Azerbaijan’s oil industry is built around a clear geographic and economic fact: a landlocked country developed one of the most important crude-export systems linking the Caspian Sea with world markets. Offshore production, foreign investment, the state oil company SOCAR, and the Baku–Tbilisi–Ceyhan pipeline turned Azerbaijan into a major supplier to Türkiye and Europe. That system remains valuable, but the industry is no longer in its rapid-growth phase. Production from the country’s largest field has declined from earlier peaks, making field management, new wells, export reliability, and cost control more important than simple expansion.
Azeri–Chirag–Gunashli Still Carries the Oil Sector
The Azeri–Chirag–Gunashli field complex, usually known as ACG, remains the centre of oil production in Azerbaijan. Located offshore in the Caspian Sea, ACG has produced for nearly three decades and supports a large network of platforms, subsea systems, terminals, pipelines, and service companies. BP operates the development with SOCAR and a group of international partners.
ACG averaged about 330,000 barrels per day in 2025. That was below the approximately 342,000 barrels per day produced in 2024, and output averaged about 325,000 barrels per day during the first quarter of 2026. The figures show the central issue facing Azerbaijan’s oil industry. ACG is still a large and productive asset, but it is a mature field that requires continuous investment simply to limit decline.
The Azeri Central East project has helped add new production. Its offshore platform began producing in 2024 and averaged about 25,000 barrels per day in 2025. New wells, water injection, pressure management, maintenance, and improved reservoir data can extend the productive life of ACG, but they are unlikely to return Azerbaijan to the output levels reached around the beginning of the 2010s.
Across the country, Azerbaijan produced 27.7 million tonnes of oil and condensate in 2025. Average daily production was approximately 571,000 barrels, including about 111,000 barrels per day of condensate. ACG accounted for 16.2 million tonnes, while condensate from Shah Deniz and Absheron also contributed to total liquids production. This distinction matters because the country’s export statistics increasingly combine crude oil with condensate from its expanding gas fields.
The BTC Pipeline Gives Caspian Oil Access to the Mediterranean
Azerbaijan’s importance as an oil exporter depends as much on infrastructure as on geology. The Baku–Tbilisi–Ceyhan pipeline, known as BTC, carries crude from the Caspian coast through Georgia and Türkiye to the Mediterranean port of Ceyhan. This route allows Azerbaijani oil to reach international shipping markets without crossing Russia or Iran.
BTC began operating in 2006 and has capacity of more than one million barrels per day. Azerbaijan’s current production is well below that level, but the pipeline remains the main export artery for Azeri crude and condensate. It also gives the country strategic value as a possible transit route for selected volumes from other Caspian producers.
In 2025, Azerbaijan exported 23.1 million tonnes of oil and condensate, compared with domestic refining of 6.2 million tonnes. The difference shows how strongly the sector remains oriented toward external markets. Azeri Light crude is valued for its relatively low sulphur content and has traditionally been sold to refiners around the Mediterranean and in wider European markets.
Operational control of BTC is also becoming more closely linked to Azerbaijan’s national oil company. BP announced that operation of the pipeline would transfer to SOCAR in July 2026 under existing contractual arrangements. BP is retaining its ownership interest, so the change is not a withdrawal from the project. It does, however, place SOCAR in a more direct operating role over the country’s most important oil-export route.
SOCAR Connects Production, Refining, and State Strategy
SOCAR is involved across Azerbaijan’s oil economy. It produces oil from its own fields, represents the state in major production-sharing agreements, operates refineries and pipelines, and invests in energy businesses abroad. This broad role allows the company to connect upstream development with national revenue, domestic fuel supply, and export policy.
Foreign companies remain important because offshore Caspian production requires advanced drilling, engineering, project management, and reservoir expertise. Azerbaijan’s production-sharing model brought BP, ExxonMobil, MOL, INPEX, TPAO, and other international partners into the sector. The arrangement helped finance large projects that would have been difficult to develop through domestic capital alone.
Oil revenue has supported the national budget, the State Oil Fund of Azerbaijan, infrastructure investment, and the country’s foreign-exchange position. This creates a strong incentive to protect production even as the economy seeks greater diversification. Lower output or weaker oil prices can affect public revenue well beyond the petroleum industry itself.
Domestic refining remains concentrated at the Heydar Aliyev Baku Oil Refinery. Modernisation is intended to improve fuel quality, operating efficiency, and the refinery’s ability to meet domestic demand. Refining is important for energy security, but Azerbaijan’s oil system is still defined mainly by the value of exported crude and condensate.
New Investment Is Designed to Manage Decline
The next stage of Azerbaijan’s oil industry is likely to look different from the development boom that followed the original ACG agreement. Large new discoveries could change the outlook, but the more immediate priorities are extending mature fields, developing smaller accumulations, and using existing infrastructure more efficiently.
At ACG, additional drilling and reservoir management can recover barrels that would otherwise remain underground. The existing network of platforms and pipelines lowers the cost of connecting nearby resources. The start of non-associated gas production from deeper ACG reservoirs in 2026 also shows how a mature oil development can evolve into a broader oil-and-gas asset. Gas will not reverse the decline in crude output, but it can preserve the commercial importance of offshore infrastructure.
Onshore exploration may also contribute smaller volumes. SOCAR and MOL signed an agreement covering exploration and production in the Shamakhi–Gobustan region, adding another area to the search for commercially useful resources. Such projects are more likely to supplement national production than to replace ACG at its historical peak.
The main risks are technical, commercial, and fiscal. Offshore projects require high capital spending, while mature reservoirs generally produce more water and require more intervention over time. Lower global oil prices can delay drilling or reduce the value of marginal projects. Azerbaijan must therefore balance the goal of sustaining output with the need to avoid expensive developments that do not generate adequate returns.
Azerbaijan’s Oil Future Depends on Efficiency and Export Reliability
Azerbaijan will remain an important Caspian oil exporter, but its position is changing. The country is moving from rapid production growth toward long-term management of mature assets. ACG, BTC, SOCAR, and the Baku refining system will continue to anchor the industry, while new wells and smaller projects help slow decline.
The central test is not whether Azerbaijan can recreate its earlier oil boom. It is whether the country can preserve reliable output, maintain the quality and security of its export routes, and use petroleum revenue to support a more diversified economy. Success will depend on disciplined investment, strong operating performance, and continued cooperation between SOCAR and international partners.
