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  4. Azeri-Chirag-Deepwater Gunashli
  5. From vision to value: 30 years of ACG

From vision to value: 30 years of ACG

The Contract of the Century

 

Since Azerbaijan gained independence in 1991, it has opened its oil industry to foreign participation as a way to fund development and, through agreements with nearby countries, promote regional stability and growth. A national strategy developed by the government was crowned with the signing of a ground-breaking Production Sharing Agreement (PSA) in September 1994 – a historic day for Azerbaijan. The PSA was signed between the State Oil Company of Azerbaijan Republic (SOCAR) and a consortium of 10 foreign oil companies from six nations for the development of an area that covered three major oil fields in the Azerbaijan sector of the Caspian Sea – Azeri, Chirag and Deepwater portion of the Gunashli field (ACG).

 

The ACG PSA, initially signed for 30 years and in 2017 extended until mid-century, was enacted into law by the Milli Majlis (Azerbaijan Parliament) on 2 December 1994 and became effective on 12th December 1994. This PSA represents the first major investment by Western multinational companies in any country of the former Soviet Union and has become known as THE CONTRACT OF THE CENTURY.

 

Following ratification of the PSA the Azerbaijan International Operating Company (AIOC) was formed to implement the agreement on behalf of the foreign shareholders working in partnership with SOCAR and the government of Azerbaijan. Originally AIOC comprised 10 major foreign oil companies (bp, Amoco, Unocal, LUKoil, Statoil, TPAO, Pennzoil, McDermott; Ramco; Delta Nimir) representing six countries: UK, USA, Russia, Norway, Türkiye and Saudi Arabia.

 

Effective June 1999, bp assumed operatorship for AIOC.ACG current participating interests are: bp (30.37%), SOCAR (25.0%), MOL (9.57%), INPEX (9.31%), Equinor (7.27%), ExxonMobil (6.79%), TPAO (5.73%), ITOCHU (3.65%), ONGCVidesh (2.31%).The

 

ACG contract is governed by a Steering Committee, which approves the work programme and specific project budgets for AIOC. The Steering Committee is made up of representatives from SOCAR, the Government of Azerbaijan, and the participating foreign oil companies.

 

ACG is Azerbaijan’s first offshore PSA and it signifies the institutionalisation of Azerbaijan’s new oil strategy, and the creation of a framework that provides legal stability for investors. According to the PSA, for each stage of the field development, the participating oil companies cover all development costs and recover them in the form of ‘cost recovery oil’. The rest of the oil produced is ‘profit oil’ which is then split between the companies and the State of Azerbaijan.

 

Contract area


The ACG oil field lies offshore Azerbaijan in the Caspian Sea, approximately 100km east of Baku. The ACG megastructure comprises a series of reservoir horizons, including Balakhany VIII and X, and upper and lower Fasila, located between 2,000 and 3,500m beneath the Caspian Sea. Total investment by the end of the first half of 2024 was about $45 billion. To date, total production from ACG has been about 4.4 billion barrels.

 

The field has been developed in several phases: Chirag has been producing since 1997 as part of the Early Oil Project (EOP). This was followed by Azeri Project Phase 1 - Central Azeri where production started in early 2005. Successive Phase 2 included West Azeri, which started production in December 2005, and East Azeri, which started production in late 2006. The next ACG development phase - Phase 3 Deepwater Gunashli started up in April 2008. These phases were followed by the Chirag Oil Project, which included the West Chirag platform and first oil from the platform was achieved on 28 January 2014. The latest ACG development project is Azeri Central East (ACE) which was sanctioned in April 2019 and included construction of one production platform. The ACE project safely delivered first oil on 16 April 2024.

 

The ACG field is currently producing around 336,000 barrels per day, which is exported to world markets mainly via Baku-Tbilisi-Ceyhan (BTC) and Western Route Export Pipeline (Baku-Supsa) routes.

 

International recognition


The 30-year successful co-operation between the ACG partners and the Government has demonstrated that the foreign oil companies can work with the Government of Azerbaijan and SOCAR to jointly implement a world-class project involving offshore production platforms, subsea pipelines, onshore storage and export to international markets.

 

This has increased investor confidence and gained international recognition for Azerbaijan as the place to do a successful business. 

 

With ACG, Azerbaijan has developed a growing role as a highly strategic supplier of energy. 


The extension of the contract

 

Driven by the extraordinary success of ACG’s development, the Azerbaijan Government of Azerbaijan and the ACG partnership extended the ACG contract until mid-century by signing the amended and restated agreement on 14 September 2017. The new contract was signed in Baku in the presence of H.E. President Ilham Aliyev.

 

The new contract enables the government and the investors to maximize the economic benefits from ACG for Azerbaijan and the companies over the next 30 years with the potential for more than $40bn capital to be invested in this world-class field. It ensures that over the next three decades ACG’s participating companies will continue to work together with the Government of Azerbaijan to unlock the long-term development potential of ACG through new investments, new technologies and new joint efforts to maximise recovery from the field.

 

The safe start-up of ACE delivers on the first major investment decision made by the ACG partnership since the signing of the extended ACG production sharing agreement.  


People fuelling ACG’s success

 

The success of ACG lies primarily in the highly skilled people involved in its development.

 

While ACG has been a truly international endeavour involving thousands of dedicated people across the world, most of the work was carried out locally by Azerbaijani experts and workforce.

 

The ACG project created jobs for thousands of people from the neighbouring communities and helped hundreds of local Azerbaijani companies grow and become suppliers to the oil and gas industry. This led to the development of new professional skills and significant improvements in local business infrastructure, allowing world-class offshore platform fabrication to be fully carried out in Azerbaijan.

 

Today, 90 percent of the professional staff of bp Azerbaijan – the operator of ACG - are Azerbaijani nationals. As part of the development of the national staff, many of these employees have gained high professional competencies, taking on leadership roles in bp’s offices in the UK, Iraq, Kuwait, Mauritania, Senegal, and beyond.

 

Baku-Tbilisi-Ceyhan (BTC) oil export pipeline 

 

Internationally, ACG's success highlights the strategic importance of energy from Azerbaijan.

 

ACG opened a new route from the landlocked Caspian Sea to global markets. The Baku-Tbilisi-Ceyhan (BTC) oil export pipeline is an integrated component and a crucial part of the ACG project.

 

Currently the majority of ACG volumes are carried to world markets via this pipeline. BTC is a world-class pipeline, which spans three countries and 1,768km from Azerbaijan through Georgia to the Mediterranean where a new marine terminal has been constructed at Ceyhan, Türkiye. BTC is a safe and reliable route to international markets and makes the region a major international energy player.

 

The BTC pipeline has created substantial revenues for the transit countries and helped strengthen economic and political links between Azerbaijan, Georgia, Türkiye and the West. BTC throughput capacity has been increased from its design capacity of one million barrels per day to its current capacity of 1.2 million barrels per day.

 

To date, BTC has safely and reliably carried more than 4.3 billion barrels (around 576 million tonnes) of crude oil from the Caspian to the Mediterranean.