Exxon and BP Go Head to Head for ‘Oil Contract of the Century'

As two of the oil and gas industry’s most formidable giants, Exxon and BP both boast serious buying power. But what happens when the two set their sights on the same venture? This scenario is currently unfolding, as ExxonMobil and British Petroleum fight it out for what’s been described as the “contract of the century.”

At present, BP operates Azeri-Chigar-Guneshi, a set of fields located in the heart of the Caspian Sea. It’s a hugely lucrative region for the company, and contributes to one tenth of the firm’s total global output. According to sources at Reuters, the British owned company has just come to a renewal agreement with the Azeri government regarding terms for a follow-up 30-year contract. While the existing deal between BP and Azeri doesn’t expire for another eight years, its common industry practice for firms to secure ongoing access long before renewal dates elapse.

Fighting it out for a slice of the $100 billion ‘ACG’ pie

Understandably, BP would prefer to retain exclusive access to its fields. Yet in a bid to heighten its presence in the ACG region, Exxon is now after a slice of the $100 billion region. Currently, the American multinational oil and gas corporation sources just 1% of its hydrocarbon output from its stakes in the ACG region. If the firm gets its way, opportunities to expand on this figure will no doubt materialise.

With the two companies now in a deadlock, tensions between BP CEO Bob Dudley and Exxon CEO Rex Tillerson are mounting.

“There have been numerous attempts to find a breakthrough, with BP and Azerbaijan agreeing new terms but Exxon rejecting them time and time again,” reveals a source with exclusive insight into the negotiations process. “It has been going on for almost two years, with Exxon insisting on better terms.”

A win-win for Azerbaijan

For Azerbaijan, interest from oil and gas goliaths has played a keynote role in helping the nation recover from the collapse of the Soviet Union. Over the past two decades the Azeri government has been leveraging its energy wealth, and positioned itself as a steady European energy provider.

Whichever way the Azeri government swings, there’s no denying that competition between BP and Exxon will only serve to amplify contract terms, and ensure Azerbaijan secures the best possible deal on its coveted ACG fields.

While Exxon and BP are vying for rights to extract oil from the Azeri-Chigar-Guneshi fields, experts assert that the focus could soon shift to green energy. ‘Can fossil fuels and green energy work hand-in-hand?’ offers interesting insight into the concept, with commentary from Professor Dr. Gioia Falcone, Head of the Oil and Gas Engineering Centre at Cranfield University.