Oil majors Exxon Mobil and BP are in disagreement over the terms of a key oil exploration agreement in Azerbaijan, unnamed sources in the Western oil industry have told Reuters.

The contract in question is the production sharing agreement (PSA) that a consortium of oil companies signed with the Azerbaijani government in 1994 for exploration at the Azeri-Chirag-Guneshli oil field, the country's largest and the source of three quarters of Azerbaijan's oil output. The PSA expires in 2024, but negotiations to renew it began as early as 2014. However, Exxon Mobil has refused to settle for the terms put forward by BP and the Azerbaijani government as it is seeking to maximise its revenues from the field in order to partially offset its losses resulting from low oil and gas prices in recent years.

Exxon is a minority stakeholder (8%) in the field, which is operated by BP. The British company holds a controlling share in the project of 35.8%. The consortium includes seven other companies - Azerbaijan's state-owned oil company Socar (11%), Chevron (11%), Turkey's TPAO, Norway's Statoil, Japan's Itochu and India's ONGC.

The field is believed to have total reserves of some 2bn barrels, 60% of which are recoverable. About a third of recoverable oil has been extracted to date, and the remainder would be spread out until 2040 or possibly 2060. The consortium has invested some $32bn in developing it.

Production at the field peaked at 820,000 barrels per day (bpd) in 2010, and has gradually fallen to some 600,000 bpd since as a result of decreased pressure at the wells, scheduled closures for maintenance work at some wells and several accidents.

Sources in Baku and the oil industry corroborated the allegations about Exxon Mobil, and added that the chequered relationship between the CEOs of the two oil majors has further hampered the progress in negotiations.