Azerbaijan will demand mandatory production cuts from ACG's large oil fields

The Azerbaijani government has demanded that the ACG project, led by BP, must cut production sharply for the first time from May, as Azerbaijan will fulfill its commitments
under the global production reduction agreement, Reuters reported.

Previously, oil majors trading large production-sharing in parts of Azerbaijan and Kazakhstan were not subject to any production decisions imposed by the government, as such foreign investment was highly recognized
.

However, due to the severity of the coronavirus-induced oil crisis, it is unlikely that Azerbaijan will cut production without imposing restrictions on BP and its partner shareholders, including MOL in Hungary, ExxonMobil in the United States, Equinor in Norway and Inpex
in Japan.

BP, representatives of major shareholders, and Azerbaijan's energy ministry declined to comment
.

OPEC members Nigeria, Angola and Iraq, as well as non-members such as Kazakhstan and Russia, will closely monitor this development
.

Azerbaijan is not a member of the Organization of the Petroleum Exporting Countries (OPEC) but part of
the broader organization OPEC+.

Following Russia and Kazakhstan, Azerbaijan needs to reduce its oil production by a total of 164,000 b/d from May to 554,000 b/d
from May under the OPEC+ deal signed this month.

Among them, the huge offshore ACG field in the Caspian Sea will be required to cut about 75,000-80,000 b/d
from May, the sources told Reuters.

Reuters calculations show that this accounts for about 15 percent
of ACG production.
The ACG consortium reported average production of 535,000 b/d last year and plans to maintain that level
in 2020.

One of the four sources said: "Proportionally, onshore fields will cut more because they cost more
.
”

The ACG production cuts will lead to a decline in oil exports through Georgia and Turkey through the Baku-Tbilisi-Ceyhan pipeline, Azerbaijan's main oil export route
, the sources said.