Baku-Ashgabat agreement on Caspian oil field after 30 years of conflict

The Republic of Azerbaijan and Turkmenistan agreed to develop the Serdar/Kapaz oil field, after 30 years of dispute.

The most significant dispute between Baku and Ashgabat’s governments over the Caspian Sea’s legal regime was the ownership of the square. So far, Azerbaijan, Russia and Kazakhstan have signed bilateral and trilateral agreements on the Caspian Sea division. Still, the dispute over the Kapaz oil field has prevented Turkmenistan from signing any contract.

Iran does not recognize the agreements and says the Caspian Sea division should be done with all coastal states’ consent.

Simultaneously, with the signing of the agreement by the two countries’ foreign ministers, Azerbaijan President Ilham Aliyev announced in a joint video conference with his Turkmen counterpart Gurbanguly Berdymukhamedov that the oil field would be renamed. “Dostluq”, its new name, which means friendship, will be a symbol of friendship between the two countries.

The field was discovered in 1986 and had reserves of about 50 million tons (about 350 million barrels) valued at about $35 billion to $40 billion.

Dostluq field also contains 100 billion cubic meters of gas.

Azerbaijan started exporting gas to Europe

Most of Turkmenistan’s oil production is currently flowing into international markets through Azerbaijan. The Baku government hopes that the joint development of the Dostluq field will pave the way for Turkmen gas exports through Azerbaijan.

Ilham Shaban, the Caspian Oil Studies Center director, said that the Dostluq oil field is located 20 km from the Karabagh oil field in Azerbaijan. Azerbaijan, SOCAR, is developing it and oil and gas production will start from this field in the next three years.

He added that the Dostluq and Karabagh fields are located very close to the Azeri-Chirag-Gunashli oil block in the Caspian Sea. The necessary infrastructure is ready to transfer oil and gas produced from this field to Baku.

The block accounts for more than three-quarters of Azerbaijan’s total oil production. Its pipelines extend to Baku and from there to the Turkish port of Ceyhan.

Azerbaijan also started exporting gas to Europe, and there is a 3,500-kilometer pipeline from the Caspian Sea to Italy to transport gas.

Baku and Tehran to negotiate over the disputed oil field

Iranian Foreign Minister Mohammad Javad Zarif is scheduled to travel to Baku, Armenia, Georgia and Russia next week.

Before the US sanctions, Iran and Azerbaijan had agreed to develop Iran’s disputed Alborz oil field jointly. Baku and Tehran also disputed ownership of the territory for three decades.

Negotiations over the field’s development came to a halt after the US sanctions. Its development required foreign companies and capital entry, which could not be achieved under the sanctions.