Billions more barrels of oil possible from Azerbaijan

British energy company BP led a consortium of international partners in extending a contract with the Statoil Oil Company of the Azerbaijan Republic for the Azeri-Chirag-Gunashli field in the Azeri waters of the Caspian Sea.

Since the initial production sharing contract was signed in 1994, the oil field has produced more than 3 billion barrels of oil and delivered more than $125 billion in net profits to Azerbaijan. Under the terms of new contract, SOCAR takes another 11 percent stake in the development to 25 percent and the international partners pay $3.6 billion to an Azeri state oil fund.

"The terms of the new contract reflect the growing financial and technological potential of Azerbaijan and SOCAR," SOCAR President Rovnag Abdullayev said in a statement. "They also demonstrate the confidence of our foreign partners in the Azerbaijani economy, taking our effective partnership to a new level."

Over the next 32 years, the partners estimate more than $40 billion in capital will be invested in the field.

Economists at the Organization of Petroleum Exporting Countries expect oil production in Azerbaijan to decline slightly to average 790,000 barrels per day this year. Oil production in July, however, averaged 820,000 barrels per day, though the forecast for the next year is for modest declines. OPEC earlier this year said a lack of new developments in Azerbaijan is contributing to production declines.

Azerbaijan is one of 11 non-OPEC producers contributing to a multilateral effort to offset a lopsided market with managed production declines.

Laura Bennie, a Caspian sector researcher for consultant group Wood Mackenzie, said in comments emailed to UPI the contract extension for ACG is a testament of the field's value and for Azerbaijan's economy.

"ACG production may now be below 600,000 barrels per day, but there are still billions of barrels to recover and billions of dollars to invest," she said.

A new production platform will be commissioned in the 2020s. The new contract, which awaits parliamentary ratification, is effective through the end of 2049.