We have always been absolutely sure that Azerbaijan would have its say in the gas sector as well – President Ilham Aliyev
Azeri, Chirag, Gunashli
Today it has been 22 years since the Contract of the Century was signed. According to the order of the National Leader of Azerbaijan Heydar Aliyev, this day, September 20, has been marked since 2001 as the professional holiday of oilmen of Azerbaijan, which is of big symbolic significance. It was September 20, 1994 when one of the outstanding events of the modern history of Azerbaijan occurred.
Production sharing agreement, a well-known contract which was signed by 11 big oil companies from 7 countries of the world in Baku and thereafter called the Contract of the Century, implied a joint development of Azeri, Chirag fields and deepwater Gunashli field (ACG) in the Azeri sector of the Caspian Sea.
Addressing the ceremony of launching the jacket for Shah Deniz II project at the Heydar Aliyev Baku Deepwater Jackets Factory on September 1, 2016, President of Azerbaijan Ilham Aliyev once again noted that it was on September 20, 1994 when the basis of all grandiose projects, implemented in Azerbaijan, was laid. The Contract of the Century is the main source for development and improvement operations performed in the country, sustainable economy and big currency reserves. Therefore, every year when celebrating their professional holiday, oilmen are once again analyzing their achievements and perspectives of oil-gas production determined on basis of the ACG agreement.
Successful implementation of oil and gas strategy by President of the Republic Ilham Aliyev, which was worked out by All-National Leader Heydar Aliyev, promoted an active development of Azerbaijan. The country is now contributing significantly to the energy security of Europe.
The Contract of the Century, which provided Azerbaijan with an opportunity to gain big political and economic dividends, has a particular role in this strategy. It was apparent that Azerbaijan is a sovereign state and a reliable partner. Leading companies and states of the world benefited from operating and investing in this country. Signing of agreements with 34 foreign companies after the Contract of the Century did not happen by chance. Alongside with this the Contract of the Century promoted high oil production growth in Azerbaijan. Oil production in History of Azerbaijan reached the highest rate, that is to say, from 9 ml. tons produced in 1997 it increased up to 51 ml. tons in 2010. In other words it increased by 5-6 times.
Azeri, Chirag fields and Deepwater Gunashli have produced 407 ml. tons of oil and 124.3 bcm of gas since the launch of development until September 1 of this year. Present monthly production on these fields reaches 2.7 ml. tons of oil and 1 bcm of gas.
It is gratifying to emphasize that participants of the Azeri-Chirag-Gunashli projects have been gaining income from profit oil for 17 years in a row. 225.5 ml. tons of profit oil of Azerbaijan was sold at world markets of Azerbaijan until September 1, 2016. This indicator keeps growing every year.
Azerbaijan’s profit oil accounts for 57.4% of its oil sold at the world oil markets.
As far as is known, Baku-Novorossiysk and Baku-Supsa were the oil pipelines transporting oil to the world markets in early years.
Construction and launch of the export pipeline Baku-Tbilisi-Ceyhan was one of the positive aspects of introduction of the Contract of the Century. This oil pipeline allowed transporting Azerbaijani oil to the world markets and Europe in rather higher volumes.
425 ml. tons of Azerbaijani oil were transported to the world markets until September 2016. Of this total, 312.9 mln fell to the share of Baku-Tbilisi-Ceyhan pipeline.
Shah Deniz
The Contract of the Century has once again proved that Azerbaijan is an oil country, while the discovery of the grandiose Shah Deniz field, bearing 1.2 bcm of gas and 240 ml. tons of condensate, its successful implementation helped Azerbaijan enter the world market as country capable of exporting higher volumes of gas to the world markets. Addressing the ceremony of the launch of the jacket for Shah Deniz II project, President Ilham Aliyev said: “Signing of the agreement about Shah Deniz project in 1996 was a successful stage despite the fact that no one at that period spoke about energy security in the world especially in Europe, gas projects did not relate to areas bringing profits. There was a certain hesitation observed. But we were absolutely sure that Azerbaijan would have its say in the gas sector as well”.
Shah Deniz field development is split into two stages: Stage I and Stage II. Stage I development of the field is carried out from Alfa platform. The platform consists of 15 wells and is located on the north-east of the field where the sea-depth reaches 100m.
There are 8 wells operating at Shah Deniz field now. Their average daily production totals 29 mln cubic meters and 7 thou tons of condensate. Shah Deniz field has produced 75 bcm of gas and 19 ml. tons of condensate since the commencement of production.
According to Shah Deniz I project, the South Caucasus Pipeline transported 5.5 and 41.5 bcm of gas to Georgia and Turkey as of September 1, 2016 respectively. Nowadays the mentioned pipeline is transporting 1.7 mln cubic meters to Georgia and 16.5 mln cubic meters of gas to Turkey every day.
Important measures have been taken to export gas, produced within the framework of Shah Deniz II, to the EU countries.
Practical work is underway to implement the Trans-Anatolian gas pipeline (TANAP) and Trans Adriatic gas pipeline (TAP) which together form a Southern Gas Corridor with the length of 3,500km.
In this way, Shah Deniz gas will be delivered by TANAP and further through Greece, Albania and Adriatic Sea to south of Italy from where it will be transported to the Western Europe.
Supply of Azerbaijani gas to Europe has been scheduled for 2019. The first stage envisages annual transportation of Shah Deniz gas to Europe in the volume of 10 bcm. This volume is expected to be increased twice as much at the following stages.
As the President of Azerbaijan said: “If the Contract of the Century is the contract of the XX century, the Shah Deniz project is the contract of the XXI century and it is of vital importance not only for Azerbaijan but for the European countries”.
Exploration of the Azerbaijani sector of the Caspian Sea
Now let’s dwell on the exploration work which has been underway in the Azeri sector of the Caspian Sea over the last years.
In 2010 the State Oil Company of the Republic of Azerbaijan discovered a new gas condensate field Umid in the Caspian Sea. The field was discovered as a result of the drilling of the prospect well #8 from the fixed offshore platform #1 installed at the sea area where the depth reaches 58m. This field was the first one discovered by SOCAR during the independence of our country.
According to initial estimates, the volumes of hydrocarbon reserves of Umid field reach 200 bcm of gas and 40 ml. tons of condensate.
There are wells #10 and #12 currently operating at this field. The production volume at Umid field has totaled 1.1 bcm of gas and 184.2 ml. tons of condensate since the beginning of the development. Drilling of the new production well #14 is carried out at the field. The depth of the well makes 6,500m. The drilling reached 6,170m till September 6. We rest big hopes on this well because operations on installation of 4 new jackets are carried out within the framework of development of the field. 19 production wells are planned to be drilled from these facilities. The information we receive upon drilling will be of valuable importance for us.
Discovery of Absheron field has been another achievement of recent years. The discovery of this field in September of 2011 at an area with the sea depth of 350-550m has been the result of the joint cooperation of SOCAR with the French companies Total and Gas de France.
According to initial data, the volumes of hydrocarbon reserves of Absheron field total 350 bcm of gas and 45 ml. tons of condensate.
Based on the PSA agreement, the contractor is currently preparing the Program on development of Absheron field. The following operations are scheduled within the framework of the annual production plan in order to produce initial gas volumes: to complete surveying concerning the development of the field till September of this year.
The project partners are expected to approve the program of development of Absheron field late in October of this year. The program on development will be submitted to the State Oil Company early in November. SOCAR is expected to approve the program of development till the end of 2017. The Final Investment Decision about the primary production plan is planned to be made till the end of January of 2017.
The drilling of the first production well has been scheduled for the 3rd quarter of 2017. Production of first gas volumes is expected in the 3rd and 4th quarters of 2019.
Big gas condensate fields like Absheron and Umid let us feel optimistic about aspects of discovery of new oil-gas fields in the Azeri sector of the Caspian Sea. New information obtained as a result of appraisal drilling confirms our assumptions in prospectivity of such structures as Babek, Nahchivan, Zafar, Mashal, Asima and Shafag.
Wells #90 and #124, drilled at Bulla Deniz field, have for the first time made it possible to reveal oil and gas presence in the Podkirmakin suite layers of the Baku archipelago fields. The obtained results have once again confirmed prospectiveness of lower pay horizons of Bulla field and promoted the acceleration of development. One prospect well and three production wells are planned to be drilled from the new jacket #6 in order to evaluate hydrocarbon reserves of the XIII horizon of the 5th tectonic block. Drilling of the prospect well #78 with a target depth 5900m has started since May 11, 2016. According to the project on development of the field, 5 new jackets, which shall drill 26 wells, are planned to be installed here during 2016-2025.
According to the available information, the forecast of the volume of hydrocarbon reserves of Babek structure totals 400 bcm of gas and 80 mln tons of condensate. 3D seismic work covering 622 square km was carried out at the structure in 2012. Obtained seismic materials have been processes and interpreted. A 3D model of Babek structure has been designed on basis of the obtained data. Due to the complication of drilling of prospect wells in conditions of high formation pressure, the drilling on Babek structure is postponed to future years.
The probability to discover promising structures at shallow area of Absheron peninsula is very high. Considering the importance of these areas in terms of their prospectiveness, as well as BP’s experience in exploration and development of shallow areas, SOCAR decided to carry out these operations together with BP. On December 22, 2014 SOCAR and BP Exploration Limited (Azerbaijan) signed an agreement about exploration, development and production sharing at shalow area around the Absheron peninsula (Azeri sector of the Caspian Sea).
On May 24, 2016 SOCAR and BP signed a Memorandum of Understanding in Baku about conduction of geological-exploration works at D230 block covering 3,222 square meters and located in the north part of the Absheron peninsula (Azeri sector of the Caspian Sea). I would like to note that the depth of the water in the area of D230 block varies from 150 up to 170m. The depth of the collectors totals 3,000-3,500m.
It is of big importance to search and explore oil-gas fields in Mesozoic deposits lying deep in the onshore and offshore sectors of Azerbaijan and having a complex geological structure.
Surveying the prospectiveness of search and exploration of Pliocene and Mesozoic deposits in the Absheron sector of the Caspian Sea and at onshore sites is found as an important and priority direction. SOCAR’s Geophysical and Geological Department held 3D seismic work to study the prospects of oil and gas presence in Mesozoic deposits of Goshadash structure. The obtained materials are now being processed and interpreted.
Foreign companies Statoil, Total and ConocoPhillips applied to SOCAR with the request to conduct an onshore exploration in Azerbaijan in order to determine the presence of oil in Mesozoic deposits. Based on the “Supplements to the joint survey agreement on primary exploration” signed between SOCAR and ConocoPhillips, Nobel Oil, geological and geophysical information is being collected and evaluated in order to expand the north-west part of Yevlah-Aghabedi deposits, evaluate areas and study the prospects.
Thus, implementation of big oil-gas projects, launched in Azerbaijan with the signing of the Contract of the Century is ongoing. Throughout the whole period of successful implementation of the country’s oil-gas strategy the oilmen of Azerbaijan have carefully coordinated the work of foreign partners as well as showed interest in new oil-gas production technologies applied here.
I am sure that our cooperation in the field of energy security will be continued in future as well. Owing to this cooperation, we will have our knowledge and experience enriched with new and useful ideas.
