EXPLORATION DRILLING

After a global drop in the oil market in 2014, even the largest oil companies reduced costs and cancelled many projects, which brought record losses and were more time consuming. With the increase of oil prices, the industry is becoming "increasingly aggressive," according to market analysts.

According to experts of Rystad Energy, large oil companies in 2019 will invest $208 billion on drilling operations and other oil services. According to Rystad Energy, this year the oil industry should start implementing projects that will increase production by 46 billion barrels of oil, which is three times more than in 2018.

Heavenly Shine

The rise in global oil prices has boosted the search of new oil and gas deposits in Azerbaijan, with the major share of work implemented this year. The last time such activity in the Azerbaijani sector of the Caspian Sea was observed in the early 2000s, when foreign companies drilled exploration wells trying to discover promising fields. However, in most cases the companies have failed to find commercially attractive oil reserves or finalize exploration operations. This time, the forecasts are much more optimistic, as is the situation with oil prices.

British energy giant BP is going to implement the largest volume of exploration works thanks to its ongoing projects in Azerbaijan. Within the next two years (2019-2020), the company intends to start drilling six exploration wells in four different contract areas.

"Currently, the volume of exploration works planned in Azerbaijan can be compared in scale with the upcoming works on our Brazilian projects," Gary Jones, Regional President of BP in Azerbaijan, Georgia and Turkey, said.

The company mainly expects to get positive results of the drilling of the first exploration well at the Shafag-Asiman prospective structure in the Azerbaijani sector of the Caspian Sea. BP expects to open a large gas field here. According to estimates of SOCAR, which owns the other half of the share in the project, the structure’s reserves are 500 billion cubic meters of gas (cmg) and 65 million tons of condensate (mtc).

"If we get industrial reserves of hydrocarbons as a result of drilling operations, this field may become the second Shah Deniz (with reserves estimated at more than 1 trillion cmg and 2 billion barrels of condensate, R+)," G. Jones said.

Drilling operations will use the semi-submersible drilling rig (SSDR) Heydar Aliyev. It is planned to start the works in the second half of 2019. The depth of the well will reach 6500-7000 m. However, it is expected to get high pressures and temperatures during drilling, which can create certain difficulties. "The results of seismic studies have shown that there are gas deposits in this structure. Following the results of drilling operations, a large gas field can be discovered here," SOCAR President Rovnag Abdullayev said.

The second Contract of the Century?

Another major discovery in the oil and gas sector of Azerbaijan can be the block D230 in the northern Absheron. Operators of this project are SOCAR and BP, equally sharing the profits. In 2019-2020, BP plans to conduct a three-dimensional seismic survey on the field.

Since exploration works have not conducted on the D230, the results may indeed be surprising. SOCAR considers D230 block promising in terms of oil reserves. Her project partner from Britain shares a similar opinion. As the operator for the implementation of initial works on D230, BP hopes to repeat the success of the Contract of the Century.

"We have very high hopes for D230. If the results of exploration are successful, then the second ACG may be discovered," G. Jones said.

The block of ACG fields is currently the largest oil reserves in Azerbaijan with the annual production volume of 29 million tons, or nearly 74% of all oil production in the country. However, according to G. Jones, the development of these fields is only the first stage of a long path. "As you know, technologies do not stand still, but are actively developing and now allow us to obtain more detailed information about deep structures. We expect that by using the potential of future technologies and by reducing the costs from these fields, we will be able to extract much more than we have done so far," Mr. Jones said.

By the way, this year a new phase of the development of the ACG field will be sanctioned, the Central-Eastern Azeri (CEA) project. The main objective is to drill additional wells and install additional offshore facilities to achieve a maximum daily production volume of nearly 100 thousand barrels of oil and 350 thousand cubic feet of natural gas (cfg). It is expected to reach the peak of production from the new platform in 2024. In the second quarter of 2019, ACG shareholders are going to make the final investment decision on CEA Project.

Another joint project of BP and SOCAR to start this year is the exploration of the shallow waters of the Absheron archipelago. "Drilling of the first exploration well will start in the second quarter of 2019. In the following months, a second well will follow. We are planning to drill another well in 2020," Bakhtiyar Aslanbayli, Communications, External Affairs, Strategy and Region Vice President in Azerbaijan, Georgia and Turkey. Aslanbayli added that BP is preparing to start drilling an exploration well in the South-West Gobustan field this year.

Another long-standing partner of Azerbaijan, the Norwegian Equinor, is also preparing for drilling of the first exploration well in the Karabakh field. Drilling works will start in the second half of 2019 using the Dada Gorgud SSDR. It is expected to get first production from this field in 2021. In addition, in the spring of 2019, Equinor plans to begin seismic studies on the block of promising structures Ashrafi-Dan-Ulduzu-Aypara.

Gas production by SOCAR

State Oil Company of Azerbaijan (SOCAR) works not only with its British partner but also has its own plans for exploration drilling in the Caspian Sea. Thus, the company is going to drill the first appraisal well at the prospective Babak structure, which is part of the Umid-Babek block. President of the company, Rovnag Abdullayev, said that drilling operations will begin in 2020 and SOCAR has already determined the drilling site for the appraisal well. The reserves of this field are estimated to be at least 200 billion cmg and 30 mtc. The capacity of Babak is twice as high: 400 billion cmg and 80 mtc.

In the future, SOCAR plans to develop the promising structures Zafar-Mashal and Nakhchivan. "The development of these new fields and prospective structures will allow us significantly increase the production of natural gas in Azerbaijan in the coming years and to stabilize oil production. Our strategic goals for the coming years are the complete satisfaction of Azerbaijan's domestic demand, sustainable energy security, study of new investment opportunities in Azerbaijan and foreign countries, the improvement of our value chain and an even greater increase in income," R. Abdullayev said.

By the way, the Absheron offshore field is expected to make a significant contribution to the provision of domestic gas in Azerbaijan. In the third quarter of 2019, SOCAR is planning to complete the drilling of the first production well with a depth of more than 7,400 meters. This will enable the start of commercial gas production from this field as part of the first stage of development. Gas production from the field is scheduled for early 2020 and at the first stage, it can reach 1.5 billion cubic meters annually, while at the peak of production the project can produce about 5 billion cmg annually. The reserves of the field are estimated at 350 billion cmg and 45 mtc.

In other words, these figures clearly indicate that the pessimistic forecasts of some experts about the imminent decline of the oil and gas era in Azerbaijan are greatly exaggerated. In addition, if the forecasts of exploration drilling meet all the expectations of geologists, Azerbaijan will further strengthen its significance as an oil-producing country.