Socar, Azerbaijan's state oil and gas company, has signed an exploration, development and production sharing agreement with Canada's Gran Tierra Energy for a large onshore block in the Guba-Caspian region, approximately 160 kilometres northwest of Baku. This marks the second such deal, following a similar agreement with Hungary's MOL Group in December for the Shamakhi-Gobustan region, as the government seeks to investigate the potential of unexplored onshore areas near major Caspian Sea producing fields operated by supermajors like BP and TotalEnergies.

Partnership and Project Structure

Under the agreement, Gran Tierra Energy will hold a 65% operating stake in the project, with Socar retaining the remaining 35% interest. The contract area, identified as Guba-Khazaryani, covers over 1600 square kilometres and includes a legacy 65-kilometre-long structure. This structure has a historical production of over 100 million barrels of oil and 200 billion cubic feet of natural gas, which Gran Tierra cites as evidence of the scale and quality of Azerbaijan's petroleum system.

Contract Terms and Work Commitments

The contract stipulates a five-year exploration and appraisal period, followed by a 25-year development period for any economic discoveries, with a potential five-year extension. The exploration period is divided into two phases:

1. The initial three-year phase includes commitments to acquire a gravity study, drill two wells, and acquire 250 square kilometres of 3D seismic.
2. The subsequent two-year phase carries further commitments to drill two additional wells and acquire another 250 square kilometres of 3D seismic.

Gran Tierra plans to begin an airborne gravity study in 2026, with seismic acquisition and drilling activities scheduled for 2027. The deal is pending ratification by Azerbaijan's parliament before it comes into force.

Strategic Context and Historical Significance

An energy consultant in Baku noted the deal could provide a definitive answer within two to three years on whether significant onshore oil and gas resources remain in Azerbaijan. This initiative builds on the country's long history as an oil pioneer, where industrial production began near Baku in 1846—predating the U.S. oil industry. By 1901, fields near Baku were producing more than half of the world's total oil supply.