Press Release

Morgan Lewis Advises State Oil Company of Azerbaijan in Agreement for Future Development of the Super-Giant Azeri-Chirag-Gunashli Oil Fields

Thursday, September 14, 2017

LONDON, BAKU, September 14, 2017: Morgan Lewis represented the State Oil Company of the Azerbaijan Republic (SOCAR) in negotiating the amendment and extension of a production sharing agreement (PSA) and associated agreements for future development of the super-giant Azeri, Chirag, and deep-water Gunashli (ACG) oil field complex in the Azerbaijan sector of the Caspian Sea.

SOCAR and the BP-led Azerbaijan International Operating Company (AIOC) consortium finalized the agreement at a signing ceremony in Baku today, presided over by H.E. President Ilham Aliyev of the Republic of Azerbaijan, BP CEO Bob Dudley, and SOCAR President Rovnag Abdullayev.

The ACG field complex, located about 100 km east of Baku, is the largest producing project in the Caspian Sea and one of the largest producing offshore oil fields in the world. To date the field has delivered about 3.2 billion barrels (some 440 million tons) of oil equivalent, which has been exported to world markets through the Baku-Tbilisi-Ceyhan pipeline and otherwise. There has been around $33 billion of investment so far, with the potential of up to $40 billion more in the newly extended term. Total ACG project production averaged 585,000 barrels per day in first half 2017. Azerbaijan’s State Oil Fund (SOFAZ) has received more than $125 billion in project revenues to date.

As part of the agreement, the international co-venturers will pay a bonus of $3.6 billion to SOFAZ, and SOCAR will increase its equity share in the ACG PSA from 11.65% to 25%.

The amended and restated agreement will cover development of the fields until 2050, 25 years beyond the duration of the existing 30-year agreement signed in 1994, and will add significant resource development potential to the project. In addition to operator BP, the international consortium members are Chevron, INPEX and Itochu of Japan, Statoil of Norway, ExxonMobil, TPAO of Turkey and ONGC Videsh of India.

“Today’s signing expands and extends an extraordinarily important and successful project, opening the door to continued major investment that will enhance production from this world-class reservoir for decades to come,” said Morgan Lewis partner Jon Hines. “We are most honored to have assisted SOCAR in this endeavour.”   

Mr. Hines led the Morgan Lewis Moscow- and London-based team advising SOCAR, which included of counsel Alexander Marchenko and associates Thomas Edwards and Kseniya Lopatkina, with support from partner Lewis Jones. The AIOC consortium was represented by Norton Rose Fulbright.

For more information, read the press release issued by SOCAR and BP here.