Azerbaijan aims to restock depleted oil reserves with exploration signings

Azerbaijan is stepping up oil and gas exploration with a more systematic approach and several agreements signed with explorers in recent days, officials said, as output decline looms over the ACG oil complex, the main source of Azeri Light crude.

Agreements signed with ExxonMobil, Turkey's TPAO, Hungary's MOL and Canada's Gran Tierra Energy at the Baku Energy Week forum over June 3-5 stemmed from a two-year bid round, the first of its kind in Azerbaijan, officials said. Invitations were sent to 23 companies, 11 of which expressed interest, resulting in "data room" events in 2024 to enable scrutiny of the opportunities.

State company Socar has also created a standalone exploration subsidiary, Caspian Geophysical, with new, upgraded data-processing capacity. In a first for the region it is using airborne full-tensor gravity survey technology, officials said.

It comes as crude output has been on a downward path for over a decade at the BP-led Azeri-Chirag-Gunashli oil complex -- although production has stabilized since a new $6 billion platform came online at ACG in 2024. The EU meanwhile has been turning to Azerbaijan''s Shah Deniz field to help replace Russian gas supplies.

"We're moving to the next chapter in the Azerbaijan oil and gas industry -- we don't have that much time anymore like 10 or 15 years ago," Socar chief geologist and vice president Arzu Javadova said. "We have to be more efficient, aggressive really, which means we have to collaborate" with international companies, matching experience from around the world with analogous geological prospects in Azerbaijan, she said.

Azerbaijan had 7 billion barrels of oil reserves and 60 Tcf of gas reserves as of January 2025, according to the US Energy Information Administration.

Onshore potential

Much of the country's exploration effort is focused on onshore areas that have not yet been surveyed with up-to-date technology.

Socar is responsible for most onshore production in Azerbaijan, and produces 120,000 b/d from its onshore and shallow-water operations, according to Ali Gurbanov, head of Socar's operating unit, Azneft. US company ConocoPhillips was involved in earlier onshore surveys, but over a decade ago. "We really believe that the onshore holds huge untapped resources," Kamran Zahid, managing director of the new Socar venture Caspian Geophysical, said.

"There really hasn't been comprehensive exploration with large seismic surveys over the past 20-30 years," he added. "There were some postage stamps -- small seismic surveys mainly focused around near-field areas -- but really nobody looked at all of these plays that we have in the detail we're applying now."

A memorandum of understanding with ExxonMobil -- a minority partner in ACG and the Baku-Tbilisi-Ceyhan pipeline -- aims to bring the major's shale expertise to an area in west-central Azerbaijan known as Ganja-Yevlakh-Aghjabadi. Zahid said Socar and ExxonMobil would work side-by-side both on subsurface evaluation and studying the commercial feasibility of onshore unconventionals, adding that the study area could be modified prior to a production sharing agreement being signed.

Gran Tierra, a newcomer to Azerbaijan, signed an MOU covering the Guba-Caspian region in the north of the country; its experience with complex geology in Colombia and Ecuador made it a good fit, Zahid said.

MOL signed "key terms" building on a 2024 MOU covering another onshore area, Shamakhi-Gobustan. MOL holds minority stakes in both ACG and the BTC pipeline, regularly taking Azeri Light for its own refineries, and was chosen for its long experience with onshore production in Central Europe.

Some smaller companies have already been pushing boundaries. In April 2025, independent GL Group said it had begun drilling Azerbaijan's first horizontal onshore well, targeting deep oil deposits in the Kura basin in the south of the country.

Offshore plays

In the deepwater, seismic data is relatively comprehensive, Zahid noted. This week BP signed an agreement with TPAO and Socar bringing in the Turkish company to help appraise the Shafag-Asiman gas and condensate discovery, made in 2021 some 7,200 meters below the seabed -- much deeper than the ACG deposits. TPAO is taking a 30% stake.

Socar also wants to develop deepwater gas accumulations found relatively close to the seabed at depths of just 700-1,000 meters, which were previously viewed purely as drilling hazards, Zahid said.

Meanwhile, BP and Socar are also pursuing shallow-water opportunities. BP this week joined a production sharing contract known as Ashrafi-Dan Ulduzu-Aypara (ADUA), where it plans to assess Miocene geological formations in a potential "play opener" for the basin, Dan Sparkes, BP's subsurface vice president for the region, said.

Following a recent strategic "reset" in which BP ditched some low-carbon goals, the UK major now appears committed to maximizing Azerbaijan's oil and gas potential. The new ACG platform launched in 2024 already shows signs of slowing output decline before it is fully ramped up, with more production and gas injection wells still planned, BP regional president Gary Jones told Platts earlier in an interview. ACG production was down just 2% on the year in the first quarter 2025, at 331,000 b/d.

BP also began a five-year ocean-bottom seismic program at ACG in 2024, expected to cost $370 million and aimed at spotting "bypassed" hydrocarbons, Sparkes noted. The maturity of the basin means "we need to be doing the rejuvenation, the developments and the exploration all at once, quickening the pace," Sparkes said. "More activity fronts, but smaller prizes, so we've got to drive up the efficiency in order to make that work," he said.