Azerbaijan’s draft state budget projects a decline in both gas and condensate production at the Shah Deniz field in 2027, along with a drop in profit tax revenue from the project.
According to state budget forecasts, output at the Shah Deniz field is set to decline in 2027. Condensate production is expected to fall by 0.5 million barrels (1.7%) from the 2026 forecast to around 29.8 million barrels, while natural gas output is projected to drop by 0.2 billion cubic meters (0.7%) to 26.7 billion cubic meters.
Profit tax revenue from the project is forecast at 1.42 billion manats ($835.3 million) for 2027, down 180 million manats ($105.9 million), or 11.3%, from the 2026 forecast. The figure is also 840.3 million manats ($494.3 million), or 37.2%, below the profit tax actually collected in 2025.
Budget documents attribute the decline in tax revenue to two factors: falling production volumes and a more conservative approach to gas price assumptions. The gas price assumed for European exchanges in 2027 is set $30 (6.8%) lower than the 2026 figure.
Decline also forecast for 2026
Under 2026 budget calculations, condensate production at Shah Deniz is expected to reach 30.3 million barrels and gas output 26.9 billion cubic meters. That marks a decline from 2025 of 3.3 million barrels (10.4%) in condensate and 0.6 billion cubic meters (2.2%) in gas. The documents note that a major factor behind the drop in tax revenue for 2026 is lower European gas prices, with the assumed price $73.8 (15.3%) below the previous year’s level.
Actual figures for the first nine months of 2026 confirm the trend is already underway. During that period, the Shah Deniz Alpha and Shah Deniz Bravo platforms together produced around 20 billion standard cubic meters of gas and 21 million barrels of condensate. That represents a year-on-year decline of 1 billion cubic meters (5%) in gas and 3 million barrels (12.5%) in condensate compared with the same period of 2025.
The combined production capacity of the Shah Deniz facilities currently stands at around 79 million standard cubic meters per day, or roughly 28.8 billion standard cubic meters annually.
Background on the project
Located about 70 kilometers southeast of Baku in Azerbaijan’s sector of the Caspian Sea, Shah Deniz is one of the country’s main gas and condensate fields. The agreement on exploration, development and production sharing for the field was signed on June 4, 1996, and ratified on October 17 of that year. The field was discovered in 1999.
Supplementary agreements signed in Baku on December 17, 2013, extended the production-sharing agreement by ten years, pushing its term from 2036 to 2046. Project participants include bp (29.99%, operator), Lukoil (19.99%), Türkiye’s TPAO (19%), the Southern Gas Corridor company (16.02%), NIKO (10%) and Hungary’s MVM (5%).
