Major events in caspian countries' oil and gas industry for last week (Feb. 19-23)

Analysis Materials 26 February 2018 16:54 (UTC +04:00)

Azerbaijan to receive new Chinese oil production equipment

New Chinese oil production equipment for operation at Azerbaijan's largest block of oil fields Muradkhanli-Jafarli-Zardab will arrive in the country on March 16, 2018, Canada's Zenith Energy company, the project operator, said.

Zenith's A-80 workover rig, inherited from Azerbaijan's state oil company SOCAR, has recently undergone further upgrades to increase its capabilities and enable it to be utilized more extensively in the company's workover operations, according to a message from Zenith.

"The company is in the process of fitting hydraulic tongs to increase the pulling efficiency and speed of the rig, a new rig floor, and installing other ancillary equipment. The aforementioned upgrades are in addition to the comprehensive modernization Zenith's A-80 rig underwent in 2017 when field rehabilitation began in Azerbaijan," said the company.

Zenith Energy received delivery of the first consignment of oil production equipment from China in late December 2017. The order of the equipment was announced by Zenith on August 21, 2017. The equipment quickly cleared customs and is now being deployed in the field.

"Zenith has been advised that the second and final consignment of Chinese oil production equipment will arrive on March 16, 2018. The shipment will include the company's new set of blow-out preventers and drill pipe, as well as ancillary workover equipment," said the message.

As was announced on January 25, 2018, the company has signed a purchase agreement for an A-100 truck-mounted workover rig. This was purchased using the funds raised from Zenith's UK placing announced on January 24, 2018.

"The factory where the A-100 rig is under construction is located approximately 2 hours from the company's field locations, enabling Zenith's operational team to inspect progress twice a week. Delivery of the rig is expected in late April 2018," said Zenith Energy.

Azerbaijan's state oil company SOCAR and Zenith Aran Oil Company signed a Rehabilitation, Exploration, Development and Production Sharing Agreement (REDPSA) in March 2016 for a block that includes the Muradkhanli, Jafarli and Zardab oilfields. These fields cover an area of 642.2 square kilometers. Production under the agreement began in August of 2016.

Zenith holds a 80-percent participating interest in the three fields within the contract area, while SOCAR retains the remaining 20 percent. The duration of the agreement is 25 years, with a potential extension of five additional years.

SOCAR drilling subdivision reveals plans for 2018

The Integrated Drilling Trust of Azerbaijan's state oil company SOCAR plans to drill more than 100,000 meters in 2018, Iskender Shirali, head of the SOCAR Integrated Drilling Trust, told Trend Feb. 20.

He said that this year it is planned to complete and transfer about 60 wells to customers.

"This year we plan to drill nine Azerbaijani fields onshore and offshore, using new technical means and technologies," Shirali said.

He noted that both exploration and production wells will be drilled.

"Drilling operations will be carried out onshore in the Guba-Caspian and Absheron regions, as well as in the Baku and Absheron archipelagoes," Shirali said.

The SOCAR Integrated Drilling Trust drilled 115,200 meters in 2017.

SOCAR expanding capacity of underground gas storage facilities in Azerbaijan

Azerbaijan's state oil company SOCAR continues work to expand the capacity of underground gas storage facilities in the country, Iskender Shirali, head of the SOCAR Integrated Drilling Trust, said in an interview with Trend Feb. 20.

There are two gas storage facilities - Kalmaz and Garadagh - in Azerbaijan. Capacity of Azerbaijan's underground gas storage facilities allow to store more than 3.5 billion cubic meters of gas.

Shirali said that the Trust is drilling new wells on the territory of the Garadagh underground gas storage facility.

"The use of new generation drilling rigs significantly accelerates our work," he added. "Fourteen wells were drilled at the Garadagh underground gas storage facility in 2015-2017. In 2018, it is planned to increase drilling volumes there and to drill more than 27,000 meters by the end of the year."

He noted that the work on expanding the underground gas storage facility is important from the point of view of meeting the growing domestic demand for gas and commercial gas trade.

"It is considered that in order to ensure energy security, the volume of gas storage facilities should be at least 20 percent of the total domestic consumption level," Shirali said. "Presently, the capacities of the Garadagh and Kalmaz underground gas storage facilities account for about 35 percent of gas consumption in Azerbaijan."

It was earlier reported that in order to use commercial potential of gas storage facilities of Azerbaijan's state oil company SOCAR, Azerbaijan imports additional volumes of gas at low prices in summer, and in winter, when gas prices are higher, the country exports the purchased gas and receives additional income.

Total talks about creation of JV with SOCAR

Creation of JOCAP (Joint Operating Company Absheron Petroleum) by Azerbaijan's state oil company SOCAR and the French company Total for the development of Azerbaijan's Absheron gas field in the Caspian Sea will be completed in the second quarter of 2018, according to a presentation by Total, an operator of the field's development.

The presentation was made in Baku Feb. 20 at public hearings on the Environmental Impact Report of the drilling project.

The operation of the Absheron field is carried out by Total E&P Azerbaijan.

In the second quarter of 2018, the operation of the field will be transferred from Total E&P Azerbaijan to JOCAP, in which SOCAR and Total will have a 50 percent share each, according to the presentation.

JOCAP will undertake all commitments related to the field's operation and its impact on the environment.

Earlier, SOCAR and Total signed a framework agreement on the main contractual and commercial principles regulating the program of the first phase development of the Absheron field.

The first phase of the field's development envisages drilling of one well at a sea depth of 450 meters. The production will stand at 1.5 billion cubic meters of gas per year and these volumes will be used in Azerbaijan's domestic market.

Absheron's reserves are estimated at 326 billion cubic meters of gas and 108 million tons of condensate, according to the estimations of Total specialists.