Nathan Reynoso 
By Dr. Gubad Ibadoghlu, Visiting Senior Fellow at London School of Economics and Political Science (LSE) and a senior policy analyst at the Economic Research Center (ERC), Baku, Azerbaijan
17 February 2025
Despite pledges after COP28 by participating nations to reduce fossil fuel production in the lead-up to COP29, Azerbaijan is significantly increasing its oil and gas investments, as our expert explains in this piece. Azerbaijan is not an outlier—in partnership with international and state-owned oil companies, production is on the rise.
Azerbaijan hosted the 29th COP in Baku in November 2024. This leadership role in the UN climate process will continue until the next UN Climate Change Conference (UNFCCC COP 30) in Belem, Brazil, in November 2025. Until then, Azerbaijan’s central commitment is to ensure the implementation of the decisions taken at the previous UN Climate Change Conferences. Despite this crucial role, the Azerbaijani government does not appear interested in implementing important climate commitments and COP decisions, instead focusing on extractive measures in the fossil fuel sector.
Prior to COP29 and at the meeting’s opening ceremony, Azerbaijan’s President Ilham Aliyev, who has ruled Azerbaijan for 22 years and calls natural resources a “gift from God,” has declared the importance of the fossil fuel sector to his rule and created a targeted smear campaign in Western media, which he argued unfairly applied the “petrostate” label to Azerbaijan. “It is not fair to call Azerbaijan a ‘petrostate’,” Aliyev said, pointing out that the country accounts for less than 1% of global oil and gas. A petrostate, in political terms, is “a small oil-rich country in which institutions are weak, and wealth and power are concentrated in the hands of a few.” In scientific classification, a “petrostate” is a country with an economy that is heavily reliant on the extraction and export of oil or natural gas. Therefore, petrostate countries are not defined by their specific weight in global oil and gas production.
During the most recent US election campaign, Donald Trump, at a Republican town hall on May 11, 2023, declared “Drill, Baby, Drill.” The signing of the National Emergencies Act on the first day of office by US President Donald Trump and the US withdrawal from the Paris Agreement indicates that the new administration’s pro-fossil fuel agenda will continue. Declaring an energy emergency allows the Trump administration to fast-track permits for new fossil fuel infrastructure. But there are two ways to increase oil production in the United States. The first is to ease government regulation, the second is to create incentives for oil companies to produce more. Undoubtedly, oil and gas producing companies that are satisfied with the first are not interested in a significant price decrease.
The Trump administration’s fossil fuel agenda emboldens resource-rich countries, like Azerbaijan, which are heavily dependent on oil and gas resources, and encourages them to attract investments to expand this sector. However, Azerbaijan is mandated to do the opposite and expand its activities in alternative energy. But Azerbaijan leveraged the opportunity of hosting COP29 to attract increased investment in its oil and gas sector, disregarding COP28’s recommendations to phase out fossil fuels. Specifically, the Azerbaijani government showed indifference to the decision made at COP28 in Dubai, which called for the gradual elimination of inefficient fossil fuel subsidies and the adoption of measures to transition energy systems away from fossil fuels.
Azerbaijan’s Engagement with BP
The State Oil Company of Azerbaijan (SOCAR) and global giant bp (the largest foreign investor in Azerbaijan) are increasing their investments in the oil and gas sector. This comes with other costs: continued reliance on oil and gas, without diversifying the economy, could lead to significant socio-economic and environmental challenges in the future.
On December 18, 2024, less than a month after the end of COP29, in an interview with Dmitry Kiselev, Director General of “Rossiya Segodnya” International News Agency, the President of Azerbaijan announced an increase in oil reserves at the country’s largest block, Azeri-Chirag-Guneshli (ACG). “According to new estimates, the reserves of the field, which we have been developing for 30 years, have grown to 1.5 billion tons,” Ilham Aliyev emphasized.
The government of Azerbaijan cooperates extensively and intensively with the British company bp in this direction. bp is the head of the consortium established to exploit Azerbaijan’s main oil (ACG) and gas (Shah Deniz) fields and the operator of the ACG project. ACG is beginning oil production from the new Azeri Central East (ACE) platform as part of the ACG field development in the Azerbaijan sector of the Caspian Sea.
Despite its stated global climate priorities, bp has advanced activities under the $6 billion ACE project. The ACE platform, a promising venture, is the seventh oil-producing platform installed on the giant ACG field in the Caspian Sea. It is a development project that includes a new offshore platform and facilities designed to process up to 100,000 barrels of oil per day. The project is expected to produce up to 300 million barrels over its lifetime.
Total ACE production for the first three quarters of 2024 was on average about 6,500 barrels per day ACE production is expected to increase through 2024 to around 24,000bpd as two more planned wells are drilled, completed, and brought online. However, as of this writing, BP Azerbaijan has not published ACE production totals for 2024, so we speculate as to the trend until the data is made public.
bp’s Vice President for Wells in the Azerbaijan-Georgia-Turkey region announced that bp plans to drill 19 wells in the ACG field in 2025 at the IADC Drilling Caspian 2025 Conference & Exhibition in Baku on February 6-7, 2025. In his announcement, he emphasized bp’s commitment to technological innovation and increased productivity.
bp also recently decided to build a new platform at the giant Shah Deniz gas condensate field in the Caspian Sea as part of the company’s strategic plan to expand its operations and increase its production capacity. An investment agreement is planned to be signed in 2025.
On September 20, 2024, during an anniversary event, bp signed a memorandum with SOCAR for two additional offshore blocks in the Caspian Sea: the Karabakh block and the Ashrafi-Dan Ulduzu-Aypara block. Simultaneously, SOCAR signed multiple agreements aimed at solidifying Azerbaijan’s intent to monetize its remaining hydrocarbon resources. These agreements included three documents with BP and a Memorandum of Understanding with the Hungarian company MOL, signaling an emerging strategic partnership. Hungarian Prime Minister Viktor Orbán, a self-declared ally of Azerbaijani President Ilham Aliyev, appears to be fostering closer ties between the two nations.
Additionally, bp is actively evaluating hydrocarbon reserves and planning future exploration activities in the Shafag-Asiman offshore block.
Simultaneously, it appears that bp’s financial situation is deteriorating, and that the company is trying to cut costs. According to Bloomberg, BP Plc is eliminating 4,700 positions internally—about 5% of its workforce—and more than 3,000 contractor jobs. More cost-cutting efforts are planned this year and beyond. At the beginning of 2025, bp’s capitalization fell to $82 billion from approximately $152.6 billion in early 2018.
Azerbaijan’s Engagement with Other European Oil and Gas Companies
The Azerbaijani government is negotiating with France’s TotalEnergies for a second phase of the “Absheron” field project, following the completion of the first production phase. Progress on these plans is already underway. Currently, SOCAR and TotalEnergies each have a 35% stake in the Absheron project, while Abu Dhabi National Oil Company (ADNOC) has 30%.
On September 05, 2024, Italian Eni and SOCAR signed three Memorandums of Understanding (MoU). The first MoU focused on the expansion of Eni and SOCAR’s cooperation on hydrocarbon exploration and production, with the aim of strengthening European and Italian energy security.
A second MoU envisages cooperation between Eni and SOCAR to reduce greenhouse gas emissions and improve energy efficiency in the upstream sector in Azerbaijan, through the application of best available technologies.
Finally, a third MoU, to explore potential cooperation in the biofuel production chain, has been signed.
Furthermore, on November 12, 2024, during the COP29 proceedings, SOCAR and the Italian company Italgas signed a cooperation agreement, underscoring Azerbaijan’s continued focus on expanding its hydrocarbon sector rather than aligning with international climate action goals.
On June 5, 2024, Hungarian MVM Group entered into a sale and purchase agreement with the Azerbaijani state-owned entity Southern Gas Corridor CJSC (SGC) for the acquisition of a 5% stake in the Production Sharing Agreement for the Shah Deniz offshore gas-condensate field and a 4% stake in Azerbaijan Gas Supply Company Limited (AGSC), the exclusive special-purpose vehicle established for the marketing and sale of natural gas produced from Shah Deniz gas-condensate field.
Renewed American Interest in Azerbaijan’s Fossil Fuel Sector
American companies appear to have a renewed interest in Azerbaijan’s oil and gas sector. Chevron, the second largest oil and gas company in the US, withdrew from Azerbaijani projects 5 years ago, when on November 4, 2019, it signed an agreement with Hungarian MOL to sell the company’s assets in Azerbaijan for $1.57 billion—9.57% in the ACG project and 8.9% in BTC. The deal was completed on April 16, 2020. In October 2020, Chevron announced the liquidation of its representative office (Chevron Azerbaijan Limited) in Azerbaijan.
However, Chevron has decided to return to the Azerbaijan oil and gas sector. In October 2024, at a meeting with the President of SOCAR, Chevron Eurasian Business Unit Executive Director Derek Magnes discussed joint activities in production and transportation, as well as cooperation in decarbonization.
American oil giant ExxonMobil also plans to expand its business in Azerbaijan.
Exxon has been in Azerbaijan since March 1995, when it entered the Azeri-Chirag-Guneshli Caspian project.
It was also the operator of two exploration projects (the Nakhchivan and Zafar/Mashal projects) in Azerbaijan, which were terminated due to the discovery of commercially unattractive volumes of hydrocarbons.
In addition, Exxon signed a contract in December 1999 with SOCAR for the exploration of the Savalan and Dalga offshore structures located in the southern part of the Azerbaijani sector of the Caspian Sea. However, this contract was not implemented at that time due to strong objections from Iran regarding the uncertainty of the legal status of the Caspian.
ExxonMobil is also currently a shareholder in the Baku-Tbilisi-Ceyhan (BTC) pipeline.
Russian Interest in Azerbaijan’s Fossil Fuel Sector
Russia’s state-level interest in Azerbaijan’s energy sector has grown in recent years. With this aim, Russian President Vladimir Putin visited Azerbaijan on August 18-19, 2024. As a result, Baku and Moscow expanded their joint activities in developing new fields in the Caspian Sea. According to the Russian president, Lukoil has invested up to $4 billion in Azerbaijan’s energy projects so far. He added that the Convention on the Legal Status of the Caspian Sea has created new opportunities for mutually beneficial cooperation, and that Rosneft, in addition to Lukoil, will begin joint activities with SOCAR in the near future to implement an oil and gas production project. Before his visit to Baku, Russian Deputy Prime Minister Alexander Novak told the press on July 3, 2024, that “we have a very broad spectrum of issues in the energy sector with Azerbaijan. This includes the development of joint ventures and the participation of Russian companies such as Lukoil, Tatneft, Sibur, and Novatek in new projects with their Azerbaijani counterparts.” For example, Russia’s Tatneft oil company and SOCAR will carry out the development of the Bibi-Heybat onshore field.
Russia aims for gas cooperation with Azerbaijan. Russian gas monopoly Gazprom on January 17, 2025 announced an agreement with the SOCAR on the North-South project (most likely, this concerns the supply of Russian pipeline gas through Azerbaijan to the northern provinces of Iran, which experience a shortage of blue fuel in the winter). Russia eyes 55 bcm of gas exports to Iran per year.
SOCAR Expands Global Production Base
On February 2, 2025, SOCAR expanded its global presence with a new agreement to acquire a 10% stake in Israel’s Tamar gas field from Union Energy. This follows its 3% interest acquisition in a UAE oil project in 2024. SOCAR paid $285 million for last year’s acquisition of a 3% stake in the SARB, Umm Lulu, Bin Nasher, and Al Bateel offshore concession from ADNOC.
Operated by Chevron Mediterranean Limited, a subsidiary of US-based Chevron, Tamar is one of the largest gas reserves in Israel’s Mediterranean basin. The deal remains subject to regulatory approvals and other conditions.
SOCAR sees this as the start of its investment in the Mediterranean upstream sector, reinforcing its strategy to secure stakes in key international energy assets.
Azerbaijan and the Energy Transition
The Azerbaijani government appears ill-equipped to navigate the anticipated decline in oil revenues that even a moderate energy transition could trigger. In response, President Aliyev is intensifying efforts to offset declining oil production by ramping up gas output.
This strategy highlights Azerbaijan’s prioritization of maximizing both economic returns and political leverage from its fossil fuel resources, despite the global push toward transitioning to sustainable energy systems.