Iran is the only littoral state in the Caspian Sea that does not extract oil or gas, unlike Russia, Azerbaijan, and others, which have invested over $160 billion in Caspian fields.
All littoral states, except Iran, are aiming to increase oil and gas production from these fields in 2024. They collectively produced over 1.2 million barrels per day of oil and 50 billion cubic meters per year of gas from these fields in 2023.
BP’s vice president for the Middle East and Caspian communications and external affairs told Iran International that it plans to drill 24 wells in the Azerbaijani section of Caspian Sea in 2024, with one already nearing completion.
Bakhtiyar Aslanbayli added that the BP-led consortium is also preparing to launch a new platform in Azeri-Chirag-Guneshli (ACG) oil block. It also plans to drill a deeper well (4,200 meters) in ACG’s gas layer in late 2024 to start producing the dry gas from this field in the first quarter of 2025.
Iran remains the only Caspian littoral country that does not produce hydrocarbons from the sea. Despite attempts in the past, including seismic research and drilling wells, Iran has faced technical challenges and setbacks. The country's section of the Caspian Sea, with depths of up to 1,000 meters, presents significant technical and financial hurdles for exploration and development.
BP delivered 2 billion cubic meters (bcm) of associated gas from this oil block to Azerbaijan in 2023, but for first time it is preparing to produce dry gas from its deeper layer as well.
BP-led consortiums invested more than $5.1 billion in Azerbaijan’s offshore Shah Deniz gas field and ACG. These fields share more than 95% of the country’s oil and gas production.
French TotalEnergies also inaugurated another offshore gas field, Absheron, for Azerbaijan in July 2023 with initial 1.7 bcm/yr of gas and 12,000 b/d of ultra-light oil, called gas condensate. Azerbaijan’s state-run Socar and TotalEnergies have invested $1 billion in this project and plan to increase investments to quadruple the prodcution level by 2026.
Socar itself drilled 17,000 meters of oil and gas wells in other fields during 2023 as well. Azerbaijan produced 612,000 b/d of oil and 48 bcm of gas in 2023, almost totally from Caspian fields. It has absorbed more than $95 billion foreign investment in its Caspian oil and gas projects during 1996 to 2023.
Ilham Shaban, the director of Baku-based Caspian Oil Research Center told Iran International that Kazakhstan produced 407,000 b/d of oil and 1 bcm of gas from offshore Kashagan field in 2023. Italian Eni, the operator of this field, is preparing to start drilling in offshore Abay block, southwest of Kashagan in 2024.
Eni-led consortium has invested $60 billion in Kashagan, the biggest oil reservoir in Caspian Sea, as of now.
Qatari UCC Holding recently signed an $11 billion contract with Kazakhstan, including the construction of two gas processing plants for Kashagan with a capacity of 3.5 billion cubic meters per year. Additionally, Dragon Oil from the UAE, the only operating company in Turkmenistan’s offshore fields, plans to boost its oil production from Turkmen offshore fields to 100,000 barrels per day by early 2026, having invested around $6 billion in the projects.
Dragon Oil is currently producing 60,000 b/d of oil from Turkmen offshore fields and eyes boosting this volume to 100,000 b/d by early 2026. It has invested about $6 billion in Turkmen offshore oil and gas projects as of now.
In the Russian side of the Caspian, Lukoil has inaugurated Valery Grayfer field in 2023 after operating Korchagin and Filanovsky offshore fields during recent years. It produced about 150,000 bpd of oil in 2023 from Caspian fields and plans to start development of Khazri field in 2024. Lukoil has discovered 11 oil and gas fields in the Russian section of Caspian Sea.
Iran Still Waits
Iran conducted drillings in its shallow waters during the Soviet era and in 1990s without any result.
Iran has carried out seismic tests in 4000 square kilometers of the Caspian Sea at blocks 6,7,8 and 21 from 2003 to 2005, but the research vessel Pejwak caught fire and burned in 2005 and the exploration operations stopped.
After that Iran started to drill three wells in some blocks by its Amir Kabir drilling rig. However, its crane crashed in 2015 and now it is idle in Iranian waters.
After signing the JCPOA nuclear deal in 2014, Iran initiated negotiations with several international companies for Caspian projects, but no concrete results were achieved. With only 0.5 billion barrels of proven and probable reserves in the Caspian Sea, according to the US Energy Information Administration, Iran's upstream activity in the region remains limited. Despite claims of discovering a gas field in 2012, Iran's exploration and development efforts in the deep waters of the Caspian Sea face substantial challenges without foreign investment and expertise.