British oil major BP and Azerbaijani national oil company Socar on September 14 signed a contract extending their production sharing deal for Azerbaijan’s biggest cluster of oil fields until 2050. It could mean investments amounting to up to $40bn being put into development and production over the next 32 years.

The new contract provides a one-off bonus of $3.6bn for the government coffers, which will come as a badly needed gain given that Azerbaijan has for three years struggled with much reduced global oil prices and is battling to emerge from recession.

Under the new production sharing deal, still to be ratified by the parliament in Baku, Socar will increase its stake to 25% from 11.65%, while BP, which will remain the operator, will see its stake fall to 30.37% from 35.8%. The existing deal, signed in 1994 and instrumental in Azerbaijan’s economic development following the collapse of the Soviet Union is due to expire in 2024.

Under the agreement, a BP-led consortium and Socar commit to continue developing the giant Azeri-Chirag-Guneshli (ACG) offshore fields, the largest in the part of the Caspian basin that comes under Azerbaijan.

As well as BP and Socar, the consortium shareholders include Chevron, Inpex, Statoil, ExxonMobil , TPAO, Itochu and ONGC Videsh.

The oil fields provide around three-quarters of Azerbaijan’s oil output, at about 585,000 b/d. ““ACG production may now be below 600,000 barrels per day, but there are still billions of barrels to recover and billions of dollars to invest," Wood Mackenzie analyst Laura Bennie said in a note emailed to bne IntelliNews.

“Attention will now turn to a brand-new production platform [Azeri Central East], which will be commissioned in the 2020s,” she added.

The office of Azerbaijani President Ilham Aliyev said the remaining ACG oil reserves amount to around 500mn tonnes.