Turkmenistan and Azerbaijan have agreed to settle decades-long claims on a large oil and gas block in the Caspian Sea, with new plans for joint operations in the region.

The foreign ministers of the two countries signed a memorandum of understanding (MoU) in the Turkmen capital of Ashgabat on Thursday to consider joint exploration and development of the Dostluk acreage.

'Friendship' tract

Dostluk, translated as "friendship" in both Turkmen and Azeri languages, appears to be a new name that the two sides had given to a Caspian deep-water block previously known as Serdar in Turkmenistan and Kyapaz in Azerbaijan.

The block is located near the border between the Caspian maritime sectors of the two countries.

The precise definition of this border became a bone of contention between Turkmenistan and Azerbaijan soon after the break-up of the Soviet Union in 1991.

Both countries repeatedly clashed with each other over ownership of the block following their own interpretation of the maritime border.

Each side conducted or attempted to arrange the gathering of seismic data on the block, with the most recent conflict dating back to 2012.

Baku-based news agency Trend quoted a spokesperson for Azerbaijan’s state oil and gas producer Socar as saying that, based on earlier seismic data collected by Soviet-era geologists, the Dostluk block may be comparable to the Karabagh offshore field in terms of its potential hydrocarbon reserves.

The Karabagh field, which lies 120 kilometres to the east of Baku, is said to hold around 400 million barrels of oil equivalent in estimated reserves.

Relations thaw

According to a Turkmen government statement, both countries decided to join forces on the contested block following the visit of Turkmen President Gurbanguly Berdymukhamedov to Baku in March last year, as relations between the two countries had been gradually warming in the last several years.

This week's MoU is hoped to “create additional stimulus [for attraction] of large foreign investments in the project and development of economics of the two nations”, the statement said.

According to the Socar spokesperson, both countries will now proceed to agreeing commercial and technical terms for the joint exploration and development of the Dostluk block that “will most likely require the collection of new modern seismic data and the drilling of exploration wells”.

Azerbaijan is already a major transit point for Turkmenistan, with about 29 million barrels of Turkmen oil — or one third of the country’s total output — crossing the Caspian Sea each year to enter Baku–Tbilisi–Ceyhan trunkline to reach international markets.

(This article has been amended to correct the respective former names of the Dostluk block. Also, Shell has not been a partner in the Karabagh field.)