Baku Signs Another Caspian Oil Contract, While Iran Still Waits

Azerbaijan’s state-run oil and gas company, Socar, signed a new 25-year production sharing contract (PSA) with British Petroleum on April 26 to explore and develop an oil and gas block in the Caspian Sea. Socar is also preparing to contract another offshore gas project with Norwegian Statoil next month.

As Radio Farda writes in the article Baku Signs Another Caspian Oil Contract,While Iran Still Waits, more than 97% of the country’s total 37 million metric tons (mt) of oil and 99% of its 18 billion cubic meters (bcm) commercial gas production annually comes from the Caspian fields. BP-led consortium in Azer-Chirag-Guneshli oil block as well as Shah Deniz gas field accounts for the majority of Baku’s oil and gas production.

​Azerbaijan’s offshore oil and gas production is seven times more than the total production by other four Caspian littoral states; although Russia, Turkmenistan and especially Kazakhstan are also developing their offshore projects.

Iran’s Caspian projects

Iran is the only Caspian littoral country which doesn’t produce any hydrocarbons from the sea, but it introduced a new contract model, called Iran Petroleum Contracts (IPC) in 2015, and included 49 oil and gas projects for foreigners, including three blocks and a field in the Caspian Sea. IPC is a mix of old contract model pay-back and PSA.

According to U.S. Energy Information administration “Iran also has 0.5 billion barrels of proven and probable reserves in the Caspian Sea, but to date very limited upstream activity has occurred in Iran’s portion of the Caspian Sea”.

Iran has signed two agreements since the elimination of sanctions in January 2016; one with French Total and another with Russian Zarubezhneft to develop three oil and gas fields. But, its negotiations with Danish Maersk, Norwegian Statoil and Russian Lukoil on Caspian projects ended without any agreement and Iran’s Oil Minister Bijan Namdar Zanganeh announced last summer that none of thementioned companies want to get involved in these projects.

Iran has offered four projects in the Caspian Sea, blocks 24, 26 and 29, as well as the Sardar-e-Jangal oil field to foreigners for  exploration and development. Iran has divided its exploration area in Caspian to 46 blocks, of which eight have priority. Iran has previously carried out seismic tests in 4000 square kilometers of the Caspian Sea at blocks 6,7,8 and 21 from 2003 to 2005, but the seismic vessel, named Pejwak, caught fire and burned in 2005 and the exploration operations stopped.