The two companies have signed a production sharing agreement (PSA) in this regard, which will be valid for 25 years.

Block D230 is contained in the North Absheron basin, and is located nearly 135km north-east of Baku. This previously unexplored block spans an area of around 3,200km2 is located in water depths of 400-600m with estimated reservoir depths of around 3,500m.

The PSA for the block, which was inked in London in the presence of UK Prime Minister Theresa May and Azerbaijan President Ilham Aliyev, comes into place nearly two years after the signing of the memorandum of understanding (MoU) between the parties for exploration of Block D230.

SOCAR president Rovnag Abdullayev said: “We have a long tradition of successful cooperation with BP. I believe that the synergies between modern upstream technology and unique historical experience, embodied in both companies, create a solid basis for our continued success.

“Being based on fair and equal conditions, today’s agreement will become an important milestone in the pursuit of the highest degree of efficiency in the joint development of the natural resources of Azerbaijan.”

Under the terms of the PSA, BP will be the operator during the exploration phase of the block with a stake of 50%, with SOCAR holding the remaining 50% stake.

BP group CEO Bob Dudley said: “This agreement underpins a new joint effort by SOCAR and BP to explore further Caspian opportunities in support of long-term production in Azerbaijan.

“We have now been operating in the region for more than 25 years and believe there is still significant oil and gas potential there.”

BP along with its partners signed its first PSA in Azerbaijan with SOCAR in 1994, covering the development of the Azeri, Chirag and Deepwater Gunashli (ACG) field.

The British oil and gas major alongside SOCAR and other partners has also been involved in the development of the Shah Deniz gas condensate field in the Azerbaijan portion of the Caspian Sea, which has been in production since 2006.

Currently, the second phase development of the field is going on under the $28bn Shah Deniz 2 expansion project, which is expected to commence production later this year.