Chevron’s Sells Assets of Azerbaijan Oil Field for $1.57bn
Chevron CVX sold its Azerbaijan oil assets to energy company MOL Hungarian Oil and Gas Plc in a $1.57-billion deal.
The deal involves the sale of a 9.57% interest in the Azeri-Chirag-Deepwater Gunashli (“ACG”) oil fields (including interests in the Western Export Route Pipeline) and 8.9% interest in the Baku-Tbilisi-Ceyhan (“BTC”) oil pipeline located in Azerbaijan. The deal provides Chevron with the much-needed cash at a time when oil is facing a historic slump.
ACG churned out 20,000 barrels of oil equivalent per day last year. The sale is an integral part of Chevron’s disinvestment target of generating $5 billion to $10 billion (before tax proceeds) between 2018 and 2020.
The original ACG project deal was struck in 1994 to develop Azerbaijan’s oil industry soon after the collapse of the Soviet Union. It was backed by five major U.S. companies, namely ExxonMobil XOM, Amoco, Unocal, Pennzoil and McDermott and was considered “the contract of the century” by Azerbaijan and partners. The venture also drew considerable support from the U.S. government.
The field’s large reserves and hopes of major discoveries were expected to aid Europe diversify from Russian oil and gas. However, such beliefs faded after no large discoveries were made. Eventually, most U.S. companies either abandoned the project or were taken over by rivals, while support from the United States receded as they started redirecting their focus on the development of domestic shale fields.
Earlier, MOL was supposed to acquire both Chevron and ExxonMobil’s stakes in the ACG project but later opted to proceed only with the former. Meanwhile, ExxonMobil is still seeking a suitable buyer for its 6.8% interest in ACG.
The purchase is expected to transform MOL’s upstream segment into an international business and strengthen its position in the core CIS region as half of the company’s upstream production would now come from outside Central and Eastern Europe.