Azerbaijan’s ACG field is on the cusp of a significant transformation following the signing of a Non-Associated Gas (NAG) agreement. A consortium of energy giants, including ONGC Videsh, bp, the State Oil Company of Azerbaijan (SOCAR), and others, has added a crucial new addendum to the existing Production Sharing Agreement (PSA) for the Azeri-Chirag-Deepwater Gunashli (ACG) Field. This move, which is set to bring vast reserves of natural gas into production, signals a major development in Azerbaijan’s energy landscape.

The deal was signed during a major event in Baku, coinciding with Azerbaijan’s national Oil Workers’ Day and the 30th anniversary of the original ACG PSA. The NAG resources of the field are estimated to hold up to 4 trillion cubic feet of natural gas, providing a major boost to energy production in the region. This resource, located beneath and above the current oil-producing layers, had not been included in the original agreement.

The ACG field, located in the Caspian Sea, has been a key player in Azerbaijan’s oil production since the 1990s. However, the newly identified gas reservoirs promise to add a new dimension to the field’s output. The consortium partners, which include bp, SOCAR, MOL, INPEX, Equinor, ExxonMobil, TPAO, ITOCHU, and ONGC Videsh, will move forward with exploration, development, and production plans to unlock these gas reserves.

The initial step in this new endeavour was the successful completion of a data well in 2023. This well confirmed the presence of natural gas within the expected pressure range, laying the foundation for future drilling and production efforts. The first phase of production is expected to begin by 2025, starting with an initial well targeting two priority reservoirs.

Expert Opinion

Industry experts believe this deal underscores Azerbaijan’s growing influence as a key player in the global energy sector. While oil has been the main focus of the ACG field for decades, the shift to natural gas production is seen as a logical step, given global efforts to diversify energy sources. The timing of this deal is also crucial, as it allows the consortium to begin tapping into a resource that could potentially add a significant stream of revenue to the region.

ONGC Videsh, which has held a stake in the ACG field since 2013, stands to benefit from this new development. As India’s largest international oil and gas exploration and production company, ONGC Videsh has a vested interest in expanding its production capabilities. With 32 assets in 15 countries, the company’s daily production of oil and oil-equivalent gas already stands at around 200,000 barrels. The NAG deal provides ONGC Videsh with a unique opportunity to further solidify its standing in the global market.

The overall impact of this agreement on Azerbaijan’s economy is expected to be substantial. The government and SOCAR have long been strategic about how they manage the country’s hydrocarbon resources, and this new development plays into their long-term goals for maintaining energy independence and increasing exports. The first gas production, expected by 2025, will likely strengthen Azerbaijan’s standing as a key energy supplier, particularly to European markets looking to diversify their sources of natural gas.

The ACG field’s development into a gas-producing giant highlights how the Caspian Sea remains central to Azerbaijan’s energy strategy. With this deal, the field will now produce both oil and gas, ensuring the country remains a vital player in global energy markets for years to come.

  Azerbaijan, Baku, BP, Equinor, ExxonMobil, Inpex, Itochu, MOL, ONGC Videsh, SOCAR, TPAO