Major events in caspian countries' oil and gas industry for last week (April 16-20)

SOCAR talks on development of new fields

Azerbaijan's state oil company SOCAR is carrying out significant work to develop new oil and gas fields in the country, SOCAR Vice President for Geology and Geophysics Bahram Huseynov said, according to the message posted on the SOCAR website April 16.

Huseynov noted that this work is being done to meet the growing demand for gas in Azerbaijan.

"We are on the threshold of a new stage of the work regarding the Karabakh and Umid fields," he added. "The initial detailed design phase regarding these fields will start in the near future. Design of the drilling of the first exploratory well also continues on the Babek structure. The work continues on the engineering design as part of scheme of the initial gas production from the Absheron field, and the preparation is underway for making final investment decision on the project."

In 2016, 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 470 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. It is planned to produce up to 4 billion cubic meters of gas as the second stage.

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.

The Absheron project will be operated by JOCAP (Joint Operating Company Absheron Petroleum) (50 percent SOCAR, 50 percent Total).

The Karabakh oil and gas field, opened in 2000, is located 130 kilometers east of Baku. The depth of the sea varies in the range of 250-450 meters at the field. The initial oil reserves of the field are estimated at 100 million tons.

SOCAR is the operator of the field's development. The company expects to obtain the first production from the field in 2021.

SOCAR announced the opening of Umid field in 2010.

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 Babek structure in the Caspian Sea was signed between SOCAR and SOCAR Umid Oil and Gas Ltd on January 12, 2017.

According to the results of drilling of the first exploration well, the volume of the field reserves reach over 200 billion cubic meters of gas and 40 million tons of condensate. Umid field is located 75 kilometers from Baku.

The reserve of Babek structure may stand at 400 billion cubic meters of gas and 80 million tons of condensate, according to preliminary data.

Wood Mackenzie assesses Azerbaijan’s hydrocarbon production potential

Events in 2017 and 2018 set a positive framework for Azerbaijan's future oil and gas production, Ashley Sherman, Principal Research Analyst - Caspian at Wood Mackenzie told Trend.

Extension of the contract for development of Azeri-Chirag-Guneshli (ACG) block of oil and gas fields to 2050 and first production from Shah Deniz Phase Two (on schedule for H2 2018) are globally significant milestones that will help shape the outlook for several decades, she said.

"However, oil and gas each have increasingly different trends. Azerbaijan's oil production is declining and the goal is to manage that decline as well as possible - at ACG and SOCAR-operated fields. In contrast, sales gas output will almost double by 2025 - thanks to Shah Deniz Phase Two alone," noted Sherman.

The principal research analyst pointed out that a priority for Azerbaijan and SOCAR is to diversify the outlook, so that production and international investment are not so reliant on these two megaprojects.

"Respective talks with Total and Statoil to develop Umid-Babek and Karabakh are ongoing in 2018," she said, adding that drilling for early production at the Absheron gas-condensate field has already started.

Equally, Azerbaijan's diverse potential extends across the energy value chain, said Sherman.

"The SOCAR Polymer and SOCAR Carbamide projects will be launched in 2018. Progress on the larger SOCAR GPC petrochemical project is also a top priority," she said Sherman.

Wood Mackenzie is an international consulting company providing a wide range of services in the fuel and energy industry. The company was founded in 1973 and its headquarters is located in Edinburgh, Scotland.

In Azerbaijan, Wood Mackenzie works both with representations of its global clients and with local companies.

Azerbaijan reveals earnings from its biggest oil project

From early 2001 and until April 1, 2018, the State Oil Fund of Azerbaijan (SOFAZ) received over $130.55 billion as part of the project to develop the Azeri-Chirag-Gunashli (ACG) block of oil and gas fields in the Azerbaijani sector of the Caspian Sea, a source in SOFAZ told Trend April 19.

"In January-March 2018, SOFAZ received $2.065 billion within the ACG project," said the source.

The contract for developing the ACG field was signed in 1994. A ceremony to sign a new contract on development of the ACG block of oil and gas fields was held in Baku Sept. 14, 2017.

In January 2018, SOFAZ also received the first bonus payment of $450 million under the new agreement to develop the ACG block.

Revenues of SOFAZ as part of the project to develop the ACG block of oil and gas fields in the Azerbaijani sector of the Caspian Sea are expected to total nearly $5.195 billion in 2018.

The new ACG participating interests are 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.

Azerbaijan finances over 78% of its share in Southern Gas Corridor

Up to 20 April 2018, Azerbaijan's Southern Gas Corridor CJSC has invested over $9 billion as part of financing its share in the projects, Trend learned from the CJSC.

The total funding needs in 2014-2020 required for the financing of the company's participating interests in the projects is $11.5 billion, said the company.

"Up to 20 April 2018 Southern Gas Corridor CJSC has invested over $9 billion (78.1 percent) of the total of $11.5 billion (total funding needs in 2014-2020) required for the financing of its participating interests in the projects," said the company.

The Southern Gas Corridor is one of the priority projects for the EU and provides for the transportation of 10 billion cubic meters of Azerbaijani gas from the Caspian region through Georgia and Turkey to Europe.

At an initial stage, the gas to be produced as part of the Stage 2 of development of Azerbaijan's Shah Deniz field is considered as the main source for the Southern Gas Corridor projects. Other sources can also connect to this project at a later stage.

As part of the Shah Deniz Stage 2, the gas will be exported to Turkey and European markets by expanding the South Caucasus Pipeline and the construction of Trans-Anatolian Natural Gas Pipeline (TANAP) and Trans Adriatic Pipeline (TAP).

Terms of future drilling at Azerbaijan’s Absheron gas field announced

Plans for future drilling at Azerbaijan's Absheron gas field in the Caspian Sea after completion of the first well are not frozen yet, an informed source in Azerbaijan's oil and gas market told Trend.

The first well should be completed by end Q2-2019, noted the source.

Decisions on next phase will be taken if a profitable project can be agreed between French Total and SOCAR, added the source.

In 2016 Azerbaijan's state oil company 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 470 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. It is planned to produce up to 4 billion cubic meters of gas as the second stage.

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.

The Absheron project will be operated by JOCAP (Joint Operating Company Absheron Petroleum) (50 percent SOCAR, 50 percent Total).

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