Iran, Azerbaijan plan joint Caspian oil, gas projects

Iran and Azerbaijan expect to finalise several energy agreements "soon", including deals on gas swaps and the joint development of oil and gas fields in the Caspian Sea.

"We had a constructive meeting with the Azeri delegation, and we came to good agreements on co-operating on the gas front," Iranian oil minister Javad Owji said following discussions with Azeri deputy prime minister Shahin Mustafayev in Tehran.

Mustafayev's state visit to the Iranian capital is the first since a brief flare-up in tensions between the neighbouring countries in September that was triggered by Azerbaijan's arrest of two Iranian truck drivers on charges of illegally entering its territory.

Owji said a "good agreement" was signed on gas swaps between Azerbaijan's neighbours and Nakhchivan, an autonomous Azeri exclave bordered by Armenia, Turkey and Iran, although he gave no details. Nakhchivan has been receiving gas from Iran under a 25-year gas swap contract signed in 2004. The deal involves Tehran importing up to 2mn m³/d of Azeri gas and delivering the same volume of Iranian gas to Nakhchivan.

"Another point of discussion … was the development of oil and gas fields in the Caspian Sea," Owji said. "Preliminary talks on this front have been held, technical discussions are now ongoing and we are hoping to sign a final contract."

Owji did not specify which projects are under consideration. It is not the first time Tehran and Baku have talked up the joint development of their Caspian oil and gas resources. In early 2018, Iran signed a series of preliminary agreements with Azerbaijan to jointly develop two blocks in the southern Caspian Sea. At the time, Iran's then oil minister Bijan Zanganeh did not disclose which blocks were covered by the agreements but said future production from the assets would be split evenly between the two countries.

Deep waters

In late 2015, Iran earmarked four Caspian projects for foreign investment — exploration in blocks 24, 26 and 29, and development of the Sardar-e-Jangal field in block 6. Blocks 24, 26 and 29 are located 100-130km from Iran's northern coastline in have water depths ranging from 600m to 900m. Seismic surveys were carried out at the blocks before 2000. Block 6 is situated around 250km from the shore and reaches water depths of up to 750m.

Iran's efforts to unlock its deepwater Caspian oil and gas resources have been hindered by a lack of investment and access to cutting-edge technologies over the past 10-15 years, driven by sanctions. The southern Caspian Sean can reach water depths of over 1,000m, which is far deeper than any of Iran's offshore fields in the Mideast Gulf.

By Nader Itayim