Azerbaijan’s proven crude oil reserves are estimated at 7 billion barrels in January 2009 by the Oil and Gas Journal. The country’s largest hydrocarbon basins are located offshore in the Caspian Sea, particularly the Azeri Chirag Guneshli (ACG) fields, which accounted for over 80 percent of Azerbaijan’s total oil output in 2008.

The State Oil Company of Azerbaijan Republic (SOCAR) is Azerbaijan's state-owned oil and natural gas company and is responsible for producing oil and natural gas in Azerbaijan, operating the country's two refineries, running the country's pipeline system, and managing the country's oil and natural gas imports and exports. Although the Ministry of Industry and Energy handles exports as well as exploration and production agreements with foreign companies, SOCAR is party to all of the international consortia developing oil and gas projects in Azerbaijan.

The Azerbaijan International Operating Company (AIOC) is a consortium of 10 petroleum companies that have signed extraction contracts with Azerbaijan. AIOC includes: British Petroleum (BP), Chevron, Devon Energy, StatoilHydro, Turkiye Petrolleri, Amerada Hess, ExxonMobil, Inpex, Itochu, and SOCAR. AIOC has made significant direct investments in the development of the ACG fields, as well as the construction of the South Caucasus Pipeline (SCP) and the Baku-Tbilisi-Ceyhan (BTC) pipelines. BP is the largest foreign investor and has been involved in Azerbaijan since 1992.

Oil production in Azerbaijan increased from 180,000 barrels per day (bbl/d) in 1997 to 875,000 bbl/d in 2008. Production climbed in late 2005 and in 2006 following the startup of the Azeri fields, amounting to about 207,000 bbl/d additional production in 2006 compared with 2005. In 2008 another 228,000 bbl/d leap in production followed the startup of the Guneshli field, expected to produce 320,000 bbl/d at peak. While production has been increasing, domestic consumption has been generally decreasing, from 203,000 bbl/d in 1992 to 128,000 bbl/d in 2008. This has led to a significant increase in oil exports.

The ACG fields are Azerbaijan's largest, located 62 miles east of Baku in the Caspian Sea. Total peak production capacity is expected to reach over 1 million bbl/d in 2009. The fields are operated by BP on behalf of AIOC. There are currently 5 offshore production platforms; a sixth, the Chirag Oil Project, is under construction and is expected to start up in 2013. This new platform will be used to drill new wells in the reservoir for enhanced recovery tying into the existing system. Chirag production is projected at 185,000 bbl/d at startup in the first half of 2010. The BP-led AIOC consortium and the Azeri government are expected to approve a $10 billion project to double output from the Chirag field by 2013. The new venture is expected to extend total Azeri Light oil production of 1 million bbl/d until 2019, from 2010-2012 under the current schedule.

Azerbaijan had estimated net oil exports in 2008 of 749,000 bbl/d, according to EIA, more than double 2005 exports. According to EIA, the United States imported more than 62,430 bbl/d between January and June 2009, compared with 44,505 bbl/d during the same period of 2008. Most of Azerbaijan's oil is exported via pipeline, but small amounts are shipped by truck and railway. During the period January-August 2009, Azeri sources reported that 16,240 bbl/d of oil products were exported by rail to the port of Batumi, Georgia on the Black Sea.

Azerbaijan has 3 major export pipelines:

The majority of oil exports pass through the BTC pipeline system, which runs 1,110 miles from the ACG fields in the Caspian Sea, via Georgia, to the Mediterranean port of Ceyhan, Turkey. From there the oil is shipped by tanker mainly to European markets, with Italy reportedly being the largest importer of Azeri crude in 2008 at about 40 percent of crude exported. The pipeline began exporting in July 2006; it is operated by BP, the largest shareholder, and owned by AIOC members. The capacity of the pipeline is 1 million bbl/d. It was reported that Azeri pipeline crude oil exports in 2008 were 653,300 bbl/d. The BTC pipeline is also used to export Kazakhstan oil, which travels by tanker across the Caspian to the pipeline head at Sangachal Terminal, near Baku. It was reported that Kazakh crude oil exports from the Tengiz field began in October 2008 at 350 bbl/d and had increased to 4,800 bbl/d by February 2009.

The 830-mile long, 100,00-bbl/d-capacity Baku-Novorossiysk pipeline runs from the Sangachal Terminal to Novorossiysk, Russia on the Black Sea. SOCAR operates the Azeri section and Transneft operates the Russian section. 2008 exports were estimated at 29,000 bbl/d by Argus FSU. In April 2009, SOCAR announced plans to nearly double exports to 50,000 bbl/d of oil in 2009 as the BTC is close to capacity because of production growth in the ACG oil fields as well as increasing throughput from Kazakhstan.

The Baku-Supsa pipeline has an estimated capacity of 145,000 bbl/d and runs 520 miles from Baku to Supsa, Georgia on the Black Sea. It is operated by BP and owned by AIOC members. The pipeline was shut down for repairs from October 2006 to August 2008, but due to safety concerns during the Russia-Georgia conflict it was not restarted until November 2008. Argus FSU reported that only 13,000 bbl/d were exported to Supsa in 2008. Azeri sources report that 55,000 bbl/d were exported through this pipeline during the period January-August 2009. The pipeline is used by ExxonMobil Company to export its share of oil from the ACG fields because ExxonMobil, although it is a participant in AIOC, is not a participant in the BTC pipeline.

On October 2, 2009 Azerbaijan and Kazakhstan signed a series of agreements to facilitate and increase exports of Kazakh oil via Azerbaijan. Reportedly some 100,000 bbl/d is moving currently via the BTC pipeline and by rail to Georgia's Black Sea ports and these routes will be expanded. SOCAR and Kazmunaigas also agreed to study the feasibility of a trans-Caspian pipeline.

Azerbaijan has a crude oil refining capacity of 399,000 bbl/d as of January 2009, according to the Oil and Gas Journal. Azeri crude oil is refined domestically at two refineries: the Baku refinery, with a capacity of 239,000 bbl/d, and the New Baku refinery, with a capacity of 160,000 bbl/d.