Iran, Azerbaijan eye joint development of oil and gas fields in Caspian Sea

Iran, Azerbaijan eye joint development of oil and gas fields in Caspian Sea

Iran and Azerbaijan, members of the OPEC+ alliance, are looking at finalizing "soon" a number of energy deals, including joint development of an oil field in the Caspian Sea, Iranian oil minister Javad Owji said Nov. 21. "Some agreements were made," Owji was quoted as saying by the official IRNA news agency after a meeting with Azerbaijan's first deputy prime minister, Shahin Mustafaev. "Initial talks were held regarding [a] gas deal with Azerbaijan, gas swap from neighboring countries with Azerbaijan, the contract for transfer of gas to Nakhichevan and development of oil fields in the Caspian Sea."

S&P Global Platts reports that Azerbaijan's Nakhichevan enclave, located between Armenia, Iran and Turkey, receives gas from Iran under a swap arrangement agreed to in 2004, with Baku supplying gas to the Iranian city of Astara. "We hope that this meeting leads in the coming weeks to expansion of oil and gas cooperation and development of the two countries' fields," Owji said.

The two oil producers have been developing oil and gas cooperation over the past years. The two states signed a memorandum of cooperation in 2018 for joint work in an oil field located in the waters of the Caspian Sea. "We discussed a few new projects and I believe that new documents will be signed in the near future as the result of these talks," Mustafaev was quoted as saying by IRNA.

In 2011, Iran announced discovery of 50 Tcf of gas in the Caspian Sea field called Sardar Jangal, whose oil in place later was estimated at 2 billion barrels. Iranian oil officials have previously said that the reservoir's development required deep-water technology which Iran does not have.

Numerous disputes have hampered the development of oil and gas production and infrastructure projects in the Caspian since the collapse of the Soviet Union in 1991. In 2018, the five littoral states of the Caspian Sea - Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan - signed a convention providing a legal framework for sharing access to the area and its resources.

Azerbaijan expects to increase its gas production to some 47.5 Bcm by 2025, the country's deputy energy minister Kamal Abbasov said Oct. 28. Azerbaijan is keen to hike its gas production for both domestic use and future exports. Production last year totaled 37 Bcm, Abbasov said during a webinar organized by the International Energy Forum. Azerbaijan's output of crude oil fell 0.8% on the month to 587,000 b/d in October, data released Nov. 4 by state-owned energy company Socar showed.

This indicates that October production was well below Azerbaijan's quota set under the OPEC+ agreement, which amounted to 640,000 b/d. Socar's data does not include condensate, which is excluded from the quotas of OPEC and non-OPEC member countries. Meanwhile, Iran pumped 2.52 million b/d in October, according to the latest S&P Global Platts' OPEC+ survey. The OPEC member is exempt from quotas.

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