Azerbaijan Country Commercial Guide
Learn about the market conditions, opportunities, regulations, and business conditions in azerbaijan, prepared by at U.S. Embassies worldwide by Commerce Department, State Department and other U.S. agencies’ professionals
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Overview

Through a series of production sharing agreements (PSAs) signed in the mid-1990s, Azerbaijan succeeded in attracting substantial foreign investment from major international oil companies (IOCs). In 1994, a consortium led by BP and the Azerbaijani government signed the landmark “Contract of the Century” for the development of the Azeri-Chirag-Deepwater Gunashli (ACG) oil field, which remains Azerbaijan’s primary source of oil for export. As of 2025, the ACG field still accounts for approximately 60–65 percent of the country’s oil production, although output has declined due to field maturation. The Baku-Tbilisi-Ceyhan (BTC) pipeline serves as the main export route for Azerbaijani oil. Exploration and development of new hydrocarbon prospects in Azerbaijan’s territory of the Caspian Sea are ongoing, with active projects including the Karabakh and Absheron fields. The State Oil Company of Azerbaijan Republic (SOCAR) retains equity stakes in all PSAs and has expanded its international footprint, acquiring interests in offshore fields such as Israel’s Tamar and the UAE’s SARB and Umm Lulu fields.

Azerbaijan’s 2025 state budget is based on an average oil price of $70 per barrel, reflecting a relatively optimistic assumption about oil revenues and highlighting the country’s reliance on hydrocarbon exports for fiscal stability. Azerbaijan is also a major natural gas producer. The BP-operated Shah Deniz field remains the country’s largest gas development project, supplying gas to Europe via the Southern Gas Corridor (SGC). The SGC comprises three interconnected pipelines: the South Caucasus Pipeline Expansion (SCPX), which runs from the Sangachal terminal near Baku through Georgia to Türkiye; the Trans Anatolian Pipeline (TANAP), which spans Türkiye from east to west; and the Trans Adriatic Pipeline (TAP), which carries gas from Greece through Albania and under the Adriatic Sea to Italy. As of 2025, the SGC delivers approximately 10 billion cubic meters per annum (bcma) to Türkiye, 10.5 bcma to Italy, and 1 bcma each to Greece and Bulgaria. In 2024, Azerbaijan’s total gas production reached 50.6 billion cubic meters, a 4.3 percent increase over the previous year.

Azerbaijan is actively pursuing renewable energy development with the goal of becoming a regional exporter of green electricity. The government has reaffirmed its target of generating 30 percent of its electricity from renewables by 2030. As of 2025, Azerbaijan has launched several utility-scale projects, including the 230 MW Garadagh solar plant and the 240 MW Shafag Solar Power Plant, currently under construction in the Jabrayil District. Azerbaijan’s offshore wind potential in the Caspian Sea is estimated at 157 GW, with signed agreements promising up to 22 GW of future capacity. However, progress has been uneven due to bureaucratic hurdles and limited private-sector involvement. Incentives for renewable energy investors include a 7-year VAT exemption on equipment and facilities, customs duty exemptions, and partial exemptions from land, property, and income taxes. 

To support its renewable energy expansion, state-owned electricity producer and grid operator AzerEnergy is developing large-scale energy storage and transmission projects across the country. These initiatives aim to strengthen Azerbaijan’s energy independence, enhance the reliability of the national grid, and facilitate the integration of solar and wind power. The projects include modern substations, high-voltage transmission lines, and advanced grid management systems, laying the foundation for a more flexible and sustainable energy network.

Leading Sub-sectors

Solar, wind, thermal energy, and associated consulting services in the energy sector all hold opportunities for commercial engagement from U.S. companies. 

Opportunities

Several key offshore oil and gas projects in Azerbaijan are in various stages of exploration or early development. The Absheron gas field, developed with TotalEnergies and SOCAR, is in active production under the Early Production Scheme, with a Final Investment Decision on a Phase 2 development expected soon. The first phase of the Umid-Babek gas field, operated by SOCAR, is also operational. The Shafag-Asiman gas field, operated by BP in partnership with SOCAR and TPAO, remains in the evaluation phase. In June 2025, BP expanded its Caspian portfolio by acquiring a 35 percent interest and the role of operator in the Karabakh oil field and the Ashrafi–Dan Ulduzu–Aypara (ADUA) area (SOCAR retains a 65 percent stake).

Azerbaijan’s increasing demand for petroleum is primarily driven by growth in the construction and transportation sectors. To meet this demand, the Heydar Aliyev Baku Oil Refinery is undergoing a large-scale modernization. The project, which began in 2022, aims to enhance production capacity, improve fuel quality, and reduce environmental impact. The three-phase project includes the construction of a bitumen plant, a gas-filling station, storage facilities for Euro 5-specification diesel, and a Euro 5-specification A-92/95/98 gasoline plant. Upon completion, gasoline production is projected to rise from 1.3 million tons to 2.2 million tons; diesel from 2.2 million tons to 2.9 million tons; and aviation kerosene from approximately 700,000 tons to 1 million tons. The first phase of modernization, focusing on fuel quality upgrades, was completed in 2024, enabling the production of Euro 5-compliant gasoline and diesel. The second phase, which includes the construction of a bitumen plant and gas-filling station, is currently underway and is expected to be completed by the end of 2025. The final phase, involving the construction of storage facilities and additional processing units, is scheduled for completion in 2026.

In 2024, energy products accounted for approximately 87 percent of Azerbaijan’s total exports. The country’s oil, gas, and related petroleum products were primarily exported to key international markets, including Italy, the Czech Republic, Croatia, India, Germany, Israel, Portugal, Romania, and the United Kingdom.

Green Energy Opportunities

Resources

State Oil Company of Azerbaijan (SOCAR)
Ministry of Energy of Azerbaijan
U.S. Energy Information Administration (EIA)
State Statistics Committee of Azerbaijan

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