RIG IS REQUIRED

It is no secret that revenues obtained by Azerbaijan from the implementation of oil projects have given impetus to the development of almost all sectors of this country's economy. Certainly, this primarily applies to the oil and gas sector itself - while at the very start of the implementation of its oil strategy the republic almost completely depended on foreign investments, currently SOCAR (Azerbaijan's State Oil Company) is actively investing in projects abroad and it is all the more so capable of independently developing promising structures. We already have relevant experience for this, and infrastructure required is being established.

The path to big gas

As is known, all twists and turns that the start of exports of large volumes of gas from Azerbaijan to world markets involves are nearing a logical end. After the final scheme for the transportation of gas to Europe (the Trans-Adriatic gas pipeline project and the Nabucco-West gas pipeline project) is approved, works will start to build the gas pipelines and to extract gas. We should recall that so far Azerbaijan's proven gas reserves are over 2.5 trillion cubic metres, of which 1.2 trillion are at the Shah Deniz [Sah Daniz] offshore gas condensate field alone. Albeit, the amount of forecasted gas reserves is considerably higher - if Azerbaijan's proven extractable oil and gas reserves total 4.5bn of fuel equivalent, then the forecasted reserves are as high as 10bn tonnes.

It needs to be noted that Azerbaijan has ambitious plans to increase its potential of gas exports up to 25bn cu.m. by the year 2020 and to 40bn cu.m. by 2040. The reason is that the gas condensate fields Umid (with reserves of 200bn cu.m.) and Absheron (350bn cu.m.) have been discovered in the country in the past few years. Works are also under way within the framework of phase two of the development of the Shah Deniz. There are plans to develop the Safaq-Asiman, Naxcivan, Zafar, Masal, Babak and other promising structures and also deep-seated gas at Azeri-Chirag-Guneshli [Azari-Gunasli-Ciraq] bloc of oil and gas fields. All this requires both development and explorational drilling to be carried out. This is the process where a hitch can be seen currently because there is a catastrophic shortage of floating rigs. 

Thus, at the moment we have three modern floating rigs (Istiqlal, Dada Qorqud, and Heydar Aliyev) which are involved in the implementation of current oil and gas projects in the Azerbaijani sector of the Caspian. In particular, two rigs are operating at the Shah Deniz field and one - at the ACG bloc.

Correspondingly, there is a great need for oil rigs of next generation to ensure the development of new fields and exploration and discovery of others. It is necessary to take into consideration the fact that floating rigs that Azerbaijan has have been used for quite a long time and are obsolete. Because of this, it is sometimes impossible to install state-of-the-art equipment on platforms when work is carried out to modernize and renew them.

One, two, three, four

Considering prospects for the development of the oil and gas sector and the need for rigs, SOCAR is carrying out work to build new infrastructure. According to estimates by SOCAR specialists, four modern rigs need to be built in order to explore and develop offshore fields. This, by the way, is not a cheap thing to do. In particular, according to preliminary calculations, up to 4bn dollars will be invested in the construction in Azerbaijan of four new floating rigs in the period up to 2018-19.

In the very new future SOCAR plans to sign a contract with the Singaporean company Keppel FELS Limited which won a bid to build one such rig to drill at Azerbaijan's promising structures and fields- Umid, Babak, Karabakh, Asrafi, etc.

The operator for the new rig will be Caspian Drilling Company Ltd (CDC), in which SOCAR has 92.44 per cent of shares. CDC has major experience in drilling works at offshore fields. In particular, it takes an active part in drilling works at the ACG and Shah Deniz. The company is also the operator for two semi-submersible floating rigs - Dede Gorgud and Istiglal.

Ninety per cent of the funding for the construction of the first rig will come from the State Oil Fund of Azerbaijan (SOFAR), and 10 per cent is to be invested by SOCAR. Thus, 388,575,000 manats is envisaged already this year in SOFAR's budget for the construction of the rig that the State Oil Company needs.

The new rig will be designed to drill wells as deep as 8,000 metres, with the depth of water being 1,000 metres, which, in principle, is enough to drill anywhere in the Caspian.

According to bid proposals submitted, the construction of the rig will take three and a half years and will start in September 2013 at a new shipbuilding factory which SOCAR is building in Baku. The ultra-modern rig of sixth generation will be designed with a view to being capable of being modernized and equipment installed on it in order ensure safety during drilling of wells with high pressure.

As SOCAR President Rovnaq Abdullayev said earlier, in the very near future it is planned also to resolve the issue related to a second rig, the installation of which will be carried out in parallel with the construction of the first one. The construction of the second floating rig of next generation will be carried out on the basis of a drilling club being set up which will comprise oil companies that need wells to be drilled at the shelf. In addition, Abdullayev said, works are currently under way to develop projects to build a third and a fourth rig.

This rush is quite explainable because, as already said, the need for additional rigs is quite obvious.

Modernization and renewal of the fleet of floating rigs will create conditions for a large scale development of the large gas resources of Azerbaijan, an increase in proven reserves of gas, a strengthening of the country's export opportunities and an increase in the republic's significance in ensuring Europe's energy security.