BAKU, Azerbaijan, Dec.27. Trend presents a digest on oil and gas fields in Azerbaijan as of 2022.
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).
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
bp implemented planned maintenance (turnaround - TAR) works on the East Azeri platform. In accordance with the plan, production from the East Azeri platform was suspended on 13 June for 15 days to enable efficient maintenance, inspection and project work to be undertaken. The program was safely and successfully completed on June 28. During the TAR, various projects such as flare ignition system upgrade, nucleonic sources replacement and critical repair works were undertaken. The program scope also included some of the required brownfield works associated with the spare power scope on the East Azeri platform and the gas insulated switchgear (GIS) module installation to allow the ACE platform to draw power from the Azeri field optimizing power generation across the assets.
Total ACG output for the first three quarters made up 418,000 barrels per day (b/d) (around 114 million barrels or 15 million tonnes in total) from the Chirag (25,000 b/d), Central Azeri (105,000 b/d), West Azeri (108,000 b/d), East Azeri (63,000 b/d), Deepwater Gunashli (77,000 b/d) and West Chirag (40,000 b/d) platforms.
Azeri-Chirag-Gunashli completed 11 oil producer and two water injector wells in the third quarter of 2022. At the end of the third quarter of 2022, 137 oil wells were producing, while 33 were used for water and eight for gas injection.
bp spent around $337 million in operating expenditure and $1.204 billion in capital expenditure on Azeri-Chirag-Gunashli activities in the first three quarters of 2022. In the same period of 2021, the company expended $398 million in operating expenditure and $1.243 billion in capital expenditure. Thus, the company’s operating and capital expenditures on ACG dropped by 15.33 percent and 3.14 percent, respectively.
Associated gas deliveries from the Azeri-Chirag-Gunashli field to the state of Azerbaijan over the first three quarters of 2022 amounted to an average 8 million cubic meters (2.2 billion cubic meters 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 jacket of the Azeri Central East (ACE) platform built at the Heydar Aliyev Baku Deepwater Jackets Factory (BDJF) is ready for load-out to sail away to its permanent location in the ACG contract area in the Caspian Sea. The construction of the jacket was completed safely and on schedule. It will be loaded out onto the transportation barge STB-1 at the quayside of BDJF in preparation for sail-away. Oil production from the Azeri Central East platform is planned to start from 2024.
The Azeri Central East (ACE) sanction is the first major investment decision by the Azeri-Chirag-Gunashli (ACG) partnership since the extension of the ACG Production Sharing Agreement (PSA) to 2049 was agreed in 2017. The ACE project is a $6 billion development which includes a new offshore platform and facilities designed to process up to 100,000 barrels of oil per day. The project is expected to produce up to 300 million barrels over its lifetime.
The ACE project is centred on a new 48-slot production, drilling and quarters platform located mid-way between the existing Central Azeri and East Azeri platforms in a water depth of approximately 140 metres. The project will also include new infield pipelines to transfer oil and gas from the ACE platform to the existing ACG Phase 2 oil and gas export pipelines for transportation to the onshore Sangachal terminal.
The ACE jacket weighs 16,000 tonnes and stands 153 metres high. It contains three risers - one water injection, one oil export and one gas export. The jacket will be installed in a water depth of 137 metres.
Oil production at Azeri-Chirag-Gunashli block of fields offshore Azerbaijan is forecast at 153.1 million barrels in 2022, as compared to 167.01 million barrels in 2021. As such, ACG output will drop by 8.33 percent year-on-year. As for 2023, the block’s production will decrease by 15.35 percent and amount to 129.6 million barrels.
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
Russian PJSC LUKOIL announced in February completion of the transaction of buying a 9.99% interest in the Shah-Deniz gas project from PETRONAS. The transaction value was approximately $1.45 billion. Following the completion of the deal, LUKOIL increased its share in the project from 10% to 19.99%.
The Shah Deniz partnership commenced in July the define stage of a new project which will allow the Shah Deniz Alpha (SDA) platform to receive its power supply from the Shah Deniz Bravo (SDB) platform through a subsea cable. The project is designed to significantly reduce SDA’s operational emissions and increase the platform’s operational efficiency, providing a robust, long-term, high-availability power supply.
bp started a planned maintenance program (turnaround - TAR) on the Shah Deniz Alpha platform and Shah Deniz 1 facilities inside the Sangachal Terminal. In accordance with the plan, production from the Shah Deniz Alpha platform was be suspended on 14 August for 14 days to enable efficient maintenance, inspection and project work to be undertaken. In late August, bp completed the maintenance. All of the program scopes were completely delivered, and the production and export systems of the platform and the terminal were put into operation.
Maersk Drilling said it is looking into recycling its drilling
rig, as it completed Shah Deniz operation. The rig is cold-stacked
outside Baku.
The report released by the Chamber of Accounts reveals that Shah
Deniz field’s gas production as of 2022 is forecast at 24 billion
cubic meters, before reaching to 25.4 billion cubic meters in 2023.
The field’s condensate production is forecast at 33.8 million
barrels in 2022 and 36.4 million barrels in 2023, compared to 34.08
million barrels in 2021.
The Asian Development Bank (ADB) expects that the total production
at the Shah Deniz will exceed 26 billion cubic meters by 2024.
The incomes of the State Oil Fund of Azerbaijan (SOFAZ) from sales of gas and condensate produced at the Shah Deniz field increased from January through November 2022 totaling $1.35 billion, up by almost two times compared to the first 11 months of 2021 ($730.7 million).
Incomes from the sale of condensate extracted from the Shah Deniz field, as of early December 2022, amounted to $328.5 million, which is 18.1 percent more compared to the same period of last year ($278.17 million).
In the first nine months of the year, the field produced about 18 billion standard cubic meters (bscm) of gas and more than 3 million tonnes (about 27 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 73 million standard cubic meters of gas per day or more than 26.5 bcma.
In the third quarter of 2022, production from the West South flank started up as part of the Shah Deniz 2 project. On the East North flank, subsea installation activities commenced with the first subsea umbilical installation successfully completed in the third quarter.
In the third quarter of 2022, the Shah Deniz Alpha platform had a planned maintenance program (turnaround - TAR) and then the drilling rig went back on warm stack.
The Istiglal and Maersk Explorer rigs have already drilled 21 wells in total for the Shah Deniz 2 project. These include five wells on the North flank, four wells on the West flank, four wells on the East South flank, five wells on the West South flank and three wells on the East North flank.
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 field produced a total of 6 billion cubic meters of gas from the date of its commissioning till November 1, 2022. The gas field was put into operation in 2012. Currently, 4 production wells are functioning there. During the reporting period, more than 950,000 tons of condensate was extracted from the field.
Work on the reconstruction of the Umid-1 platform at the Umid-Babek block is nearing completion. The main goal of the project on Accelerating production from "Umid-1" stationary offshore platform is to overcome bottlenecks in transportation from the platform and increase production by drilling new wells. Three million cubic meters of gas and 470 tons (3,600 barrels) of condensate are produced daily at the field and are transported via SOCAR's technological system to the Dashgil terminal. Following the above project’s implementation, it’s planned to increase daily gas and condensate production to 8.1 million cubic meters and 1,200 tons (9,000 barrels), respectively. The project envisages reconstruction of the platform, construction of a 54-kilometer 20-inch (500 mm) underwater pipeline and its onshore section with a length of nearly 3.7 kilometers, a gas pipeline from the Dashgil-2 terminal and construction at the Sangachal head installation of a point for connection to the SOCAR gas transmission system.
UK-based Aquaterra Energy, a leader in global offshore energy engineering solutions, was awarded a high-pressure high temperature (HPHT) subsea riser contract with oil and gas operator, Umid Babek Operating Company (UBOC), for the exploration of its HP well on the Babek project in Azerbaijan.
Aquaterra Energy will deliver its 15,000 psi subsea riser system, utilising its AQC-SR connector range, as part of UBOC’s drilling program for the BX-01 exploration well located at the Babek field. Aquaterra Energy will provide a complete end-to-end managed service, as a fully independent riser system and connector OEM, which will be operated via a jack-up MODU, in water depths of 62 meters.
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