Azerbaijan and a BP-led consortium reached an agreement on developing a new natural gas field in the Caspian Sea. The new reserve, found earlier this year, lies below the massive Azeri-Chirag-Gunashli (ACG) oil field and could significantly increase Baku’s volume of gas available for export to Europe.

According to BP, the reserve is estimated to hold 4 trillion cubic feet of gas “in place,” or around 113 billion cubic meters (bcm). “Gas in place” refers to the total volume held in the reservoir, not all of which will be recoverable.

The agreement between Azerbaijan’s state oil company, Socar, and the consortium was formalized via an addendum to an existing production sharing agreement (PSA) that the consortium holds for the ACG oil field. That PSA was renewed in 2017 and runs until 2049. 

BP said in a statement that the consortium drilled an appraisal well in early 2023 and in July confirmed the presence of “deep-lying gas reservoirs.” ACG consortium members are now working with Socar to formulate a development plan for the new gas reserve; production from the existing appraisal is expected to start in 2025. The statement added that under the terms of the addendum, Socar will buy all of the gas produced. Details on the volume of annual production from the new reserve have not been released.

“We are once again proving that Azerbaijan is a reliable partner in global energy markets. This project will bolster Azerbaijan’s role as a key supplier of energy to Europe, contributing to the energy security of our partners,” the statement quoted Socar President Rovshan Najaf as saying.

The new agreement is good news for Baku, which has been hedging of late on its promise to double gas exports to European Union states to 20 bcm a year by 2027. Speaking in July, Azerbaijan President Ilham Aliyev said that Baku was aiming to export 16 bcm a year to Europe by 2027. Last year, Azerbaijan’s exports to Europe through the three pipelines that make up the Southern Gas Corridor totaled 11.8 bcm, up from 10 bcm two years ago.

Uncertainty over Baku’s ability to deliver on its 20 bcm by 2027 export target created a chicken-or-egg-type of scenario in which buyers are reluctant to commit to buy more gas from Azerbaijan, in turn making it difficult for operators of the three pipelines comprising the Southern Gas Corridor to attract investment needed to expand pipeline capacity to handle 20 bcm per year.

Separately BP and Socar signed an agreement to jointly prospect for hydrocarbons in two blocks in the Caspian Sea, dubbed Karabagh and ADUA.