Azerbaijan

Investment & Operational Criteria

Key Indicators

Risk Premia

3.125

%

Outlook

Uncertain

Rating

C|3U|§

Ranking

95

Reserves (1P)

Total

mm boe

Oil

40

%

Summary

While state companies continue to dominate oil & gas, the country continues to open its hydrocarbon industry up, creating opportunities for smaller companies, especially in the rehabilitation of old fields. The PSC regime has proven to be stable and a key benefit for attracting investment, and is likely to continue to flourish.

Updated

May 28, 2021

Country Basics

Region

Caspian

Reserves (1P)

Oil

mm bbl

Gas

bcf

Location

AzerbaijanAzerbaijan

Southwestern Asia, bordering the Caspian Sea, between Iran and Russia, with a small European portion north of the Caucasus range.

Outline

Tax Regime
Type

PSC/PSA

Tax Regime
Notes

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.

Investment & 
Operational
Climate

Since 2017, the inflation rate has stabilised and stood at 2.6% in 2019. The double devaluations of 2015 hit the banking sector hard. Eleven of 42 banks closed since, while some banks continued to struggle with high levels of non-performing loans. Since April 2020, the Central Bank revoked the licenses of four banks and overall, the number of banks fell to 26, and there are plans to privatise the largest state owned bank. The dollarisation level of deposits remains high (62% in 2019). The country had 2.2% growth in 2019, which is expected to decelerate to -3% in 2020, according to the World Bank. Over the medium term, GDP growth will remain largely dependent on developments in the oil and gas sectors. The 2020 drop in the oil price has reinvigorated the government’s attempts at structural reforms and trying to revive the non-oil sector.

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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