Azerbaijan's Energy Industry

Azerbaijan: a longstanding energy powerhouse

Azerbaijan’s energy industry is one of the world’s oldest and remains a crucial hydrocarbons supplier in the Caspian Sea region. Its offshore basins hold significant reserves. The NOC State Oil Company of Azerbaijan Republic (SOCAR) is a key counterpart for PSCs and represents the State in many upstream agreements, alongside relevant government approvals. BP is the largest foreign investor in the nation and has operated in the country since 1992.

Most of the country’s oil and gas production is produced from its Azeri–Chirag–Deepwater Gunashli fields, which is pumped onshore by pipeline to the Sangachal terminal south of Baku. Much of the crude is exported via the 1,768-km Baku–Tbilisi–Ceyhan (BTC) pipeline through Georgia and Turkey to the Ceyhan marine terminal.

The country is transitioning its energy industry from its traditionally oil-centric production to becoming a growing gas producer and exporter. The Shah Deniz field, located 70 kilometres from Baku in water depths of up to 1,600 metres, is Azerbaijan’s largest gas and condensate field and the cornerstone of its gas production and exports. The development produced its first gas in 2006.

While practical development of renewable energy sources has been limited, the country has significant potential. Azerbaijan generates about 10% of its electricity from large hydropower installations. The country aims to reduce greenhouse gas emissions by 35% by 2030 from its emissions figures in 1990, which will involve revamping a substantial energy industry that accounts for the majority of its GDP and around 90% of its exports.