BAKU, Azerbaijan, Dec.29
By Leman Zeynalova - Trend:
Azeri-Chirag-Gunashli
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.
ACG participating interests are: bp (30.37 percent), SOCAR (25.0 percent), MOL (9.57 percent), INPEX (9.31 percent), Equinor (7.27 percent), ExxonMobil (6.79 percent), TPAO (5.73 percent), ITOCHU (3.65 percent), ONGC Videsh Limited (OVL) (2.31 percent).
In May 2021, BP successfully and safely completed the 15-day planned maintenance program at West Azeri platform offshore Azerbaijan.
All activities envisaged in the program, namely, inspection and project works were successfully completed ahead of the schedule on May 4 and production from the platform began.
In accordance with the plan, production from the West Azeri platform was suspended on 22 April for 15 days to enable efficient maintenance, inspection and project work to be undertaken. During the TAR, various projects such as flare tips changeout and ignition system upgrade, nucleonic sources replacement and critical repair works were undertaken.
In June, Petrofac, in a joint venture (JV) with the State Oil Company of the Republic of Azerbaijan (SOCAR) secured a new contract valued at around US$25 million to support the Azeri Central East (ACE) project operated by bp in Azerbaijan. The scope of work includes the provision of Commissioning Technicians and other specialist personnel, mobilization and associated services to support the project at both onshore and offshore work sites in-country.
In the first half of 2021, the Azeri-Chirag-Gunashli block completed a high-density seismic survey aimed to better understand the reservoir and target production and water injection activities to maximize efficient production from the ACG field. The survey activities, which lasted six months and involved three vessels, were delivered safely and on schedule. In addition to the crewed vessels, an unmanned surface vessel (USV) and a mini remotely operated underwater vehicle (ROV) were utilized during the survey.
bp announced that on 18 September 2021 the field produced the 4 billionth barrel of oil. The 4 billion barrels total production was transported primarily via the Baku-Tbilisi-Ceyhan (BTC) and Western Route Export pipelines from the Sangachal terminal near Baku across Azerbaijan, Georgia and Turkey to the world markets.
The 25-day maintenance program, which began on September 23, 2021 on the Chirag platform at the Azeri-Chirag-Guneshli block, was successfully completed on October 16, two days ahead of schedule.
The safe implementation of all the work envisaged by the program was ensured, the production and export systems of the platform were launched. The scheduled maintenance program included inspection and renovation work, including replacement of burner tips, upgrades to the ignition system, replacement of transmission valves and overhauls. The bulk of the work under the program also included work on the Chirag gas lift project, which could only be completed after the platform was shut down. This project was intended to extend the lifespan of the platform, increase production and ensure a safer and more reliable operation of the platform.
On November 30, 650,000 barrels of crude oil from Azeri-Chirag-Gunashli safely travelled all the way from the Sangachal terminal near Baku across Azerbaijan and Georgia and onto the Stamos, the 1000th tanker that sailed the cargo to Italy.
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.
Project status
The Azeri-Central East (ACE) platform project at Azerbaijan’s Azeri-Chirag-Gunashli (ACG) block of fields is progressing according to the plan and the delivery of the final major equipment packages are now complete.
At the Heydar Aliyev Baku Deepwater Jackets factory (BDJF), the jacket fabrication continues. The final roll-up of the leg frames have been completed and the assembly of the jacket towers has already commenced. Subsea fabrication of the structures and spools is close to completion. Subsea installation has commenced and the subsea construction vessel ‘Khankendi’ has now installed all subsea crossing mattresses and the gas pipeline tie-in structure.
Overall, the Azeri-Central East (ACE) platform project at Azeri-Chirag-Gunashli block offshore Azerbaijan is currently 62 percent complete. The project construction activities are currently at peak and involve about 5,500 people across Baku, Europe and the UK, with the majority being Azerbaijani nationals. All engineering, procurement and fabrication works remain on track to support first production from the ACE project in 2023.
Fabrication activities on the topsides and drilling facilities continue at the fabrication yard in Bibi-Heybat. These include progressing the pipe erection and hydrotesting, cable pulling and installation of the final topsides weather deck panel, with the lower derrick now installed. All living quarters modules are successfully installed on the topsides; integration and internal hook-up activities have now commenced. Drilling mechanical completion handovers are progressing as planned, drilling commissioning at grade has commenced in the main drilling support and drilling equipment set modules, and will continue into 2022.
The revenues of the State Oil Fund of Azerbaijan (SOFAZ) from the Azeri-Chirag-Guneshli (ACG) block of fields in the Azerbaijani sector of the Caspian Sea from January through November 2021 amounted to $5.272 billion. As such, SOFAZ's revenues increased by 58 percent compared to the same period in 2020 ($3.336 billion). The total revenue from ACG from 2001 to December 1, 2021 amounted to $ 154.677 billion.
The volume of oil production at the Azeri-Chirag-Gunashli (ACG) block of fields in 2022 is forecasted to decrease. According to the forecast, this indicator will amount to 170.1 million barrels, down by 1.5 million barrels (0.87 percent) compared to the 2021 forecast. It’s also forecasted that by the end of this year, 171.6 million barrels of oil will be produced. About 545 million tons of oil have been produced since the commissioning of the Azeri-Chirag-Gunashli (ACG) block of fields.
In the first three quarters of 2021, bp spent more than $398 million in operating expenditure and about $1,243 million in capital expenditure on ACG activities. During the third quarter, ACG continued to safely and reliably deliver stable production. Total ACG production for the first three quarters was on average about 461,000 barrels per day (b/d) (about 126 million barrels or 17 million tonnes in total) from the Chirag (29,000 b/d), Central Azeri (109,000 b/d), West Azeri (115,000 b/d), East Azeri (77,000 b/d), Deepwater Gunashli (87,000 b/d) and West Chirag (44,000 b/d) platforms. At the end of the quarter, 136 oil wells were producing, while 30 were used for water and eight for gas injection. During the first three quarters of 2021, ACG completed seven oil producer and three injector wells. During the three quarters, ACG delivered an average of 8 million cubic metres per day of ACG associated gas to SOCAR (2.2 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.
Shah Deniz
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 became as follows: 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).
In October 2021, PJSC LUKOIL announced conclusion of an agreement on acquiring 15.5 percent interest in the Shah Deniz from PETRONAS. The value of the transaction amounted to $2.25 billion. Following completion of the sale, LUKOIL's interest in the project was expected to increase from 10 percent to 25.5 percent. PETRONAS said that the sale of its stake in Azerbaijan’s Shah Deniz gas and condensate field to Russia’s LUKOIL follows PETRONAS’ continuous review of its business portfolio to ensure a better fit in its growth strategy in the increasingly evolving energy landscape. LUKOIL said it is in talks to increase its share in Azerbaijan’s giant Shah Deniz gas and condensate field.
On December 9, bp decided to increase its holding in the giant Shah Deniz gas field in the Caspian offshore Azerbaijan through negotiations with the Shah Deniz partners on implementation of bp’s pre-emptive rights on PETRONAS previously announced sale of its share. The company has entered into an agreement to purchase from Petronas a 1.16 percent interest in the bp-operated Shah Deniz field for USD $168 million based on the same commercial terms of the Shah Deniz transaction announced earlier by PETRONAS. As a result, bp will hold a 29.99 percent interest in Shah Deniz and will remain the operator of the field. The transaction is expected to be finalized by the end of January 2022.
On December 10, PJSC LUKOIL announced the signing of amendments to the agreement concluded in October 2021 on the acquisition of a share in the Shah Deniz project from PETRONAS. In accordance with the new arrangements, the share acquired by LUKOIL is reduced from 15.5 percent to 9.99 percent with proportional decrease in the transaction value from $2.25 billion to $1.45 billion. The conclusion of the amendments resulted from negotiations with the Shah Deniz project partners on implementation of pre-emptive rights.
Following PETRONAS’ decision to sell its stakes in the production sharing agreement for the exploration and development of the Shah Deniz field in the Azerbaijani sector of the Caspian Sea, SOCAR acquired 4.35 percent of stakes from PETRONAS in accordance with the terms of the agreement between Shah Deniz project partners. LUKOIL and bp, both partners at Shah Deniz consortium, acquired the other part of PETRONAS’ 15.5 percent stakes in the project. Ultimately, SOCAR's direct participation in the project is growing to 14.35 percent. The respective agreement is expected to enter into force in January 2022.
The proven reserves of Shah Deniz are estimated at 1.2 trillion cubic meters of gas and 240 million tons of condensate.
Project status
On December 31, 2020, the Southern Gas Corridor began to supply Shah Deniz 2 gas volumes to Europe. It is expected that the volume of Shah Deniz gas deliveries to Europe as of 2021 will stand at 7.8 billion cubic meters.
In the first three quarters of 2021, Shah Deniz spent $1.57 billion in operating expenditure and around $524 million in capital expenditure, the majority of which was associated with the Shah Deniz 2 project.
This year, Shah Deniz celebrates its 25th anniversary since the signing of the Shah Deniz Production Sharing Agreement (PSA). The PSA was signed on 4 June 1996 between SOCAR and a consortium of foreign companies. It was ratified by the Milli Majlis and became effective on 17 October the same year. The project is the second after ACG largest foreign direct investment made in Azerbaijan and as such it has further strengthened the country’s economy. The Shah Deniz 25th anniversary marks an important milestone in the new history of Azerbaijan’s oil and gas industry.
During the third quarter, the Shah Deniz field continued to provide deliveries of gas to markets in Azerbaijan (to Azerkontrakt), Georgia (to GOGC), Turkey (to BOTAS), to the BTC Company in multiple locations and to buyers in Europe.
In the first nine months of the year, the field produced around 16 billion standard cubic metres (bcm) of gas and around 3 million tonnes (around 24 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 about 70 million standard cubic metres of gas per day or more than 25 bcma.
In the third quarter of 2021, the Shah Deniz 2 project reached full production rates from the East South flank following its safe start-up in the second quarter of the year. As a result of the production ramp-up from the East South flank, in July 2021, the daily production rates of the Shah Deniz Bravo platform reached the Shah Deniz Alpha rates for the first time.
On the West South flank, the pipelay barge Israfil Huseynov completed the subsea pipeline construction activities in the third quarter. The scope was delivered ahead of schedule with the barge achieving its best ever performance and highest productivity. This has allowed to commence subsea pipelaying activities on the East North flank in 2021, originally planned for the second quarter of 2022.
Overall, all West South subsea installation activities are progressing on schedule for the production start-up planned for the middle of 2022.
In the third quarter, the project also continued preparation activities for the production start-up from the final 5th well on the North Flank planned for the fourth quarter of 2021.
During the third quarter of 2021, the Shah Deniz Alpha platform rig was on warm stack.
The Istiglal and Maersk Explorer rigs have already drilled 21 wells in total and completed 19 out of those for Shah Deniz 2 production and subsequent ramp-up. The completed wells include five wells on the North Flank, four wells on the West Flank, four wells on the East South Flank, four wells on the West South Flank and two wells on the East North flank. One well on the West South flank and one well on the East North flank were drilled to final depth and suspended.
As of December 1, 2021, production at Shah Deniz amounted to 147 billion cubic meters of gas. In January - November 2021, production amounted to 20.4 billion cubic meters.
Maersk Explorer semi-submersible rig, operating for Shah Deniz development under the contract with bp, ended its mission in April 2021.
The Shah Deniz consortium announced on July 6, 2021 commencement of production from the East South flank at 540m water depth – a major milestone planned for 2021 and achieved safely and on schedule. Production from this deep-water flank started up on 30 June 2021 following the successful completion of all related offshore construction and commissioning works. The new East South production flank consists of four wells, two new flowlines and a number of subsea structures connected to the world class Shah Deniz reservoir.
In August 2021, Italian Saipem noted that installation activities for Shah Deniz 2 project will last until Q1 2023. Work relating to the Shah Deniz 2 (Call-off 007) contract continued for the scope of work encompassing the transportation and installation of production systems and subsea facilities, the laying of optical fiber cables and production umbilicals, start-up, supply of the crew and operational management of the new vessel, with installation activities envisaged until the first half of 2023.
In September 2021 Azerbaijan and Turkey extended the deal to supply gas from Shah Deniz 1. The 2001 contract for delivering 6.6 billion cubic meters of gas per year to Turkey from Azerbaijan expired on April 16, 2021.
In November 2021, Shah Deniz 2 achieved one more important milestone by starting up production from the fifth well on the North Flank.
It is predicted that 22.8 billion cubic meters of gas will be produced from the Shah Deniz gas condensate field in the Azerbaijani sector of the Caspian Sea in 2022, which is seven percent or 1.5 billion cubic meters more than the forecast at the end of 2021. According to forecasts, by the end of 2021, 21.3 billion cubic meters of gas will be produced from Shah Deniz, as compared to 18 billion cubic meters in 2020.
It is also predicted that 33.3 million barrels of gas and condensate will be produced from the field in 2022, which is 4.7 percent or 1.5 million barrels higher than the forecast for 2021. In addition, by the end of 2021, 31.8 million barrels of condensate will be produced from Shah Deniz, as compared to 29 million barrels in 2020.
Revenues from the sale of gas and condensate from the Shah Deniz field from January through November 2021 are estimated at $730.707 million, including $278.178 million from the sale of condensate. SOFAZ's revenues from the sale of gas and condensate from the Shah Deniz field increased by 164.24 percent compared to the same period in 2020, when this figure stood at $276 million. The total revenue from the sale of gas and condensate from the Shah Deniz field from 2007 to December 1, 2021 amounted to $4.397 billion.
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.
Project status
Total number of natural gas wells at Bahar-Gum Deniz oil and gas fields in Azerbaijan stands at 92. Of this number 12 accounts for active natural gas wells, 11 for inactive natural gas wells (shut in) and 69 for abandoned natural gas wells. The block has a total of 127 crude oil wells, including 30 active crude oil wells, 21 inactive crude oil wells (shut in) and 76 abandoned crude oil wells. Total active wells stand at 42, total inactive wells (shut in) 32 and total abandoned wells are equal to 145. The total number of wells stands at 219.
Gas production at Bahar field stood at 574,281 cubic meters per day in Q3 2021, as compared to the budgeted volume of 669,811 cubic meters per day. The field’s production stood at 545,164 cubic meters per day in September, as compared to 578,268 cubic meters per day in August. Bahar field produced 591,490 cubic meters per day in Q2.
Bahar-Gum Deniz oil and gas fields fell short of the planned production for September 2021. The volume of oil and condensate production at the block stood at 2,006 tons, as compared to planned 3,320 tons for September 2021, thereby showing 40 percent difference between the planned and actual output. Free gas production was equal to 16.354 billion cubic meters versus the planned 25.032 billion cubic meters. The block produced 1.916 billion cubic meters of solution gas, while the planned output stood at 2.722 billion cubic meters.
The volume of gas sales from Bahar field stood at 480,417 cubic meters per day in September, as compared to 524,872 cubic meters per day in August. The average volume of gas sales amounted to 516,962 cubic meters per day in Q3 2021.
Average oil production at Gum Deniz field stood at 73 tons per day in Q3 2021, as compared to the budgeted volume of 77 tons per day. The field’s production stood at 67 tons per day in September, as compared to 61 tons per day in August. Gum Deniz field produced on average 70 tons per day in Q2. Oil sales from Gum Deniz field averaged at 75 tons per day in Q3 2021. The highest volume of gas production in Q3 was recorded in July with 95 tons per day, while in August and September it stood at 63 tons per day and 67 tons per day, respectively.
The table below shows the work carried out at Gum Deniz:
|
Field/Location |
Work Description |
Status |
|
Gum-Deniz,Causeways PLT2 |
Repair& reconstruction at PLT2Gum-Deniz to carry out WO jobs in the wells 351& 352. Completed hammering of 11ea piles out of 12" pipes. Connecting hammered piles üith existing metal sheets' 600& 400steel beams. Continue with welding and mounting of 4ea 12" pipes for rotary supports. |
in progress |
|
Gum-Deniz,Causeways |
Installation and connection of piles made of 10"pipes in front of PLT66, for the repairof bad parts of the ocauseway and the vehicle overpass. Completed hammering of 4piles and connection of 400mm double beams between the piles. Additionally, hammering of new piles on the east side of previously hammered piles. |
in progress |
|
Gum-Deniz,Causeways PLT9 |
Connection of 600mm i-beam with 10x10panels installed on the causways' piles for the widening of the vehicle pass at the causeway in between the crossroads and PLT9where 6/0.4kV Distribution Unit No. 13located. |
in progress |
|
Gum-Deniz, PLT2 |
Concerning WO of wells 203;297; 716; 504at PLT2, skidding and installation of the UPT-50pulling unit pedestal and the pipe racks |
in progress |
|
Gum-Deniz, Causeway, PLT209 |
Carrying out works on installation of 12th,13th 14th & 15th 8x10x0,4m & 10x10x0,6m sized metal panels at PLT209. |
in progress |
|
Gum-Deniz, Fab.shop |
Welding and setting up works in the Fab. shop on the cable spoolerused during WO operations (POOH& RIH) at ESP wells of Gum-Deniz field." |
in progress |
|
Gum-Deniz,Causeways |
Continuing welding gas lines and elbows on 2.5" gaslift line layed from PLT9to PLT450 |
in progress |
The table below shows the work carried out at Bahar field:
|
Field/Location |
Work Description |
Status |
|
Bahar, GZU-2 |
Proceeding the installation of 12" gas flow line pipe supports along the existing bridge according to the project. Expansion of the existing comb separatorarea in the south-western part of the working area. Reinforcement of lines coming from wells in the southern part of the existing working site and installation of 6x13m service platform. Have started installation of pipe fittings and comb type separator fabricated in the workshop, on the pannels |
in progress |
|
Qum-D niz, PLT65 |
Moving construction crew to PLT65to carry out restoration and repairs as well to prepare wells 187, 189, 190& 191forWOs. Installation of 8th panel 60mm 10x10. Fabrication of pedestal on the east side of the well191. |
in progress |
|
Bahar, PLT20 |
Carrying out repairand restoration works in order to prepare the well 206forWO located at PLT20of "Bahar" field, Completed assembling the 4th 10x10m panel. Installation of new panel, rig on the pedestal and fixing-tighting works. |
in progress |
|
Bahar, PLT48 |
Repair& installation works as preparation of wells 145& 146at PLT48Bahar field forWO ops. |
completed |
Oil and gas production at Bahar-Gum Deniz block is expected to stand at 0.238 million barrels and 278.775 million cubic meters in 2022, respectively.
Umid-Babak
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.
Project status
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.
Production ramp up continues at Umid-Babek structure, which is developed by own resources of Azerbaijan’s state oil company SOCAR.
Babak field contains 400 billion cubic meters of gas and Umid field has at least 200 billion cubic meters of natural gas.
The production rate is increasing with the drilling of new fields. It is also planned to construct additional platforms. It is planned to build and install a platform at Umid field (Umid 2) and conduct exploratory drilling in the nearest Babak structure. Dashgil 2 terminal with capacity of 24 million cubic meters per day is under construction for initial gas and condensate processing. The product will be transported via the underwater pipeline of the terminal. Construction of the terminal has been going on since September 2019.
The joint venture of Azerbaijan’s state oil company SOCAR and the US-based KBR company plans to complete the detailed design phase for Umid-2 project.
The maximum production potential of Umid-1 platform at Azerbaijan’s Umid gas and condensate field has increased to 6.7 million cubic meters of gas and 950 tons of condensate. The increase was achieved as a result of commissioning the well #18 with record figures.
Umid field started industrial production with the launch of U1-10 well from Umid-1 platform. Currently, the field has three production wells - U1-10, U1-14 and U1-16 with output volume of 3 million cubic meters of gas and 480 tons of condensate per day.
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 received payments for a total of approximately $85,000 from SOCAR for past oil production.
Zenith Energy’s 1,200hp drilling rig (ZEN-260), as well as ancillary drilling equipment, was successfully transported outside of Azerbaijan, where it had previously been deployed for drilling activities.
Project status
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.
Canadian Zenith Energy company has fully repaid one and partially settled the second of the two credit agreements entered into with a local financial institution in Azerbaijan for a total amount of approximately $442,000. The company had two general line of credit agreements for an outstanding combined principal amount of $480,000; interest has continued to accrue.
Following the aforementioned payments, the outstanding principal amount in relation to the remaining Credit Agreement is $54,650 plus accrued interest.
SOCAR is preparing an action plan to increase production at Muradkhanli oil field. Currently SOCAR’s Azneft production union continues development work at Muradkhanli and Jafarli fields.
It is planned to change the production method of low-productivity wells at Azerbaijan’s Jafarli field. It will allow to increase the production rate of those wells, which are currently using the fountain method. Moreover, SOCAR plans to repair inactive wells at Jafarli field and resume their production.
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