Azerbaijan's Oil Reserves: Running On Empty?

Azerbaijan has been a significant player in the oil industry for centuries. In the early 20th century, it generated half of the world's oil supply. As of 2016, the country holds 7 billion barrels of proven oil reserves, ranking 20th in the world. This is equivalent to 199.8 times its annual consumption, meaning that without net exports, Azerbaijan has about 200 years of oil left at current consumption levels. However, it is important to note that Azerbaijan's oil reserves only account for about 0.4% of the world's total reserves, and the country is diversifying its economic streams as it recognizes the need to reduce its dependence on oil.

Azerbaijan's oil reserves

Azerbaijan has a rich history of oil production and is one of the birthplaces of the oil industry. In the early 20th century, it was generating half of the world's oil supply. As of 2016, Azerbaijan holds 7 billion barrels of proven oil reserves, ranking 20th in the world and accounting for about 0.4% of the world's total oil reserves. This is equivalent to 199.8 times its annual consumption, meaning that without net exports, there would be about 200 years of oil left (at current consumption levels).

The Azeri-Chirag-Deepwater Gunashli (ACG) field, located about 100 km east of Baku, is the largest oil field in the Azerbaijan sector of the Caspian Basin. It was discovered in the early 1970s when Azerbaijan was part of the Soviet Union and comprises a series of individual reservoir horizons located 2,000 to 3,500 meters beneath the Caspian seabed. Oil is produced both onshore and offshore in the Caspian Sea, with offshore production accounting for about one-quarter of the total.

In recent years, there has been a growing recognition in Azerbaijan that oil and gas are not permanent sources of income, and the country has been working to diversify its economy. This includes investing in its transportation, agriculture, and tourism sectors, as well as exploring renewable energy sources. Despite these efforts, energy exports still account for a significant portion of Azerbaijan's government revenue, and the country remains heavily dependent on its oil reserves.

How long will Azerbaijan's oil last?

Azerbaijan has proven oil reserves of around 7 billion barrels, which is estimated to be equivalent to 199.8 times the country's annual consumption. This means that, without net exports, there would be about 200 years of oil left in Azerbaijan (at current consumption levels and excluding unproven reserves).

However, it is important to note that this data is from 2016, and the situation may have changed since then. Additionally, Azerbaijan's oil industry is facing challenges due to the need to diversify its economic streams. The country has been heavily dependent on the oil sector, and with the oil running out, it is crucial for Azerbaijan to develop other sectors such as transportation, agriculture, and tourism.

Azerbaijan's oil reserves account for about 0.4% of the world's total reserves, and the country is a significant producer and exporter of oil. The Azeri-Chirag-Deepwater Gunashli (ACG) field, located in the Azerbaijan sector of the Caspian Basin, is the largest oil field in the region. It was discovered in the early 1970s when Azerbaijan was part of the Soviet Union.

In recent years, there have been efforts to diversify Azerbaijan's economy and reduce its dependence on oil. The country has invested in modernising its energy infrastructure and improving its transportation and logistics network. Additionally, Azerbaijan has also focused on developing its tourism sector and establishing itself as a cultural hub.

In conclusion, while Azerbaijan has a significant amount of oil reserves, the country is aware of the finite nature of its oil resources and is working towards diversifying its economy. The success of these efforts will determine how long Azerbaijan's oil will last in terms of its economic impact and sustainability.

Azerbaijan's oil exports

Azerbaijan has been a major player in the oil industry for centuries. In the early 20th century, it was generating half of the world's oil supply. As of 2016, the country holds 7 billion barrels of proven oil reserves, ranking 20th in the world and accounting for about 0.4% of the world's total oil reserves. Azerbaijan exports 78% of its oil production, which amounted to 654,629 barrels per day in 2016.

The country's main oil-producing regions are located near Baku, at Sabunchy, Surakhany, and Bibi-Heybat. The Azeri-Chirag-Deepwater Gunashli (ACG) field, located about 100 km east of Baku, is the largest oil field in the Azerbaijan sector of the Caspian Basin. It was discovered in the early 1970s when Azerbaijan was part of the Soviet Union. The field comprises a series of individual reservoir horizons located 2,000 to 3,500 meters beneath the Caspian seabed.

The State Oil Company of the Republic of Azerbaijan (SOCAR) is a major source of income for the Azerbaijani government. It is a fully state-owned national oil and gas company headquartered in Baku. SOCAR is involved in exploring oil and gas fields, producing, processing, and transporting oil, gas, and gas condensate, and marketing petroleum and petrochemical products in domestic and international markets.

In recent years, Azerbaijan has diversified its export routes to mitigate the risk of supply or demand shocks. The Baku-Tbilisi-Ceyhan (BTC) pipeline is the main export route for Azerbaijani oil, accounting for about 80% of the country's oil exports. The pipeline runs from the Sangachal terminal near Baku, through Georgia, to the Mediterranean port of Ceyhan in Turkey. It has a capacity of 1.2 million barrels per day and is the second-longest oil pipeline in the world.

In addition to the BTC pipeline, Azerbaijani oil is also exported through the Baku-Novorossiysk pipeline to Russia, and the Baku-Supsa pipeline to Georgia and then on to European markets.

In 2023, Azerbaijan's crude oil exports through the BTC pipeline were halted for six days due to devastating earthquakes in southern Turkey. The earthquakes damaged the control room at the Ceyhan terminal, interrupting the loading of crude oil onto tankers. However, operations resumed within a week, and Azerbaijani oil exports continued to meet the high demand in Europe.

The Azeri-Chirag-Deepwater Gunashli oil field

The Azeri-Chirag-Deepwater Gunashli (ACG) oil field is located about 100 kilometres (62 miles) east of Baku and 120 kilometres (75 miles) off the coast of Azerbaijan in the Caspian Sea. It is the largest oil field in the Azerbaijan sector of the Caspian Basin. The field was discovered in the early 1970s when Azerbaijan was part of the Soviet Union. It consists of a series of individual reservoir horizons located 2,000 to 3,500 metres beneath the seabed.

The Azeri-Chirag-Deepwater Gunashli field contains 5.4 billion barrels of recoverable oil and is estimated to have recoverable reserves of about 5 to 6 billion barrels (790 to 950 million cubic metres) of petroleum. The field has been in operation since November 1997, with peak oil production of 885,000 barrels per day (140,700 cubic metres per day) reached in 2010.

The development of the ACG field is carried out by the Azerbaijan International Operating Company, a consortium of international oil companies, and operated by BP on behalf of the consortium. The production sharing agreement (PSA) for the field's exploitation was signed in September 1994, marking the beginning of a 30-year development period. The ACG field is developed in three phases, with the Central, West, and East Azeri complexes in phases I and II, and the Deepwater Gunashli section in phase III.

The Central Azeri platform, located about 100 kilometres (62 miles) off Baku in the Caspian Sea, has been operational since February 2005. It includes a 48-slot production, drilling, and quarters (PDQ) platform, a 30-inch oil pipeline, and a 28-inch gas pipeline, both connecting to the Sangachal Terminal.

The West Azeri platform, situated about 100 kilometres (62 miles) off Baku, started production in December 2005. It features a 48-slot PDQ platform and a 30-inch oil pipeline connecting to the Sangachal Terminal.

The East Azeri platform is an offshore 48-slot PDQ platform located 100 kilometres (62 miles) off the Baku coast in the Caspian Sea. It has been operational since 2006 and has a production capacity of 800,000 barrels per day.

The Deepwater Gunashli (DWG) complex, located on the east side of the Gunashli field, is the third phase of ACG field development. It consists of two bridge-linked platforms: a 48-slot drilling, utilities, and quarters (DUQ) platform, and a process, gas compression, water injection, and utilities (PCWU) platform. The DWG complex has been operational since April 2008 and contributes to the ACG production rate, bringing it to over a million barrels per day.

In March 2010, a $6 billion development plan was approved for the Chirag Oil Project (COP), aimed at recovering approximately 360 million barrels of oil. This project includes the installation of a new offshore platform, with the first oil expected by late 2013.

The future of Azerbaijan's economy

Azerbaijan's economy has historically been heavily dependent on its oil industry. As of 2016, the country held 7 billion barrels of proven oil reserves, ranking 20th in the world and accounting for about 0.4% of the world's total oil reserves. This equates to approximately 200 years of oil left at current consumption levels. While the oil industry has brought significant wealth to the country, there is a growing recognition that oil reserves are finite, and Azerbaijan has been exploring ways to diversify its economy.

The country has been investing in modernising its energy infrastructure, including electricity generation and transmission. Natural gas and hydropower play a significant role in Azerbaijan's energy mix, and the country has been working towards reducing its reliance on fossil fuels and increasing the use of renewable energy sources. The government has set a target of having renewable energy provide 30% of electricity-generating capacity by 2030. Additionally, Azerbaijan has been focusing on developing its transportation, agriculture, and tourism sectors. The country's strategic location along the Silk Road has made it a key logistical node in the centre of Eurasia, and it has been investing in new highways, rail lines, airports, and seaports.

The service sector, including tourism, is another area of focus for the Azerbaijani government. The country has been investing in its tourism infrastructure and aims to streamline its visa regime to make it more accessible for potential tourists. Azerbaijan has also been positioning itself as a cultural hub, hosting major regional and global events such as the Eurovision singing competition, sporting events, and aiming to host the Summer Olympics.

While oil exports still account for a significant portion of government revenue, the country is working towards economic diversification. The fluctuating oil prices and the impact of the Russia-Ukraine conflict on oil exports have highlighted the importance of reducing Azerbaijan's dependence on this finite resource. The country's efforts to diversify its economy and invest in new sectors show promise for the future, but it remains to be seen how successful these initiatives will be in the long run.

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