Hungarian player enters BP’s ACG field in Azerbaijan

Hungarian oil and gas company MOL has signed an agreement with Chevron to acquire its non-operated E&P and midstream interests in Azerbaijan for total consideration of $1.57 billion.  

The assets include a 9.57% stake in the Azeri-Chirag-Gunashli (ACG) oil field, and a 8.9% stake in the Baku-Tbilisi-Ceyhan (BTC) pipeline, which transports the crude to the Mediterranean port of Ceyhan.

MOL said on Monday that the transaction would have an effective date of January 1, 2019. Once completed, this transaction will make MOL the third largest field partner in ACG.

The supergiant ACG field is located in the Caspian Sea and is one of the largest offshore oil fields in the world, which started production in 1997.

It is worth mentioning that the next stage of development of the giant ACG field was sanctioned in April 2019. The investment decision followed an agreement with the Government of Azerbaijan to extend the life of the ACG field until 2049. The $6 billion development includes a new offshore platform and facilities designed to process up to 100,000 barrels of oil per day. The project is expected to achieve first production in 2023 and produce up to 300 million barrels over its lifetime.

Operated by BP and encompassing six offshore production platforms, ACG produced an average 584,000 barrels per day in 2018. The operator estimates total gross recoverable reserves to be c.3bn bbl of oil, following the license extension in September 2017 until 2049. Other partners in the project include SOCAR, Inpex, Equinor, ExxonMobil, TPAO, Itochu, and ONGC Videsh.

New chapter for MOL

The acquisition is in line with MOL’s strategy whereby enhanced sustainability and competitiveness of MOL’s E&P portfolio will add around 20 mboepd to net group production in the coming years, the company said.

The company also said that the transaction would be financed from available liquidity and would have no impact on MOL’s ambition to continue to increase base dividends in the coming years.

The transaction is subject to government and regulatory approvals and is expected to close in 2Q 2020. MOL expects the group’s pro-forma total hydrocarbon 2P reserves to increase to around 360-380mmboe by the end of 2020.

Zsolt Hernádi, MOL Group’s Chairman-CEO, said: “This major $1.57bn transaction is a significant milestone in building our international E&P portfolio, in one of our core regions, the CIS, where we will team up with world-class partners. Following the closing of the deal, around half of our production will come from outside the CEE region, giving us a healthy balance.”

Berislav Gaso, MOL Group, Executive Vice President for Upstream, said: “The ACG deal marks the beginning of a new chapter in MOL’s E&P story as we take a significant step to deliver on our promise of inorganic reserve replacement. By completing the ACG acquisition we are well positioned to preserve the excellent cash-flow generation ability of MOL’s E&P business for an extended period.”