Natural gas has become the growth side of Azerbaijan’s hydrocarbon economy. Oil established the country as a major Caspian energy producer, but mature oil fields are now producing less than they did at their peak. Gas production has moved in the opposite direction, supported by the giant Shah Deniz field, associated gas from the Azeri-Chirag-Gunashli complex, and the newer Absheron development.
This change has also altered Azerbaijan’s international position. The country is no longer important only as a source of crude oil. It now supplies pipeline gas to Georgia, Türkiye, Italy, Greece, Bulgaria, and a growing group of European markets. Its importance comes from the combination of offshore reserves, long-term foreign investment, and a pipeline system that links the Caspian Sea directly with southeastern Europe.
Shah Deniz Leads Azerbaijan’s Gas Production
Azerbaijan produced approximately 51.5 billion cubic metres of natural gas in 2025. Shah Deniz supplied 27.9 billion cubic metres, making it the clear centre of the national gas industry. Another 14.1 billion cubic metres came from the Azeri-Chirag-Gunashli oil field complex, where gas is produced alongside crude oil. SOCAR operations contributed 7.9 billion cubic metres, while the developing Absheron field produced 1.6 billion cubic metres.
The country also holds substantial reserves. Estimates published in 2025 placed Azerbaijan’s proved natural gas reserves at about 60 trillion cubic feet. Most of the commercially important resource base lies offshore in the South Caspian Basin, where deep water, high reservoir pressure, and difficult geological conditions make projects technically demanding.
Shah Deniz, discovered in 1999, changed the scale of the sector. The first development phase supplied Azerbaijan, Georgia, and Türkiye. Shah Deniz Stage 2 added production wells, subsea infrastructure, new processing capacity, and the gas volumes required to open the Southern Gas Corridor to Europe.
BP operates Shah Deniz in partnership with SOCAR and several international investors. Existing facilities can produce more than 70 million cubic metres of gas per day, although actual output depends on reservoir conditions, maintenance, market nominations, and the development schedule.
Absheron is becoming the second major source of growth. The field, operated through a partnership involving SOCAR and TotalEnergies, began early production in 2023. Its initial phase supplies the domestic market. Full-field development is designed to add approximately 4.5 billion cubic metres of annual gas production at plateau, along with condensate.
The Southern Gas Corridor Defines the Export Business
Azerbaijan does not export liquefied natural gas. Its international gas business depends on a connected chain of offshore platforms, processing facilities, compressor stations, and pipelines extending from the Caspian coast to Italy.
Gas from Shah Deniz first travels to the Sangachal Terminal south of Baku. Sangachal is the main processing and dispatch centre for Azerbaijan’s offshore oil and gas production. From there, export gas enters the South Caucasus Pipeline, which crosses Azerbaijan and Georgia before reaching the Turkish border.
The Trans-Anatolian Natural Gas Pipeline carries the gas across Türkiye. At the Greek border, it connects with the Trans Adriatic Pipeline, which crosses Greece and Albania, continues beneath the Adriatic Sea, and enters southern Italy. Interconnectors allow some of this gas to move into Bulgaria and other markets in southeastern and central Europe.
Azerbaijan sold approximately 25.2 billion cubic metres of gas abroad in 2025. Europe received about 12.8 billion cubic metres, while Türkiye received 9.6 billion cubic metres. Georgia purchased 2.3 billion cubic metres, and a smaller volume was supplied to Syria through a regional arrangement involving Türkiye.
The export system gives Azerbaijan access to several markets without crossing Russian territory. This has become more valuable since European countries began making stronger efforts to diversify their gas imports. Azerbaijani gas cannot replace the full volume of Russian supply lost by Europe, but it has become strategically important for countries with smaller markets or limited alternative pipeline connections.
Türkiye has a different relationship with Azerbaijani gas. It is both a major customer and the essential transit state between the Caspian region and Europe. TANAP also gives Türkiye greater control over the routes and suppliers serving its own large gas market.
Domestic Demand Competes With Export Ambitions
Azerbaijan is a gas exporter, but a significant part of its production remains inside the country. Natural gas provides most of Azerbaijan’s thermal electricity generation and is widely used for heating, industry, petrochemicals, and household supply.
This domestic role creates an important policy question. Every additional unit of gas burned in a power plant is unavailable for export. Azerbaijan is therefore developing solar and wind projects partly to diversify electricity generation and release more gas for higher-value foreign sales.
The country’s electricity system still depends heavily on large gas-fired stations. This provides stable demand for domestic production, but it also exposes the economy to inefficient fuel use when older plants and networks operate below modern performance standards. Newer combined-cycle plants, grid improvements, and renewable generation can reduce the amount of gas required for each unit of electricity.
SOCAR remains the dominant national institution across production, transportation, processing, distribution, and international marketing. State influence allows Azerbaijan to coordinate upstream development with foreign policy and export agreements. It can also make domestic pricing less responsive to international market conditions.
Low or regulated internal prices support households and local industries, but they may weaken incentives for conservation and energy efficiency. The government must therefore balance affordable domestic supply with the commercial value of exports.
Compression and New Fields Will Determine Future Growth
Azerbaijan’s next gas phase is not based only on discovering untouched fields. It also depends on maintaining production from large reservoirs that have already been operating for years.
The Shah Deniz Compression project was approved in 2025. The project will add a new offshore compression platform connected to existing Shah Deniz facilities. As reservoir pressure falls, compression will help move gas from the wells through the production system. The facilities are expected to be ready to receive first gas for compression in 2029.
The project is designed to recover approximately 50 billion cubic metres of additional gas and around 25 million barrels of condensate over its operating life. It is therefore mainly a production-support project rather than a separate expansion on the scale of Shah Deniz Stage 2.
Absheron Full Field Development offers a more direct increase in production. Its planned annual output of around 4.5 billion cubic metres would provide Azerbaijan with additional gas for domestic use or export. Other prospects, including deeper formations beneath established offshore fields, may create further opportunities, but they require extensive drilling and investment.
Pipeline capacity must develop alongside production. The Trans Adriatic Pipeline was designed with room for expansion, while TANAP can also carry larger volumes after additional compressor investment. However, producers need long-term purchase commitments before financing major upstream and pipeline expansions.
European climate policy creates a complicated market signal. Buyers want secure gas during the energy transition, but many governments and financial institutions are reluctant to support infrastructure that could operate for several decades. Azerbaijan needs contracts long enough to justify new investment, while European buyers increasingly prefer shorter and more flexible commitments.
Azerbaijan’s Gas Sector Is Becoming More Important Than Its Oil Decline
Natural gas will remain central to Azerbaijan’s economy even as international energy markets change. Shah Deniz provides a strong production base, the Southern Gas Corridor offers direct access to Türkiye and Europe, and Absheron gives the country a second major offshore growth project.
The main question is whether new supply can enter production quickly enough to support larger exports while meeting domestic demand. Compression, field development, pipeline expansion, and firm purchase agreements must move together. If they do, Azerbaijan can strengthen its role as a reliable regional supplier. Without that coordinated investment, export growth is likely to remain gradual despite the country’s large resource base.
