BAKU, Azerbaijan, Dec.28
By Leman Zeynalova - Trend:
The production sharing agreement (PSA) for developing the Azeri-Chirag-Gunashli (ACG) block of oil and gas fields was signed in September 1994, for a period of 30 years.
The Azerbaijani government and the country’s state oil company SOCAR, together with BP, Chevron, INPEX, Statoil, ExxonMobil, TP, ITOCHU and ONGC Videsh signed the amended and restated agreement on the joint development and production sharing for the Azeri, Chirag fields and the deepwater part of the Gunashli Field in the Azerbaijani sector of the Caspian Sea until 2050.
The new ACG participating became as follows: BP - 30.37 percent; AzACG (SOCAR) - 25 percent; Chevron - 9.57 percent; INPEX - 9.31 percent; Statoil - 7.27 percent; ExxonMobil - 6.79 percent; TP - 5.73 percent; ITOCHU - 3.65 percent; ONGC Videsh Limited (OVL) - 2.31 percent.
In February 2020, Azerbaijan approved a deal on the purchase of US Chevron’s share by the Hungarian MOL Group oil and gas company in the development of Azeri-Chirag-Guneshli (ACG) block of fields and in the Baku-Tbilisi-Ceyhan (BTC) oil pipeline.
With the approval from Azerbaijan, MOL became one of the full members of the consortium on the development of the ACG block and the BTC pipeline.
In April 2020, MOL successfully closed the previously announced deal with Chevron Global Ventures, Ltd and Chevron BTC Pipeline, Ltd regarding the acquisition of their non-operated E&P and mid-stream interests in Azerbaijan, including a 9.57 percent stake in the Azeri-Chirag-Gunashli (“ACG”) oil field, and an effective 8.9 percent stake in the Baku-Tbilisi-Ceyhan (“BTC”) pipeline that transports the crude to the Mediterranean port of Ceyhan for a total consideration of USD 1.57bn with an effective date of 1 January 2019. With this transaction MOL becomes the third largest field partner in ACG, a supergiant oil field, located in the Caspian Sea, which is operated by BP and started production in 1997.
The oil reserves on the block account for more than one billion tons. The recoverable reserves amount to more than 500 million tons of oil.
The production at Chirag field started in 1997, Central Azeri - early 2005, West Azeri - early 2006 and East Azeri - late 2006. Production on the deepwater part of Guneshli field began in spring of 2008, West Chirag - January of 2014.
BP is the operator of the Azeri-Chirag-Gunashli block of Azerbaijani fields, where Azeri Light oil is produced.
BP continued gas lift project at Chirag platform at the Azeri-Chirag-Gunashli (ACG) block of fields in the Azerbaijani sector of the Caspian Sea throughout 2020.
The gas lift project aims to bring high pressure gas lift facilities onto a platform to add to the lifetime of the wells and through it to the production.
The most important step is the implementation of the next phase of Azeri-Chirag-Gunashli (ACG) development which includes the construction of the Azeri Central East (ACE) platform which was sanctioned on 19 April 2019. ACE is expected to deliver ~300 million barrels incremental production from the platform over the lifetime of the PSA to 2049. It is expected that, at peak, construction activities will create up to 8,000 jobs.
The first production is planned to be achieved in 2023. ACE will use remote operations technologies which will enable platform start up from onshore.
Baker Hughes has conducted stimulation works on an additional two wells at the Azeri-Chirag-Gunashli (ACG) block of oil fields.
Following its successful deployment of a Stimulation Vessel in 2018 – 2019, Baker Hughes has recently conducted stimulation works on an additional two wells at the Azeri-Chirag-Gunashli block. The operations team was able to significantly improve the expected oil rate through a Baker Hughes chemicals solution.
In March 2020, Australian Worley company was awarded a contract for the gas lift project on Chirag platform at Azeri-Chirag (ACG) block of oil fields.
Azerbaijan International Operating (AIOC), operated by BP, has awarded the company a contract for engineering, procurement and construction services as part of a gas lift project.
Under the contract, it will provide engineering, procurement and construction services to support production operations on the Chirag platform in the Caspian Sea. The project scope includes new gas lift flowlines and production manifolds.
In October 2020, US-based Emerson company was awarded a $14 million contract to provide automation technologies for the new Azeri Central East offshore platform in the Caspian Sea, the latest development in the Azeri-Chirag-Deepwater Gunashli oilfield.
Emerson will serve as the main automation contractor, providing its Project Certainty methodologies and digital technologies that transform capital project execution to help BP bring this fast-track project onstream in 2023.
Some 274 tankers with ACG oil (around 207.6 million barrels of oil) were shipped from the Ceyhan oil terminal since the beginning of 2020.
During the third quarter, fabrication activities on the topsides and drilling facilities for the Azeri Central East (ACE) platform continued at the fabrication yard in Bibi-Heybat.
The ACE Project represents the next stage of development in the Azeri-Chirag-Gunashli (ACG) Contract Area.
The latest activities include the commencement of the major lift programme despite the disruption caused by COVID-19, the arrival of the drilling derrick at the yard, with all three sections of the derrick already safely offloaded from the barge and positioned at the site’s construction location. Construction of the drilling modules is currently ongoing.
At the Heydar Aliyev Baku Deepwater Jackets factory (BDJF) the pin piles have been completed, successfully loaded out and driven into the seabed ready to receive the platform jacket. The jacket fabrication continues, as does the work on the subsea structures.
Engineering and procurement works remain on track to support the first production from the ACE project in 2023, with the larger equipment now moving from the suppliers into Azerbaijan.
Total Azeri-Chirag-Gunashli (ACG) production for the three quarters of 2020 was on average about 482,000 barrels per day (b/d) (about 132 million barrels or 17.9 million tonnes in total) from the Chirag (36,000 b/d), Central Azeri (115,000 b/d), West Azeri (118,000 b/d), East Azeri (64,000 b/d), Deepwater Gunashli (97,000 b/d) and West Chirag (52,000 b/d) platforms.
Total oil production from Azeri-Chirag-Gunashli (ACG) in the Azerbaijani sector of the Caspian Sea since start in 1994 until the end of Q3 2020 has reached more than 3.8 billion barrels.
In the first three quarters of 2020, BP spent about $399 million in operating expenditure and about $1,398 million in capital expenditure on Azeri-Chirag-Gunashli (ACG) activities.
During the first three quarters of 2020, Azeri-Chirag-Gunashli (ACG) completed 10 oil producer and 2 injector wells.
At the end of the quarter, 124 oil wells were producing, while 39 wells were used for water and seven for gas injection.
During the three quarters, Azeri-Chirag-Gunashli (ACG) delivered an average of 6 million cubic metres per day of ACG associated gas to SOCAR (1.6 billion cubic metres in total), primarily at the Sangachal Terminal but also to SOCAR’s Oil Rocks facility.
The remainder of the associated gas produced was re-injected for reservoir pressure maintenance.
The State Oil Fund of the Republic of Azerbaijan (SOFAZ) gained $3.336 billion from January 1 through December 1, 2020, as part of the project to develop the Azeri-Chirag-Gunashli (ACG) block of oil and gas fields.
The contract for the developing the Shah Deniz field was signed on June 4, 1996.
The contract was extended from 2036 to 2048 and the shares of SOCAR and BP (project operator) in the project were increased to 16.7 percent and 28.8 percent respectively, in accordance with the documents signed in Baku on Dec.17, 2013.
The shareholders in the contract are: BP, operator (28.8 percent), AzSD (10 percent), SGC Upstream (6.7 percent), Petronas (15.5 percent), Lukoil (10 percent), NIOC (10 percent) and TPAO (19 percent).
The proven reserves of Shah Deniz are estimated at 1.2 trillion cubic meters of gas and 240 million tons of condensate.
BP implemented a planned facility shut down (turnaround - TAR) on the Shah Deniz Alpha (SDA) platform in the Caspian Sea, as well as the Shah Deniz 1 facility inside Sangachal Terminal, end of July - early August.
In accordance with the plan, production from the SDA platform was suspended on 30 July for five days to enable efficient maintenance, inspection and project work to be undertaken.
This was a routine, planned program and was part of normal operations. These activities were included in the annual work program and budget. The shut-down was also included in the annual production forecast.
Production from the Shah Deniz Bravo platform, the ACG Field (Central Azeri, East Azeri, West Azeri, Chirag, Deepwater Gunashli, and West Chirag), as well as export operations via SCP, BTC and WREP continued as normal. The Shah Deniz 2, ACG and EOP phases of Sangachal Terminal continued to operate. Gas continued to be delivered to markets via SCP and Azerbaijan’s gas lines. Loadings at Ceyhan and Supsa also continued in accordance with the lifting schedule.
In August 2020, Turan Drilling & Engineering Company LLC (A KCA Deutag and SOCAR AQS Company), was awarded a contract amendment to manage procurement, maintenance and warehousing activities on behalf of BP Exploration (Caspian Sea) Limited (“BP”).
The agreement means Turan Drilling & Engineering JV will manage the SAP maintenance system, wells procurement activity, inventory, storage and warehousing for the BP Global Wells Organisation in Azerbaijan. Turan Drilling & Engineering has employed an additional 71 people to support this activity, 69 of whom are Azerbaijani nationals. The amendment has a value of up to US $120 million and applies to the contract awarded by BP to Turan Drilling & Engineering in 2019 for the operations and maintenance of seven platform drilling rigs operated by BP in the Caspian Sea pursuant to Product Sharing Agreements. These are the East, West and Central Azeri, Deepwater Gunashli, West Chirag, Chirag and Shah Deniz installations. The initial term is for five years with two one-year extension options.
So far about 133 billion cubic meters of gas have been extracted from this field, more than 88.6 billion cubic meters of gas have been exported.
On June 30, 2018, first gas from the Shah Deniz field in Azerbaijan was sent to Turkey along the first segment of the Southern Gas Corridor (SGC) - from the Sangachal terminal expanded for Stage 2 of the Shah Deniz field along the expanded South Caucasus gas pipeline.
As part of the second stage of the field’s development, additional 16 billion cubic meters of gas per year will be produced. Of these, 6 billion will be delivered to Turkey, and 10 billion to Europe. According to forecasts, as part of the second stage of the field’s development, gas production will exceed 25 billion cubic meters per year.
The South Caucasus gas pipeline and the TANAP gas pipeline, which are part of the SGC, are already supplying gas through the territories of Azerbaijan, Georgia and Turkey.
Gas extracted as part of both stages of the development of the Shah Deniz field, was exported from Azerbaijan in 2019.
On average, about 48 million standard cubic metres (more than 1,691 million standard cubic feet) of Shah Deniz gas was exported from the Sangachal terminal daily during the three quarters of 2020.
In the first three quarters of 2020, Shah Deniz spent about $620 million in operating expenditure and $719 million in capital expenditure, the majority of which was associated with the Shah Deniz 2 project.
In the first nine months of 2020, the Shah Deniz field produced around 13.3 billion standard cubic metres (bcm) of gas and 2.7 million tonnes (21.6 million barrels) of condensate in total from the Shah Deniz Alpha and Shah Deniz Bravo platforms.
The existing Shah Deniz facilities’ production capacity is currently over 56 million standard cubic metres of gas per day or more than 20 bcma.
During the third quarter, the Shah Deniz field continued to provide deliveries of gas to markets in Azerbaijan (to SOCAR), Georgia (to GOGC and SOCAR), Turkey (to BOTAS) and to BTC Company in multiple locations.
The Shah Deniz Alpha platform rig and Istiglal rig have already drilled 20 wells in total, and completed 16 out of those, for Shah Deniz 2 production and subsequent ramp up.
The completed wells include four wells on the North Flank, four wells on the West Flank, four wells on the East South Flank, two wells on the West South Flank and two wells on the East North flank. Two wells on the West South flank have been drilled to final depth and suspended. Drilling operations will continue to deliver all wells required to ramp up to plateau level.
In the third quarter of the year, Shah Deniz Alpha platform rig continued to be on warm stack.
The Istiglal rig drilled the SDC05 well to total depth and suspended the well. The Maersk Explorer drilled the SDF04 well to total depth and suspended it. The rig also drilled the top hole and lower section of the SDF05 well.
In the third quarter of 2020, the installation of subsea production infrastructure using the subsea construction vessel Khankendi continued as per plan. The Israfil Huseynov barge safely completed the mechanical installation of flowlines to East South flank on 8 October, marking a major milestone in the project scope.
The start-up of deep-water East South flank (at 540m water depth) is planned for the first half of 2021, following completion of offshore construction and commissioning. The start-up of the two remaining deep-water flanks (West South and East North) is planned for future years and will support plateau rates of gas production.
Revenues of Azerbaijan’s state oil fund SOFAZ from the sale of gas and condensate produced at Azerbaijan's Shah Deniz field from January 1 through December 1, 2020, amounted to $276 million.
Maersk Drilling is interested in new opportunities in Azerbaijan after the contract with BP on Shah Deniz ends next year. Maersk Explorer rig is currently contracted in Azerbaijan until April 2021.
UK EXPRO international oilfield service company has completed the maintenance of the equipment for the restart of Shah Deniz operations in Q4 2020.
The implementation of the third stage of the development of the Shah Deniz gas condensate field in the Azerbaijani sector of the Caspian Sea is one of the issues that depend on negotiations.
In these issues, everything depends on the economic efficiency of investments and recoverable resources.
Phase 3 of development of Azerbaijan’s Shah Deniz gas and condensate field is a deeper layer of gas production and thus geologically complex to develop.
For that, an additional drilling rig is needed. According to BP, SOCAR wants to start exploration of Phase 3 as soon as possible once a rig is available. However, BP’s position is that before the gas is delivered to the European market, it will not become involved in a new venture in Azerbaijan due to workload and staff cuts. Therefore, it is expected that SD3 exploration will start after 2020, when gas from Phase 2 will reach the European market.
At this stage, it is not known what the terms and conditions of the marketing arrangement will be, and consequently the possible volume SOCAR may get for the domestic market is unknown.
According to BP, gas production from phase 3 may be 10 bcm/year.
The annual production volume from Azerbaijan’s Shah Deniz field is expected to reach 25.3 billion cubic meters in 2023.
The volume of gas projected in Azerbaijan in 2020 at 38 billion cubic meters will reach about 50 billion cubic meters in 2023.
The annual production from the Shah Deniz field, which is the main source of the Southern Gas Corridor, is expected to reach 18.7 billion cubic meters this year while 25.3 billion cubic meters in 2023.
Given the fact that the Shah Deniz 1 field in Azerbaijan (first phase for development of Shah Deniz gas and condensate field) started producing in late 2006 and reached its plateau level in 2010, the field’s geological tail-off period should begin in 2024–2026.
During the tail-off period, production levels may decrease by around 2 bcm/year or more, depending on well productivity.
The first gas supplies from the Azerbaijani Shah Deniz gas field to Europe via TAP are expected by the end of 2020. The project will almost triple the annual gas production capacity in Azerbaijan.
Absheron project participants include SOCAR - 50 percent and France’s Total - 50 percent.
Engie, which previously owned a 20-percent stake, left the project in June 2017.
A contract on the Absheron field was signed Feb. 27, 2009 between SOCAR and Total.
The discovery of the field was announced in September 2011. A decision was made to drill an offshoot of the first exploration well to specify the data. The work was completed in 2012.
The results of the first exploration well indicate the existence of commercially attractive gas and condensate reserves. According to Total geologists, the reserves of Absheron amount to 326 billion cubic meters of gas and 108 million tons of condensate.
The gas that will be produced from the Absheron field will be sold to the Azerbaijani state oil company SOCAR for use in the local market and will help meet domestic demand. The condensate will be delivered to Turkey via the Baku-Tbilisi-Ceyhan oil pipeline.
The next stage of Absheron development (Phase 1) is currently under study by JOCAP, the Joint Operating company of the Absheron field on behalf of Contractor Parties SOCAR Absheron and TOTAL E&P Absheron BV.
The sequence of conceptual, pre-FEED (Front End Engineering Design) and FEED studies could lead to a FID (Final Investment Decision) in 2023/2024, targeting a gas production plateau up to 5 Bcm per year.
Platform jackets installation with Gurban Abasov vessel in the vicinity of Oil Rocks as part of the Absheron field project started on 31st October. The works should be completed in 2nd quarter 2021.
The screening and conceptual development study is on-going with the objective to start Phase 1 development pre-project studies in 2nd quarter 2021.
Mobilization of the PLBH vessel is scheduled end December 2020 to start pipe laying between well ABD-001 at Absheron field in Azerbaijan and receiving facilities in Oil Rocks. The expected completion is 2nd quarter 2021.
Bahar and Gum Deniz
On Dec. 22, 2009, SOCAR signed a PSA contract with Bahar Energy Limited for the exploration, rehabilitation and development of the Bahar and Gum Deniz offshore fields in the Azerbaijani sector of the Caspian Sea.
The contract consists of two parts. The first part involves the rehabilitation and stabilization of production at the block of fields, while the second part - exploration at the Bahar-2 promising structure.
The shares of the operating company Bahar Energy Limited fully belong to the Greenfields Petroleum company from the US.
A 25-year contract has been concluded with the possibility of extension for another five years. Initially, SOCAR's share of profitable hydrocarbons will amount to 40 percent. In the future the share will increase to 90 percent. The investment in this project will hit $1 billion, according to preliminary estimates.
Bahar Energy Limited was registered in the Jebel Ali Free Trade Zone in the UAE. SOCAR signed a memorandum of understanding with the company on April 16, 2009.
Gum Deniz field has been operated since 1955 and is located 21 kilometers southeast of Baku. Bahar field has been operated since 1969 and is located 40 kilometers southeast of Baku.
Platforms and infrastructure necessary for production operations at Bahar gas field in Azerbaijan have been rehabilitated. BEOC has rehabilitated the platforms and infrastructure necessary for production operations. Many of the other platforms and infrastructure will be usable after refurbishment is undertaken. Workers and equipment is brought to and from the platforms by crew and crane vessels. Crew vessels rely on boat docks and gangways for platform access, so access is weather dependent.
Re-development of South Gum Deniz oil field in Azerbaijan is moving forward with six wells equipped with electric submersible pumps (ESPs) and powered by onsite power generation. Rental power generation equipment is scheduled to be replaced with newly procured equipment.
On May 7, 2020, Bahar Energy Limited (BEL), a wholly owned subsidiary of Greenfields Petroleum and SOCAR signed a three-year extension to the Protocol from April 19, 2020, extending the period of recovery to April 19, 2023.
Oil production at Azerbaijan’s Gum Deniz field in Q3 averaged 456 Bopd, down 155 Bopd from Q2 2020.
The third-quarter output was about 302 Bopd below budget. Oil production was down due to workovers required in the GD 465, 477, 467, 478, 418, and 372 well.
Gas production at Azerbaijan’s Bahar field averaged 19.4 MMcfd (million cubic feet per day) in Q3, up about 0.6 MMcfd from Q2-2020.
The increase was achieved mainly due to the successful recompletion in BH169 well in the horizon IX.
Production for Q3 was about 3.5 MMcfd below budget due to the delays in crane vessel support for the movement of workover rigs for gas workovers.
Fourteen workovers have been completed at Gum Deniz field on both ESP (electric submersible pump) optimization and the initiation of water injection.
A newly constructed 28 m derrick was successfully installed on platform 412 in South Gum Deniz. The derrick is being used to replace ESP’s in these wells with GD418 and 430 completed in Q3.
BEOC is moving forward with six wells to be equipped with ESPs and powered by onsite power generation purchased and installed in Q2.
Capital costs of Bahar Energy Operating Company Limited (BEOC) on Bahar-Gum Deniz block through Q3, 2020 was $2.37 million versus $10.8 million budgeted.
The total operating costs through Q3, 2020, was $18.1 million, versus $21.6 million budgeted. As such, the company’s performance for capex and opex in Q3 was 22 percent and 84 percent, respectively.
Total costs stood at $20.453 million as compared to the budgeted $32.399 million.
The average oil sales from Azerbaijan’s Bahar field stood at 83 tons per day in Q3.
As for the monthly statistics, the sales volumes were equal to 93 tons per day in January, 85 tons per day in February, 86 tons per day in March, 55 tons per day in May, 80 tons per day in June and July each, 85 tons per day in August and 85 tons per day in September.
The company didn’t sell oil in April 2020.
As for gas sales from Gum Deniz field, the Q3 average was 549,968 cubic meters per day.
The monthly sales were as follows: 493,553 cubic meters per day in January, 510,541 cubic meters per day in February, 552,572 cubic meters per day in March, 546,134 cubic meters per day in April, 530,309 cubic meters per day in May, 525,926 cubic meters per day in June, 540,580 cubic meters per day in July, 517,637 cubic meters per day in August and 591,686 cubic meters per day in September.
Revenues of Bahar Energy Operating Company Limited (BEOC) from sales of crude oil and natural gas from Azerbaijan’s Bahar-Gum Deniz block stood at $19.353 million in Q3, versus the planned $29.114 million.
The company got $13.907 million from natural gas sales, as compared to $16.259 million planned in the budget.
The revenues from crude oil sales amounted to $5.446 million versus the expected $12.854 million.
In Gum Deniz field, ESP change-outs in the GD 475, 372, 430, and 412 wells add to oil production, while in Bahar, well BH 172 continues positive fishing and recompletion activities.
As for construction works, offshore construction operations continued on GZU 2, PLT 168, and PLT 175 in the Bahar field.
The AWP&B technical program was completed. The work continues building geo and simulation models for main producing reservoirs in both GD and Bahar fields. Work on a revised Plan of Development is underway.
In 2008, SOCAR and Nobel Oil Exploration & Production Ltd created SOCAR-Umid LLC, to carry out drilling on the prospective "Umid" structure in the Azerbaijani sector of the Caspian Sea. SOCAR owns an 80-percent share and the Nobel Oil company has 20-percent share in the joint venture. In early 2017, a risk service contract was signed regarding exploration and development of the Umid-Babak block.
SOCAR announced the discovery of the Umid field in 2010. The volume of the field's reserve exceeds 200 billion cubic meters of gas and 40 million tons of condensate, according to the results of drilling the first exploration well and the estimations of SOCAR specialists.
The Umid field is located 75 kilometers from Baku, 40 kilometers away from the coast. The first geophysical work was carried out there in 1953, the second, improved one in 1972. Nine wells were drilled there from 1977 to 1992. However, none of them produced any results.
The reserves of Babak perspective structure may amount to 400 billion cubic meters of gas and 80 million tons of condensate, according to preliminary data.
The risk service contract (a contract with a minimum guarantee of compensation) for exploration and development of an offshore block including the Umid gas field and the promising Babak structure in the Caspian Sea was signed between SOCAR and SOCAR Umid Oil and Gas Ltd on January 12, 2017.
SOCAR-Umid LLC, which was engaged in the development of the Umid gas field, was affiliated to the SOCAR’s Azneft Production Union.
SOCAR has a long-term program on the development of the Umid-Babak block, thanks to which the company will be able to receive up to five billion cubic meters of gas annually from the Umid field alone.
Satti self-elevating jackup drilling rig, owned by KazMunayGas, after modernization by SOCAR’s Caspian Drilling Company, may be primarily involved in the work which is carried out jointly with SOCAR and BP on the Absheron Peninsula, on the Umid block - Babak block, as well as other operations in the Caspian Sea.
On February 10, 2020, Azerbaijan’s state oil company SOCAR and UK-based Liberty Steel Hartlepool, which is a part of the Liberty House Group, signed a contract on Umid-1 project. The contract envisages purchase of 20-inch submarine pipes for the transportation of gas condensate as part of the Umid -1 project for accelerating the production.
Drilling of a new well at the Umid field was launched on May 5. The design depth of the well is 6,270 meters and production volume is 1.5-2 million cubic meters of gas per day. After commissioning the well, gas production is expected to increase from 3-3.5 million cubic meters to 4.5-5 million cubic meters per day.
The design of the new well was carried out by SOCAR’s Oil and Gas Projects Institute and agreed with UK’s well-known Norwell Engineering company.
Engineering, geological and geotechnical studies were conducted at the shallow water Babek structure in Azerbaijan in order to carry out exploration works there.
The studies were carried out at a sea depth of 62 meters.
It is planned to drill the BX-01 exploration well by 2021 using the Satti drilling rig of the Caspian Drilling Company by installing an unmanned wellhead platform.
Currently detailed engineering work is underway for the platform and at the same time, the process of purchasing long-term equipment continues.
If the tests conducted at the seventh horizon of the productive layer are positive, field trial will start in the shallow water Babek structure.
German-based Crane specialist Liebherr received an order from Umid Babek Operating Company to deliver four new offshore cranes of the Board Offshore Crane (BOS) Series.
Four new cranes of the BOS-series will be installed next year on two offshore platforms in the Caspian Sea.
The crane order from Liebherr includes two BOS 2600 with a maximum lifting capacity of 45 tonnes at 30 meters onboard as well as two BOS 4200, lifting 50 tonnes at 40 meters onboard.
A 30-year contract on Shafag-Asiman was signed in October 2010. The exploration period will be four years, with possibility of extension for three more years.
The forecasted reserves of the Shafag-Asiman block stand at 500 billion cubic meters of gas and 65 million tons of condensate.
The block is located 125 kilometers south-east of Baku. Exploration work has not been conducted on the block yet. It is located at a depth of 650-800 meters with the depth of the reservoir at 7,000 meters.
SOCAR and BP announced that the first exploration well was spudded on the Shafag-Asiman offshore block in the Azerbaijan sector of the Caspian Sea on 13 January.
The SAX01 well is the first in the contract area and is in accordance with BP’s obligations under the PSA that was ratified by the Azerbaijani parliament in 2011.
Drilling operations are currently ongoing. The well has reached a depth of 3864 metres. Once the well reaches the target depth, the well data will be analysed and, if successful, an evaluation programme may be conducted to confirm the results.”
The well is planned to reach total depth of up to 7,000 metres.
The well is being drilled from the Heydar Aliyev semi-submersible rig operated by the Caspian Drilling Company (CDC). The rig, which has full managed-pressure drilling capability, was contracted for the SAX01 well in November 2019 and then moved to the well location in preparation for the commencement of drilling operations.
Shallow waters around the Absheron Peninsula
SOCAR and BP signed a PSA-contract on joint exploration at the potentially promising structures located in the shallow waters of the Absheron Peninsula on Dec. 22, 2014.
This agreement is part of the government's plan to fully explore all the coastal areas of the Azerbaijani sector of the Caspian Sea.
The parties to the contract were BP - 50 percent, SOCAR - 50 percent.
The area of water, covered by the PSA agreement between SOCAR and BP to carry out the development and exploration work in the shallow waters of the Absheron Peninsula, extends along the southern part of the Peninsula. The area reaches 1,900 square kilometers.
The sea depth is up to 40 meters in this territory, but the depth of the potentially productive strata is 3,000-5,000 meters.
BP in 2016 conducted primary seismic survey on potentially promising structures located in the shallow waters around the Absheron peninsula in the Azerbaijani sector of the Caspian Sea.
The primary results of data processing reveal large potential in the contract area.
Seismic exploration in the area was carried out by a joint venture of SOCAR and WesternGeco (London) - Caspian Geo, at that time called Caspian Geophysical, as well as Geokinetics (Houston).
The work to obtain seismic data in 2D and 3D formats was completed in 2017. Based on the analysis of the data, three promising zones were identified - in the west, southeast and northeast. Accordingly, it was decided to drill three wells in these directions for more accurate assessment of the reservoir.
These appraisal wells are planned to be drilled with a Satti jackup rig. Drilling operations will be carried out by SOCAR’s CDC.
In the Shallow Water Absheron Peninsula (SWAP) area, planning is ongoing for drilling exploration wells in three selected prospective areas, the company said.
Drilling activities will commence once the upgrade of the Satti rig selected to drill the first well is completed. On 28 August, the Environmental and Social Impact Assessment (ESIA) for the well was disclosed and the process of discussions with the government and public discussions are underway to obtain necessary permissions to start drilling the first well in the first quarter of 2021.
It is planned to complete the upgrade of Satti drilling rig in late December 2020. There are delays related to COVID-19 situation in Azerbaijan and around the world.
In May 2016, BP and SOCAR signed a memorandum of understanding (MOU) to jointly explore potential prospects in the block D230 in the North Absheron basin in the Azerbaijan sector of the Caspian Sea.
The MOU gives BP the exclusive right to negotiate an agreement with SOCAR to explore and develop the D230 Block.
The block covers areas in a water depth of up to 300 meters with the reservoir depth of 3,000-5,000 meters.
In April 2018, Azerbaijan’s state oil company SOCAR and the BP signed a production sharing agreement in London on joint exploration and development of the D230 block.
According to the 25-year agreement, 50 percent of the stake will belong to BP, which will become the operator for the exploration period, and the remaining 50 percent will belong to SOCAR.
In November 2018, Azerbaijani President Ilham Aliyev approved the law on granting permission to accept, approve and implement a production sharing agreement for joint exploration and development at the prospective block D230.
On the D230 block, the 3D seismic acquisition programme, which commenced in December 2019, was successfully completed on 14 March 2020. The processing of the full seismic data was completed in October and the prospect is currently being evaluated. If the results from the interpretation of the seismic survey are positive, bp may start the main exploration program.
The Karabagh prospective structure was identified in 1959 as a result of seismic surveys. It was specified in 1984 and its oil and gas reserves were confirmed in 1997-1998 through exploration drilling. The oilfield is located 120 km east of Baku, at a depth of 150-200 meters in the open sea.
The consortium operated by Caspian International Petroleum Company (CIPCO) drilled three exploration wells in the Karabagh PSA signed in 1995: two wells found gas in the southeast portion of the structure and the third well indicated presence of oil in the western part of the structure. In 1999, the PSA was terminated due to the non-commercial discovery.
In May 2018, SOCAR Karabagh and Equinor signed a Risk Service Agreement related to development of Karabagh Oil Field in the Azerbaijan Sector of Caspian Sea. According to the agreement, they hold equal shares.
Since 1994, SOCAR and Equinor have been cooperating in important joint projects, including the operating of the Azeri Chirag and Deep Water Gunashli (ACG) oil field.
In March 2020, Azerbaijan State Oil Company SOCAR and Norwegian Equinor have confirmed the fact of discovery of the Karabagh oil field in the Azerbaijani sector of the Caspian Sea, 120 kilometers east of Baku.
The drilling of the first appraisal well at Karabagh oil field was started on December 23, 2019. The well was drilled in water depth of 180 meters by the Dada Gorgud semi-submersible drilling rig operated by SOCAR’s Caspian Drilling Company (CDC). The reservoir is at a depth of approximately 3.4 kilometers. Estimated size of the discovered volumes of oil and gas are satisfactory for pursuing commercial development of the Karabagh field.
Its oil reserves estimated more than 60 million tons. “It will produce 1.5 million tons of oil per year, but it is too early to predict the volume of exports from this field.
The joint venture of Azerbaijan’s state oil company SOCAR and Norway’s Equinor for the Karabagh oil field has been established and the two companies each have a 50 percent share.
Equinor continues to work with SOCAR to progress and mature the Karabagh project, and this includes detailing a possible development solution. No investment decision has been taken by Equinor at this stage.
BOS Shelf, the operator of the Heydar Aliyev Baku Deep Water Jackets Plant, has completed the construction of the Karabagh support block, which is the largest offshore jacket for use in oil and gas production in the history of field development in the Caspian Sea.
The structure with a height of 187 meters and a weight of more than 16,300 tons will be installed at a depth of 182 meters. The support jacket was built during two years. Some 95 percent of the workers involved in the project were local workers.
Equinor continues to work with Azerbaijan’s state oil company SOCAR to progress and mature the Karabagh project, including detailing a possible development.
Ashrafi-Dan Ulduzu-Aypara (ADUA)
The ADUA exploration area is located around 50 kilometers east of Baku, around 14 kilometers to the east of Azerbaijani mainland (Absheron peninsula), and approximately 7 kilometers to the east of Azerbaijan’s Pirallahi and Chilov islands, in water depth varying between 20 and 225 meters.
Azerbaijan’s state oil company SOCAR and Statoil Azerbaijan (part of the Equinor group) signed a Production Sharing Agreement (PSA) for the Ashrafi-Dan Ulduzu-Aypara (ADUA) exploration area on May 30, 2018.
The seismic acquisition was completed at Ashrafi-Dan Ulduzu-Aypara (ADUA) in the Azerbaijani sector of the Caspian Sea in February 2020.
In May 2020 Equinor decided to postpone the drilling of the Aypara prospect due to challenges in operating during the current COVID-19 context.
The company said it is too early to indicate when the well will be spudded, and a new timeline will be concluded later.
Equinor believes that the decision to postpone the drilling will provide more time to interpret the seismic data acquired in the Ashrafi-Dan Ulduzu-Aypara license during 2019 and evaluate prospectively in the license.
Equinor is processing the seismic data of Ashrafi-Dan Ulduzu-Aypara prospect.
The company completed the acquisition of 2D and 3D seismic in the Ashrafi-Dan Ulduzu-Aypara licence which took place from October until December 2019. The operations were carried out by Caspian Geo. The data is currently being processed and it is too early to say when the interpretation will be finalized.
Nakhchivan, Caspian-Guba and Goshadash
On Jan. 22, 2020, SOCAR and LUKOIL signed a memorandum of understanding on the Nakhchivan prospective structure in the Azerbaijani sector of the Caspian Sea, as well as on the exploration block covering the Caspian-Guba and Goshadash prospective structures in the shallow waters of the sea.
Nakhchivan prospective structure is located in the deepwater part of the Azerbaijani sector of the Caspian Sea, 90 kilometers south of the Absheron Peninsula. In the area of the structure, the depth of the sea varies within 120-750 meters. The structure was discovered in 1960 as a result of seismic survey.
Goshadash prospective structure is located in the Azerbaijani sector of the Caspian Sea, 20 kilometers northeast of Sumgayit city. In 1957-1977, seismic surveys were carried out in the area.
Detailed assessment is underway on Nakhchivan, Caspian-Guba and Goshadash prospective structures in Azerbaijan, Russia’s LUKOIL company told Trend.
“The ongoing work within these exploration projects covers detailed assessment and study of the prospects of structures. This work is carried out in accordance with the schedule,” said the company.
Muradkhanli-Jafarli-Zardab onshore oil fields
The total area of the Muradkhanli, Jafarli and Zardab fields is 642.2 square kilometers, and is divided into rehabilitation and exploration territories.
The Muradkhanli-Jafarli-Zardab block is located in the Yevlakh-Agjabadi oil and gas region of Imishli district of Azerbaijan. The Muradkhanli field was discovered in 1971, Jafarli - in 1984, and Zardab - in 1981.
Azerbaijan’s state oil company SOCAR and Zenith Aran Oil Company signed a REDPSA in March 2016 for a block that includes the Muradkhanli, Jafarli and Zardab oil fields. Zenith Energy Ltd established its subsidiary company Zenith Aran Oil Company Ltd for production operations in these three fields. Production under the agreement began in August 2016.
Zenith held an 80-percent participating interest in the three fields within the contract area, while SOCAR retained the remaining 20 percent. The agreement was signed for 25 years, with a potential extension by five additional years.
In view of Zenith's strategic focus on pursuing large-scale oil production and development opportunities in Africa, the Company said in March 2020 that it will hand over the Contract Rehabilitation Area ("CRA") to SOCAR.
The company said it will continue to operate the CRA and maintain oil production activities in Azerbaijan without interruption until the handover is completed.
Zenith said it will not proceed with previously planned well interventions in relation to wells C-37 and C-30 of the Jafarli oilfield, which is expected to increase the company's free cash base.
In June 2020, Zenith Energy company handed over the Contract Rehabilitation Area to SOCAR.
As a result of the handover, Zenith ceased all oil production operations in Azerbaijan and all field production personnel, approximately 170 employees, were transferred to a division of SOCAR.
The company confirmed that its Azerbaijan subsidiary received a payment for oil production of approximately $508,000 from SOCAR.
In November 2020, Zenith Energy Ltd. announced that, in agreement with Azerbaijan’s state oil company SOCAR, the Contract Exploration Area (CEA) of its 25-year REDPSA (Rehabilitation, Exploration, Development and Production Sharing Agreement) has been terminated.
Following the termination of the CEA, the company no longer has any oil production or exploration interests in the Republic of Azerbaijan.
The company’s Azerbaijan subsidiary has recently received payments for a total of approximately $85,000 from SOCAR for past oil production.
Further, the company's local subsidiary expects to receive a final payment in due course from SOCAR and shall update the market accordingly upon receipt.
Zenith Energy’s 1,200hp drilling rig (ZEN-260), as well as ancillary drilling equipment, has been successfully transported outside of Azerbaijan, where it had previously been deployed for drilling activities.
It is currently being held at a port storage facility, ready for immediate transportation, whilst the company awaits clarity on its respective future oil and gas production and exploration activities in the Republic of the Congo and the Republic of Tunisia.
Zenith Energy’s A-100 375hp workover rig (A-100) is operational and has undergone certain modifications to render it more suited to its intended operational activities. It is currently located in Azerbaijan. The company is evaluating, in consideration of its recent acquisitions, where and how it can be best deployed and will advise the market accordingly in due course.
The A-80 workover rig (A-80) was inherited by the company from Azerbaijan’s state oil company SOCAR at no cost following the commencement of operational activities in Azerbaijan. In accordance with the terms of the REDPSA, the A-80 was returned to SOCAR upon completion of the handover of the Contract Rehabilitation Area, announced to the market on June 25, 2020.
Muradkhanly-Jafarli-Zardab block of oil fields onshore Azerbaijan is now under the control of Azneft Production Union of Azerbaijan’s state oil company SOCAR and are operated by the Muradkhanli Oil and Gas Extraction Complex of Ali Amirov Oil and Gas Production Department. The fields cover an area of 149.25 hectares. Since coming under the control of Azneft production union, Muradkhanli,Jafarli, Zardab fields have been put under conservation for a period of two years under the OPEC+ agreement. No development works have been conducted at these fields after the Aran oil company ceased to have control over the block. No geological or technical works were carried out, as the wells are not operated. It is planned to conduct geological or technical works at these fields starting from 2021.
All wells at Muradkhanli-Jafarli-Zardab block of fields onshore Azerbaijan have been put under conservation for a period of two years under the OPEC+ agreement.
During the financial year ended March 31, 2020 (April 1, 2019 to March 31, 2020), Canadian Zenith Energy company produced 74,290 barrels of oil from its assets in Azerbaijan, as compared to 85,524 barrels of oil produced in the 2019 similar period.
Zenith Energy company sold 70,005 barrels of oil from its assets in Azerbaijan during the financial year ended March 31, 2020 (April 1, 2019 to March 31, 2020), as compared to 75,913 barrels of oil sold in the 2019 similar period.
he costs associated with the termination of Canadian Zenith Energy’s operations in Azerbaijan are approximately $0.5 million which are related to the transportation costs due to the relocation of the rig which was previously installed in Azerbaijan to its operations in Congo.
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