The Azerbaijan oil and gas upstream market is expected to grow at a CAGR of over 1.5% during the forecast period. Factors such as a surge in demand for crude oil and natural gas from European countries such as Italy, France, and others, along with increasing consumption within the country are expected to drive the Azerbaijan oil and gas upstream market during the forecast period. Moreover, the increased reliance of the country on exports and government policies to support the exploration and production of oil and gas is also likely to promulgate the market. However, the increasing benefits and country’s plan to increase the share of renewables in the energy mix, complemented by volatile crude oil prices are expected to hinder the growth of the market being studied.

  • Offshore segment is expected to dominate the market during the forecast period, due to major oil and gas fields and platforms being present offshore, with the country’s largest hydrocarbon basins being in the Caspian Sea, particularly Azeri–Chirag-Gunashli (ACG) fields.
  • Factors, such as technological improvements and increasing viability of deepwater and ultra-deepwater projects in Gunashli field is expected to create ample opportunity for the market players in Azerbaijan oil and gas upstream market.
  • The presence of international oil and gas majors such as BP, Total, along with several joint ventures with State Oil Company of the Azerbaijan Republic (SOCAR) for exploration and production of several onshore and offshore fields is likely to drive the market during the forecast period.



Key Market Trends

Offshore Segment to Dominate the Market

  • Azerbaijan has been one of the top countries to start crude oil production from offshore platforms and has prolific hydrocarbon potentials in its offshore region, both for crude oil and natural gas.
  • Azerbaijan’s Azeri-Gunashli (ACG), the largest oilfield in the Caspian Sea with a development area of 432.4 square kilometers and 5-6 billion barrels of recoverable reserves, has attracted investment from foreign operators such as BP, Equinor, Total, etc. Moreover, most of the country’s natural gas is also produced offshore from the Shah Deniz field, with reserves estimate of 1.2 trillion cubic meters, or the ACG complex.
  • The country has planned exploration and appraisal activity for the high-value prospects of the Caspian Sea, potentially tapping into more than 4 billion barrels of oil equivalent. Several operators, including BP, are expected to drill four exploration wells in 2019 and the other two in 2020. Therefore, with the country opening more and more offshore land acreage during the forecast period is further expected to drive the oil and gas upstream market in the country.
  • Further, with sustained growth in the consumption of natural gas, petroleum, and petrochemical products, the country is planning to increase the exploration and production from its offshore region, in turn driving the oil and gas upstream market.



Increased Investments from Foreign Companies to Drive the Market

  • Azerbaijan has been a hotspot for many foreign companies such as BP, Equinor, Total, Chevron, and others to invest in the oil and gas exploration and production in the country. The State Oil Company of the Azerbaijan Republic (SOCAR) produces about 20% of Azerbaijan’s total oil output, while international oil companies produce the remainder.
  • Azerbaijan’s main producing field is the Azeri–Chirag–Gunashli (ACG) complex, which is operated by BP, the largest shareholder in the Azerbaijan International Operating Company (AIOC) that was formed to develop the fields. Other companies with an interest in the ACG fields include Chevron, Inpex, Statoil, Turkiye Petrolleri, ExxonMobil, SOCAR, ITOCHU, and ONGC Videsh. The stakeholders have extended their ACG production–sharing agreement (PSA) with the Azerbaijani government through 2049.
  • In April 2019, BP along with its project partners invested USD 6 billion in the Azeri Central East (ACE) project offshore Azerbaijan. Moreover, Equinor and SOCAR planned to drill an appraisal well in the same region in the later part of 2019.
  • Further, government policies and support related to the exploration and production of oil and gas are also expected to play a role in the industry and encouraging the companies to boost Azerbaijan oil and gas investments. Therefore, with increased investment, the oil and gas upstream market is expected to be driven.



Competitive Landscape

The Azerbaijan oil and gas upstream market is moderately fragmented. Some of the key players are State Oil Company of the Azerbaijan Republic, BP PLC, Equinor ASA, Total SA, and Chevron Corporation.

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