jabrayil district, next to war-torn Nagorno-Karabakh. The district is one of several abandoned in the Nagorno-Karabakh war of 1988-94, and was recaptured by Azerbaijan in 2020.

BP aims both to add resources and production at its existing hubs, and to forge links across the Caspian in other hydrocarbon-rich countries, Jones said.

"This is really a story about continued investment into the Caspian," he told Platts. Azerbaijan's "government has been doing a lot of very good work over the last few years to attract more investment, in terms of reducing the cost base, listening to what might the barriers be."

"But then I think also regionally there's a real opportunity here with the existing infrastructure," he said, pointing to current and potential supply from countries east of the Caspian through Azerbaijan.

ACG oil boost

BP has yet to confirm expected oil volumes at the Karabagh field, although Socar has spoken of several hundred million barrels. Norway's Equinor withdrew from the project in a sale of its Azeri assets in 2024.

BP's entry to the Karabagh project follows a production boost from the 2024 startup of the new ACG platform, Azeri Central East. ACG output, the main source for the Azeri Light crude grade, was down just 2% year-on-year in Q1 2025 at 331,000 b/d, a significant slowing of the previous decline.

The ACE platform has still to fully ramp up, with production currently at 28,000 b/d from three wells. Planned additional production and gas injection wells should lift that to forecast rates of 70,000-85,000 b/d, Jones said, adding this was "still a very realistic aim."

"Obviously as we drill the next well, and also see the effectiveness of this gas injection, we'll have a better feel for it," he said.

Gas sources

The latest announcements are also aimed at boosting gas supply, although there are uncertainties over the EU's plans on gas and the energy transition, Jones said.

The Shah Deniz field is currently producing above expectations, enabling additional short-term sales. This week's final investment decision on the Shah Deniz compression project targets an additional 50 Bcm of gas and 25 million barrels of condensate, with first production expected in 2029, and should extend plateau production rates, Jones said. Shah Deniz condensate has typically been added to the Azeri Light oil stream.

The deal with Turkish Petroleum on appraising the ultra-deep Shafag-Asiman discovery could provide an additional boost to Shah Deniz as the partners envisage a tie-in to the gas hub.

The deal -- under which Turkish Petroleum takes a 30% stake -- reflects the challenging nature of the 2021 find, made at 7,200 meters below the seabed after 14 months of drilling. It enables drilling an appraisal well "to fully understand the commercial aspects for a development that we would tie in" to Shah Deniz, Jones said.

Recent non-associated gas finds above and below the ACG oil reservoir are also going to supplement Shah Deniz flows following an amendment to the ACG production-sharing contract in 2024. The first non-associated gas from ACG will come on stream at the end of 2025, with a second reservoir likely on stream in May 2026, Jones said, confirming 4 Tcf of non-associated gas as the target.

"If you take Shafag-Asiman and the non-associated gas, they're two new areas of potential gas developments in the Azerbaijan Caspian for us," he said.

As yet, BP lacks the gas resources to carry out a major expansion of the Southern Gas Corridor to Europe, which would also require EU support, however, other sources could change that, Jones said, noting a potential expansion of TotalEnergies' Absheron project. "If you look at the Caspian in totality, then absolutely I think there's the real potential there to expand," he said.

Trans-Caspian hopes

BP has been at the forefront of Caspian oil and gas, in its own right and via its 1997 takeover of US company Amoco. However, it has been less involved east of the Caspian, selling stakes in projects such as Kazakhstan's Kashagan in the 2000s. Like others, it has struggled to make headway in gas-rich Turkmenistan.

Jones said he had travelled to Turkmenistan several times with a view to opportunities there. A separate memorandum of understanding on cooperation in Uzbekistan has also been signed by BP together with Socar, he said, adding the two companies were "actively looking at opportunities in Uzbekistan."

On Turkmenistan, Azerbaijan and Turkey have long sought to develop ties with the Central Asian country, but it has proved challenging. Uncertainties linger over delineation of the Caspian, and the ACG fields were previously claimed by Turkmenistan.

"Obviously there's huge volumes of opportunity in Turkmenistan, and we would love to get involved with that, but that is really a states conversation first," Jones said.

On Uzbekistan, he said it was "very early days," but there were significant potential volumes. "The issue there would be more on the commercial side and where are those hydrocarbons going to go -- you'd be looking probably to take them up through Kazakhstan."