Amount of bonuses to be paid by BP under new PSA-contract in Azerbaijan announced

Oil&Gas Materials 7 May 2011 11:08 (UTC +04:00)

Azerbaijan, Baku, May 7 / Trend E.Ismayilov M.Aliyev /

The foreign contractor (BP Company) will pay $20 million to the state within 30 days after the entry into force of the contract for exploration, development and production sharing of offshore block Shafag and Asiman in the Azerbaijani sector of the Caspian Sea, Azerbaijani Parliamentary Deputy Speaker said Valeh Alasgarov at the parliament's meeting.

He said the foreign contractor will pay $1 million per 100 million barrels of oil that can be produced through the industrial method after the discovery of hydrocarbons within 30 days after approval of the program development.

The foreign contractor will have to pay $ 50 million to the state within three days after the launch of commercial production of oil.

Based on the R factor, originally revenue from lucrative oil would be distributed as follows: 45 percent - the state share and 55 percent share of contractors (SOCAR and BP). Then, the state's share will increase to 90 percent.

Regarding the payment acres, Alasgarov noted that the foreign contractor will annually pay $ 2,000 for every square kilometer of the contract area.

Regarding the gas, which can be obtained from the perspective structure, it was noted that gas, which will remain after its use, will be transferred to SOCAR for free.

The Azerbaijani Parliament ratified on Friday the contract for exploration, development and production sharing of offshore block Shafag and Asiman, signed by SOCAR and British BP on October 7, 2010.

SOCAR and BP signed the PSA for a period of 30 years. The exploration period is 4 years with possible prolongation for another 3 years. The first stage of exploration works envisions drilling of two wells. The second one assumes drilling of two more wells, if necessary. As the sides go over to the production stage, they will operate the project jointly. The two companies hold equal interests in the project.

The reserves of field Asiman-Shafag are estimated at 300-500 billion cubic meters of gas.
"Shafag" and "Asiman" structures are located 125 kilometers to the south-east of Baku. SOCAR and BP signed a memorandum on "Mutual understanding" on the joint exploration and development of "Shafag" and "Asiman" in London in July 2009.

Exploration work has not been conducted on the block before. It is located in the depth of 650-800 m. with the depth of the reservoir at 7,000 meters.

BP is the main foreign oil investor in Azerbaijan. It heads the projects to develop the block of oil and gas fields "Azeri-Chirag-Guneshli" and gas condensate field Shah Deniz. BP is also an operator of the Baku-Tbilisi-Ceyhan and Baku-Supsa pipelines.