Currently more than 25 production sharing agreements (PSA) have been signed in Azerbaijan with the foreign companies. The gross investments on the projects are estimate4d at more than $25bln. The largest contract was signed in 1994 on development and exploration of block of Azeri-Chirag-Guneshli fields. The investments for the projects total $20bln. Later, other contracts were signed at small amounts. Part of them have already been closed due to failure of the foreign companies to find commercially attractive volumes of hydrocarbons. However, several of them return due to high oil prices in the world markets.
Azeri-Chirag-Guneshli
The Azeri-Chirag-Guneshli PSA was signed in September 1994. The agreement provides for the development of the contract area within 30 years. Production in the Chirag field commenced in 1997, on Central Azeri at the beginning of 2005, West Azeri at the beginning of 2006, and East Azeri at the end of 2006. The production from the Deepwater Gunashli field is scheduled for mid-2008. The recoverable reserves in the block are estimated at 1bln barrels.
In 2007 Azerbaijan International Operating Company produced 33mln tons of Azeri Light oil against 20mln tons in 2006 in the contracted area. In 2007 the oil production on Chirag field made up 6.3mln tons as compared to 7mln tons in 2006. Some 26.6mln tons of oil was produced on Azeri field in 2007 against 16.2mln tons in 2006.
Karabakh
The contract was signed on 10 November 1995. The project has already been closed.
Shah Deniz
Other large-scale project which works according to PSA is the development of gas-condensate field Shah Deniz. Shah Deniz is the gigantic gas field with recoverable reserves of 1trln cu.m of gas. Shah Deniz field is located in 70km west-east from Baku and the depth of water reaches 500m here. The length of the contracted are is 30km and width - 12km. Already in 1980 SOCAR carried out independent exploration drillings in the northern part of the field. During that period, two appraisal wells were drilled which yielded no results.
The contract on development of off-shore Shah Deniz field was signed on 4 June 1996. Gas production in the field was launched in December 2006. Presently, gas is transported to Georgia and Turkey via the South-Caucasus gas pipeline. Azerbaijan has plans to export gas to Europe via Nabucco pipeline, which will be constructed by 2013. Azerbaijan also purchases gas.
Some 3.2bln cu m of gas was produced ion Shah Deniz in 2007. Four wells operate in the field with daily production of more than 20mln cu.m of gas. Drilling of two more wells is expected to be completed by the middle of 2008. As a result, the daily production will increase up to 30mln cu.m of gas.
The operator of the project is BP.
Afshari-Dan Ulduzu
The contract was signed on 14 December 1996. The project was closed due to failure to discover commercially attractive volumes of hydrocarbons.
Lenkaran-Talish-Denuiz
The contract was signed on 13 January 1997. The project was closed due to failure to discover commercially attractive volumes of hydrocarbons.
Yalama
The contract was signed on 3 June 1997. Block Yalama (D-222) is the part of the largest structure in north-east part of Caspian and is located in equal parts in the Azerbaijani and Russian sections of the Caspian Sea in 30km on offshore distance. The depth of water around Yalama differs between 80 and 700 m. The probability of discovery of hydrocarbon reserves is highly assessed. According to the agreement, it needs to drill at least two wells on Yalama.
Azerbaijan and Russia has resolved the status of Caspian for long. Therefore, this issue does not present obstacles for the realization of the project. The operator of the project is Russian LUKOIL Company which currently prepares to drill the second exploration well on Yalama with Heydar Aliyev rig which belongs to Danish Maersk Company.
Absheron
The contract was signed on 1 August 1997. The investments supposed to be allocated for the realization of the project total $3-4bln.
In 1990s French Total, American ChevronTexaco and State Oil Company of Azerbaijan signed a production sharing agreement on development of offshore perspective structure Apsheron. However, the first exploration wells did not discover commercially attractive volumes of hydrocarbons and the foreign partners refused to develop it. In 2007 Total and SOCAR signed memorandum on holding talks on joint development of this structure. It is clear that the sides are going to sign a PSA, but it will deal with gas because the geologists forecast large reserves of recoverable gas reserves on the field.
Currently the project has been closed due to failure to discover commercially attractive volumes of hydrocarbons.
The prospective structure Absheron (former 'Zeynalabdun Tagiyev') was opened by the Azerbaijani geologists in 1960. Absheron is located in 40km south-west from contracted block Azeri-Chirag-Guneshli and covers nearly 160 miles.
Nakhchivan
The contract was signed on 1 August 1997. Exxon Azerbaijan Oрerating Comрany (EAOC) also could not discover enough volume of hydrocarbons in this structure.
The depth of the water in Nakhchivan structure oscillates between 100 and 500m. The structure, which is located in 100 km south from Baku and 50km south from gas-condensate field of Bulla Deniz, was discovered in 1960. The validity of the contract is 25 years with a possibility of prolongation for five years.
Oguz
The contract was signed on 1 August 1997. The project was closed due to failure to discover commercially attractive volumes of hydrocarbons.
Kurdashi
The contract was signed on 2 June 1998. The project was closed due to failure to discover commercially attractive volumes of hydrocarbons.
South-West Gobustan
The contract was signed on 2 June 1998. Gobustan Operating Company (GOC) develops South-West Gobustan according to PSA signed with SOCAR. Some 80% in GOC belongs to Commonwealth Gobustan Limited and 20% to SOCAR.
South-West Gobustan, which is located in 50-70km south and south-west from Baku, includes 15 fields and undeveloped structures: Shikhzagirli, Sheytanud, Burgut, Donguzdug, Nardaran, Ilkhiji, West Hajivali, Sundi, South Hajivali, Turgay, Kanizadag, West Duvanni, Solakhay and Dashgil.
Generally there are 137 exploration wells and 250 shadow bedding wells which were drilled during the Soviet Union. The Company has selected 60-70 wells from the first category which are available 'candidates' for oil production.
In 2007 3,600 tons of oil were produced in this onshore field, 31% more than 2006.
Araz-Alov-Sharg
After difference appeared between Azerbaijan and Iran in July 2001, the development project of perspective structure Araz-Alov-Sharg was frozen.
At that time, BMC ship of Iran approached Azerbaijani ship Geofizik-3, which was carrying out geological-exploration works, and in an ultimatum manner, required the captain of the Azerbaijani ship to leave Alov block and go away in distance of 5 miles towards north. The Iranian side stated that if its requirement is not fulfilled, it will use all possible measures and means.
The investments for the project total nearly $4bln. Araz structure is located in 125km from the southern shore of Azerbaijani section of Caspian. The depth of sea is 650-700m, width - 6km. Depth of bedding of productive layers is 3500-4000m and depth of bedding of hydrocarbons - 5200- 6000 m.
Alov structure is located in 135km from the southern shore of Azerbaijani section of Caspian. The depth of sea is 600-650m. The structure was opened in 1962. The length is 14km and width -5km. The depth of bedding of productive layers is 3500-4000m and depth of bedding of hydrocarbons - 5200- 6500 m.
Sharg structure is located in 132km from the southern shore of Azerbaijani section of Caspian. The depth of sea is 450-550m. The structure was opened in 1961. The length is 23km and width -5km. The depth of bedding of productive layers is 3500-4000m and depth of bedding of hydrocarbons - 5000- 6500 m.
Inam
Inam Project, operated by BP, is interesting for discovering gas and oil. According to the PSA contract, the foreign partners on the project need to drill at least two exploration wells in depth of 4200-4700m.
Inam structure was opened by the Azerbaijani geologists in 1953. The contracted square is located in 18km from western shore of the Azerbaijani section of Caspian and covers an area of 450sq.m. The depth of the water in the structure oscillates between 30 and 150m. The length of the productive layers makes up 18km, width - 4.5km, height - 700 meters. The depth of bedding of the productive layers is nearly 4500m. According to the estimates of SOCAR specialists, the hydrocarbon reserves in the structure total 100mln tons of oil and 100bln cu.m of gas. According to the initial data, nearly $3.5-4bln is required for te full scale development of the structure.
In 2000-2001 the first exploration well INX-1, with design depth of 5025m, was drilled in the structure. However, due to high pressure, the drilling was ceased at depth of 4550m. The well was suspended and since then, the shareholders of the project sought optimal variant of re-staring the drilling. Variants are considered to return to INX-1 well with special equipment or drill a new well. As a result of long discussions, a decision was made to drill INX-2.
The drilling is being carried out with Istiglal rig and according to the schedule, drilling will continue for more than 200 days. The design depth of the well is 5,300 m.
Muradkhanli
The contract was signed on 21 July 1998. The project was closed due to failure to discover commercially attractive volumes of hydrocarbons.
Kursangi-Garabaghly
Kursangi-Garabaghly is the largest onshore field with foreign participation. Salyan Oil Operating Company was established in 1999 to realize the project. The Company produces averagely 30,000 tons of oil per month.
Salyan Oil is the largest operating company with foreign capital producing oil in Azerbaijan. In 2007 the Company produced 308,000 tons of oil.
A 25-year production-sharing agreement on the development of Kursangi and Garabaghly oil fields was signed in December 1998.
Kursangi-Garabaghly was opened in 1960-1961. The reserves of the field are estimated at 100-150mln tons of oil. The investments in the project are assessed at nearly $1bln.
Ateshgah-Yanan Tava-Mugan Deniz
The project was closed. The development project Ateshgah-Yanan Tava-Mugan Deniz perspective structure was assessed at $2bln. However, the Japan-Azerbaijan Operating Company, operator of the project, did not discover enough hydrocarbon reserves.
Ateshgah perspective structure is located in western part of Caspian in 15km east from Kur River. The depth of water is 10-15m here. The structure was opened in 1952. In 1973 and 1974 two exploration wells were drilled which discovered signs of natural gas and oil and gas collectors.
Yanan Tava structure is located in 100km southwest from Baku. The depth of water is 12-50m here. The structure was opened in 1952. In 1972and 1974 two wells were drilled which yield no results.
Mugan Deniz structure is located in 15km southwest of Kur River, in 125km south from Baku. The depth of water is 30-50m here. The structure was opened in 1954.
Zafar-Mashal
The contract was signed between American ExxonMobil and the State Oil Company of Azerbaijan (SOCAR) on 27 April 1999. The investments for the project were estimated at nearly $2bln. The reserves are forecasted at 140mln tons of oil, with 100mln belonging to Zafar and 40mln to Mashal. The project was closed due to failure of the foreign company to find commercially attractive volumes of hydrocarbons.
Zafar-Mashal block is located in 110km southeast from Baku. The depth of water here ranges from 550 to 900m. The block was opened in 1961. The depth of the bedding of productive layers is 5-6,000m.
Lerik Deniz
The contract was signed on 27 April 1999. The project was closed due to failure to discover commercially attractive volumes of hydrocarbons.
Padar - Harami
The contract was signed on 27 April 1999. Long-lasting exploration works in the structure gave an opportunity to begin production in the second half of 2007. Last year Kura Valley Operating Company produced nearly 2,000 tons of oil in the contracted area.
Kelametdin - Mishovdag
The contract was signed on 12 October 2000. Kelametdin - Mishovdag is also interesting where the oil is produced in a stable manner. This year Karasu Operating Company plans to more actively produce oil and increase budget to more than $100mln.
In 2007, Karasu Operating Company produced some 265,300 tons of oil from these deposits.
There are plans to drill new operation field in 2008 in Mishovdag.
The pilot water pumping to the layer has been carried out in the Kelamatdin field since 2007, which will continue in 2008.
Kelamatdin field was put into operation in 1980. Some 142 wells have been drilled on the field. The remaining oil reserves are estimated at 14.5mln tons and recoverable reserves - 4.5mln.
Mishovdag field was opened in 1956. The remaining oil reserves are estimated at 43.8mln tons and recoverable reserves - 5.4mln.
Hovsan-Zijkh
The contract was signed on 3 November 2006. Firstly the contract on development of the field was signed between SOCAR and LUKOIL Company. However, later LUKOIL refused to realize the project due to difference with SOCAR with regards to ecological issues. In 2006 Rusneft Company replaced LUKOIL and produced nearly 17,000 tons of oil in 2007, a decrease of 25% from 2006.
Pirsaat
The contract was signed on 4 June 2003. In 2008 8,600 tons of oil were produced on the field, an increase of 26% from 2007.
For the first time, Shengli Oil Company displayed an interest in the field. After studying oil and gas reserves, Shengli stopped its choice of Pirsaat. After two years, the sides signed an agreement on rehabilitation, exploration and development of onshore Pirsaat field. It was the 22nd contract of this kind in Azerbaijan. The validity of the contract is 25 years, with possible prolongation for a period of five years.
Pirsaat is located in 76km southwest of Baku, covering an area of 110ha. The geological studies on the field commenced after 1930. Pirsaat has been developed since 1985.
Garachukhur
The Contract was signed on 18 June.
In 2007 Qaracuxur Operating Company produced 11,000 tons of oil, an increase of 19% from 2006.
Binagadi
The contract was signed on 29 September. Binagadi Operating Company increased the production by nearly 20% up to 120,000 tons in 2007.
Surakhani
The contract was signed in August 2005. Surakhani is one of the old fields in Azerbaijan. The field was opened in 1904. The oil production on the field in 1931 equaled almost 4.2mln tons. Dubai Rafi Oil Company signed a PSA contract with SOCAR on development and rehabilitation of the contracted area in mid 2005. Last year 130,000 tons of oil were produced on the field. The recoverable reserves of the field are assessed at 6.82mln. The investments in the project total $400mln.
Savalan
The contract on development of perspective structure Savalan has not been ratified by the Parliament. Some 20% of the field remains undistributed.