PRODUCTIVE HORIZON

It's no secret that in recent years, more has been bet on the gas future of Azerbaijan, given the enormous potential of its gas fields, as well as consumer countries' growing interest in them. However, this does not mean that the oil industry is retreating into the background - on the contrary, the country is continuing exploratory research to discover new oil-bearing strata and apply advanced technologies for the full exploitation of existing ones. All this will eventually help extend the oil glory of Azerbaijan for many years. And a special role, in addition to national SOCAR, in implementing these projects, of course, is played by BP-Azerbaijan and its Azerbaijan International Operating Company (AIOC) - perhaps, the largest foreign investor in the country's oil and gas industry during the years of independence.

New possibilities of oil production

In this case, the largest project aimed at increasing oil potential in the future and implemented by the AIOC today is the Ciraq Oil Project - the next phase of the development of the Azari-Ciraq-Gunasli fields (ACG). It provides for oil production in the western part of the Ciraq field, the construction and installation of a new drilling and residential platform West Ciraq, which will be located between the Ciraq-1 platforms and Deep-Water Gunasli at a depth of 170 metres. Under the Ciraq Oil Project, daily oil production is projected at 160,000-185,000 barrels, and all in all, it is planned to produce 360 million barrels of oil.

Today, the AIOC has already completed 62 per cent of planned construction activities as part of the Ciraq Oil Project, and in 2012, it is planned to complete the construction of the topsides, send the support block of the platform into the sea, etc. In addition, as part of the Ciraq Oil Project, the drilling of advance wells also continues. Fourteen have already been drilled, and they have been suspended for future use.

It must be noted that the project is quite expensive - its implementation will require an investment of $ 6 billion, of which $ 4 billion will be allocated for the construction of facilities, installations and the drilling of advance wells, and an additional $ 2 billion - for drilling wells from a platform in the period of oil production. Given the consistently high oil prices in recent years and the growing volume of global consumption of fuel, the game, as they say, is worth the candle.

Also in this context, it should be noted that BP-Azerbaijan continues to work within the framework of another ambitious project - Safaq-Asiman, where a 3D seismic survey from the Gilavar vessel was completed earlier this year. According to the plan, the data will be processed in 2012, while the interpretation and determination of the point of drilling will be carried out in 2013, and from 2014 to 2016, work will be carried out to plan the exploration well, whose drilling will commence in the fourth quarter of 2016. It must be noted that SOCAR is an equal partner and co-operator of the project.

As can be seen, oil production is already about to start in two projects with the participation of BP-Azerbaijan. The company, of course, continues to operate the largest block of fields Azari-Ciraq-Gunasli. In the first quarter of 2012, compared to the same period of last year, expenses on it increased by 32.3 per cent - to $ 740.5 million, while only $ 169.1 million of this amount were spent on operating and $ 571.4 million on capital expenses. At the same time, this period saw a decline of 8.4 per cent in oil production at ACG, and only 64.8 million barrels (8.8 million tons) were produced with the average daily volume of production at 711,800 barrels. Crude oil produced at ACG is exported to world markets via the Baku-Tbilisi-Ceyhan oil pipeline, and so far, 1,870 tankers of Azerbaijani oil (193 million tons) have been dispatched via the pipeline.

Gas prospects

With regard to gas production, as mentioned above, there is no doubt about its promising future in Azerbaijan. During January-March 2012 alone, 2 billion cubic metres of gas were produced from the Sah Daniz offshore gas condensate field. Thus, the average daily gas production from the field amounted to 22 million cubic metres in three months, which means a 20.2-per-cent increase in the average indicator in 2011. As is known, gas from Phase-1 is distributed between Azerbaijan, Georgia and Turkey.

But there is a fierce struggle between pipeline projects for the gas that will be produced during Phase 2. For example, the consortium of the Nabucco gas pipeline project presented a concept of a shortened version of the pipeline - Nabucco-West - for the development of the Sah Daniz gas condensate field in Azerbaijan, and it provides for the construction of a pipeline from the Turkish-Bulgarian border to Baumgarten (Austria). "We are convinced that we made a competitive and comprehensive proposal to the Sah Daniz consortium," the head of Nabucco Gas Pipeline International GmbH Reinhard Mitschek said.

A second option for the route is the SEEP project proposed by BP, the operator for the development of the Shah Deniz field in Azerbaijan. It is proposing gas supplies of 10bn cu m through existing gas pipelines to Bulgaria, Romania and Hungary. A third route - the Trans-Adriatic Pipeline (TAP) - also exists. BP-Azerbaijan has said that the final choice between these routes will be made in 2013.

By this time, one more important "gas" decision will be taken with respect to gas production from the deep-seated layers of ACG. The president of SOCAR, Rovnaq Abdullayev, told reporters that a relevant document will be signed before the end of 2012 and will introduce all participants in the ACG project. According to the "Contract of the Century", BP and its partners in the ACG project acquired the right to develop oil horizons only as far as Svita Pereryva, whose thickness is less than 100 metres. The Nadkirmakinskaya and Podkirmakinskaya suites lie below, and their capacity exceeds that of Svita Pereryva (140-160 metres each). SOCAR estimates the reserves in the horizons following Svita Pereryva at 200 billion cubic metres of gas and condensate. The BP management appealed to the Azerbaijani government to start negotiations on a new agreement regarding the development of lower levels of ACG in 2007. The issue of a new contract is being dealt with by SOCAR. Earlier, SOCAR announced that gas production from the deep-seated layers of ACG would start in 2017. According to the first vice-president of SOCAR, Xosbaxt Yusifzada, the layers under the Ciraq and Gunasli blocks will be developed in the first phase and under Azari in the second phase.

Apparently, one of the main "actors" in these ambitious plans is still BP-Azerbaijan. This means that it will continue to play an important role in the development of Azerbaijan's oil and gas sector for many more years.

OUR INFORMATION

l The contract for the development of the Azari and Ciraq fields and the deep-water part of Gunasli was signed on 20 September 1994 and came into force on 12 December of that year. Participants in the Azari-Ciraq-Gunasli project are: British BP (35.78%), American Chevron (11.27%), ExxonMobil (8.0006%), Hess (2.72%), Japanese Inpex (10.96%), Itochu (4.3%), Azerbaijan's SOCAR (11.6461%), Norway's Statoil (8.5633%) and Turkish TPAO (6.75%).

l The contract for the development of the Sah Daniz field was signed in Baku on 4 June 1996 and ratified by the Milli Maclis on 17 October of that year. Participants in the Sah Daniz project are: BP (operator - 25.5%), Statoil (25.5%), SOCAR (10%), Lukoil (10%), NICO (10%), Total (10%) and TPAO (9%).

l Participants in the BTC project are: BP (30.1%); SOCAR (25.00%); Chevron (8.90%); Statoil (8.71%); TPAO (6.53%); Eni (5.00%); Itochu (3.40%); ConocoPhillips (2.50%); Inpex (2.50%), Total (5.00%) and Hess (2.36%).