3.125
%
Uncertain
64
mm boe
44
%
While SOCAR continues to dominate, Azerbaijan keeps opening its hydrocarbon industry, creating opportunities for smaller companies, particularly in rehabilitating old fields. The PSC regime has proven stable, and the August 2025 peace framework with Armenia materially reduces conflict risk, although relations with Russia have deteriorated. Outlook amended from Uncertain because the peace framework removes the main source of uncertainty and PSC terms remain stable. Outlook: Neutral. Risk premia unchanged at 3.125%.
October 7, 2026
Caspian
mm bbl
bcf
Southwestern Asia, bordering the Caspian Sea, between Iran and Russia, with a small European portion north of the Caucasus range.
PSC/PSA
Azerbaijan’s fiscal regime consists of a combination of production sharing agreements (PSAs) and host government agreements (HGAs). In addition, the Law on Application of Special Economic Regime for Export-Oriented Oil and Gas Operations (the Law) came into force on 17 April 2009. The Law applies to export-oriented oil and gas operations carried out by contractors, as well as by subcontractors, as defined in the Law.
President Ilham Aliyev's government is firmly entrenched, having retaken Nagorno-Karabakh in 2023. Relations with Armenia moved towards normalisation after the August 2025 peace framework, but ties with Russia have become strained. US and UK guidance cite a state-dominated economy, corruption, weak courts and restricted civil liberties, offset by stable production sharing agreements (PSAs) with international arbitration. The EIA notes declining oil output from the BP-operated Azeri–Chirag–Gunashli complex, while gas from Shah Deniz via the Southern Gas Corridor has made Azerbaijan a strategic supplier to Europe under the EU's 2022 memorandum of understanding (MoU) to double supply.
Source: ESRI, Heritage Index, HMG Foreign & Commonwealth Office, US Department of State, International Trade Administration, International Law Review, Ernst & Young, Wood Makenzie & OGA data.
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