Israel, Azerbaijan Step Up Alliance With Gas Exploration Deal

(Bloomberg) -- Azerbaijan will on Monday sign agreements to explore for natural gas in Israeli waters, highlighting a key strategic alliance between the two countries amid turbulence in the region.

A consortium of Azeri state company Socar, BP Plc and Israel’s NewMed Energy LP will get the right to explore in one offshore block, in a signing overseen by Azerbaijan Economy Minister Mikayil Jabbarov and Israeli Energy Minister Eli Cohen, according to the Israeli energy ministry. The agreement gives Socar another foothold in important Israeli assets after the company bought a 10% stake in the Tamar gas field earlier this year.

The deal comes at a time when Israel has been trying to deepen ties with Azerbaijan to help counter neighboring Iran. Israel and Azerbaijan are also dependent on each other for energy and defense equipment. Baku has maintained relations with Prime Minister Benjamin Netanyahu’s government as the war in the Middle East has pitted Israel against Iran and the militant groups it backs.

The Socar consortium won the exploration rights in October 2023, but the Israel-Hamas war that kicked off that month delayed the signing of the contract. The companies will now have three years to conduct seismic surveys in the block to study the possibility of the presence of gas reserves.      

Jabbarov’s visit to Jerusalem is the first for an Azerbaijani minister since the start of the war. Israel was the sixth-biggest buyer of oil from Azerbaijan last year, with sales totaling $713 million, according to a report in caliber.az, which cited data from the State Customs Committee. 

The new exploration licenses will be for the so-called Cluster I, an area covering some 1,700 square kilometers in the northern part of Israel’s economic waters. The area “has hardly been explored in the past in terms of natural resources,” the Israeli Energy Ministry said in a statement.

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