Consulting Excellence for Azerbaijan’s Oil And Gas Industry

By Elnur Mammadov

Azeri Observer Contributor

Elnur Mammadov is the Managing Director of UTB. He has over 20 years of experience in the consulting industry, having held senior roles in tax and legal advisory at a leading international professional services firm. His work has extended beyond Azerbaijan, covering the wider Eurasia region with project experience in more than 50 countries.

Elnur Mammadov is the Managing Director of UTB. He has over 20 years of experience in the consulting industry, having held senior roles in tax and legal advisory at a leading international professional services firm. His work has extended beyond Azerbaijan, covering the wider Eurasia region with project experience in more than 50 countries.

As Azerbaijan’s business and energy markets continue to expand, the need for accurate, practical, and industry-specific consulting services for oil and gas companies regulated under Profit Share Agreements (PSAs) has become increasingly critical.

PSAs are often complex and multifaceted. While each case may present unique challenges, the primary objective remains constant: to deliver workable solutions and provide reliable support. This solution-oriented approach lies at the core of what distinguishes Unified Tax & Technology Businesses (UTB), a relatively young consulting firm that brings together a team of highly experienced professionals.

Although UTB entered the Azerbaijani consulting market only two years ago, the firm has already demonstrated its value through a professional, efficient, and detail-oriented approach, earning the trust of PSA-related businesses operating in demanding regulatory environments.

UNDERSTANDING PSAS: ORIGINS AND SIGNIFICANCE

Operating under PSA frameworks requires a deep understanding of field-specific agreements and protocols, as taxes and legal treatment often depends on the precise wording of each document. To appreciate the complexity of these arrangements, it is essential to revisit the origins of PSA practice in Azerbaijan.

Commonly referred to as “Profit Sharing Agreements,” PSAs in Azerbaijan trace their roots to the landmark “Contract of the Century,” signed on 20 September 1994. This strategic initiative, led by national leader Heydar Aliyev, marked a turning point for Azerbaijan’s integration into the global energy economy. Beginning with the Azeri-Chirag-Gunashli (ACG) oil fields, the framework later expanded to encompass the Shah Deniz gas project, the Baku–Tbilisi–Ceyhan (BTC) pipeline, and the Southern Gas Corridor (SGC).
The significance of this model lies in its ability to unite major international energy companies within a single jurisdiction, driving economic growth through the large-scale production and export of oil and gas.

COMPLIANCE AS THE REAL CHALLENGE

While the historical importance of these projects is well recognized, the real operational challenge lies in ensuring correct compliance with tax, customs, and regulatory obligations under local legislation. Each PSA is supported by separate agreements between operators, contractors, and subcontractors, along with detailed protocols that define applicable tax treatments, exemptions, and reporting rules; these cover areas such as operational expenses and local and foreign workforce remuneration.

At first glance, these documents may appear standardized. However, complexity emerges during implementation, when theoretical provisions must be applied in real-world operations. This is precisely where the role of professional consulting firms becomes essential. Accurate interpretation, tailored advice, and proper structuring of tax reporting can prevent costly errors and compliance risks.

IMPORTANCE OF EARLY ADVISORY SUPPORT

Best practice demonstrates that consulting support should be engaged before project commencement. Contractors and subcontractors must plan budgets carefully, anticipate compliance risks, structure workforce arrangements, and clearly communicate taxable and non-taxable components of employee compensation.
In practice, many of the most significant challenges arise from a legal misinterpretation of PSA wording or related protocols, often resulting in disputes or delays with tax and customs authorities. This risk is particularly evident in the process of obtaining tax and customs exemption certificates, especially for subcontractors. Inadequate documentation or misaligned contractual interpretations frequently lead to
customs clearance delays, idle equipment, increased storage costs, operational setbacks, and financial penalties. Accordingly, UTB strongly recommends conducting a comprehensive legal and tax review at the earliest stage, covering the PSA, applicable protocols, master contracts, and any subsequent amendments. A proactive approach significantly reduces operational disruption and financial exposure.

Unified Tax & Technology Businesses (UTB) – a dynamic young consulting firm uniting a team of highly experienced professionals.

LOOKING AHEAD: NEW FIELDS, NEW FRAMEWORKS

Azerbaijan’s continued economic development is reflected in the launch of new upstream projects. Fields such as Umid and Karabakh, developed after the country regained independence, demonstrate the evolving nature of the energy sector. Notably, the Umid field operates under a Risk Sharing Agreement (RSA)–a framework that requires particularly careful analysis and precise application during reporting and
compliance processes.

As Azerbaijan’s energy landscape continues to diversify, specialized consulting expertise remains indispensable for ensuring that PSA and RSA operations are executed smoothly, compliantly, and efficiently – turning regulatory complexity into a managed and predictable business process.

HOW SHOULD CONSULTANTS SUPPORT OIL AND GAS (PSA) COMPANIES?

Supporting companies operating in the oil and gas sector under Production Sharing Agreements requires a level of expertise that goes beyond standard consulting practices. The complexity of PSA frameworks-combined with field-specific protocols, regulatory exemptions, and cross-border operations–creates challenges that demand a highly specialized and practical approach.

In this context, the role of a consultant is not limited to citing provisions of legislation or referencing contractual clauses. Effective consulting means fully understanding the structure of the relevant PSA, its protocols, and the operational realities of the project. Consultants must be able to assess how legal and tax rules apply in practice, anticipate risks, and guide companies toward compliant and efficient solutions.

Most importantly, consultants should approach each case from the client’s perspective, recognizing commercial pressures, operational timelines, and cost implications. By combining technical knowledge with a solution-driven mindset, consultants can help PSA companies navigate regulatory complexity, avoid disruptions, and achieve sustainable compliance while maintaining business continuity.

In essence, the role of consultants should extend beyond providing advice. It should be about delivering the highest level of support, demonstrating genuine commitment, and offering practical, solution-driven guidance. True consulting means not only understanding the issue but also caring about the outcome and taking responsibility for helping clients move forward.

Equally important is recognizing the privilege of contributing to a vital segment of Azerbaijan’s economy. This sense of responsibility and honor should serve as a constant source of motivation, driving consultants to perform at the highest standards and to support sustainable growth across
the industry.