MORE THAN EXPECTED

For the global energy sector, the autumn of 2020 began with a series of statements about the discovery of the largest gas fields. Egypt and Saudi Arabia made similar statements in September. New discoveries are of great importance for each of these countries and will intensify competition for markets.

This month is significant for the oil and gas sector of Azerbaijan too. On September 20, on the day of signing the Contract of the Century back in 1994, the country celebrates the Day of Oil Workers. This year, the foundation-laying ceremony for the offshore operations of the gas-rich Absheron field was timed to coincide with this date. President of Azerbaijan Ilham Aliyev attended the ceremony. He noted that the development of the Absheron field will make a significant contribution to meeting the growing domestic demand of Azerbaijan for natural gas, and in the long term will strengthen the counrty’s position as an exporter, primarily in the Turkish market.

Project features

Over the past two years, two new fields with large reserves of oil and gas have been discovered in Azerbaijan: Karabakh and Absheron. Their development will allow the country to stabilise its own oil production, and to increase the export of natural gas to traditional markets, hence expanding the geography of supplies.

The Absheron field is located in the Azerbaijani sector of the Caspian Sea, 100 km southeast of Baku at a depth of 500 m. For its development, SOCAR and Total have established an operating company JOCAP.

On September 19, at the ceremony held at the Heydar Aliyev Baku Deep-Water Base Plant, President Ilham Aliyev pressed the button symbolising the start of offshore operations at the Absheron field. As part of the project, four main and six auxiliary support blocks of the production platform with a total weight of about 10,000 tons, as well as bridges, flyovers, flare systems, subsea installations, pipelines, modules and other infrastructure facilities will be constructed. In the course of the project implementation it is planned to upgrade the Gurban Abasov vessel and renew the certificate of the Azerbaijan crane vessel to increase its carrying capacity.

“The groundbreaking ceremony for offshore operations is indeed a very important event, since it symbolises the start of a new stage in the development of the Absheron gas condensate field. I am confident that this stage will be successful. Azerbaijan will take an important step in implementing its oil and gas strategy, ” President Aliyev said.

Mr. Aliyev added that the reserves of the Absheron field are equal to 350-360 billion cubic meters (bcm) of gas and 100 million tons of condensate. The field will be developed in stages.

“However, I believe that there will be even more reserves, since our experience shows that the resources are more than expected. Azerbaijan will remain a reliable gas supplier in the future. The gas produced within the first stage of the Absheron development will be used for internal needs. This is also necessary due to the growth of population and industry. Gas produced at the second stage will be exported to world markets,” President Aliyev said.

At the first stage, the volume of gas production at the Absheron field will reach 1.5 bcm annually. According to experts, at the peak of the project, about 5 bcm of gas can be produced annually. All gas produced at the first stage will be supplied to the domestic market of Azerbaijan. Also, the field will produce about 10,000 barrels of condensate daily.

In 2019, SOCAR and Total completed the drilling of ABD-001 production and appraisal well (7411 m) at the Absheron field. According to Mr. Aliyev, with the discovery of this field, a large resource was obtained for the current development of Azerbaijan's oil and gas potential.

“I am confident that the first gas and condensate will be produced at the Absheron field in two years on schedule. At the same time, this field is of great importance for our oil production to remain stable, because 100 million tons of condensate will also be supplied to world markets via the Baku-Tbilisi-Ceyhan export pipeline. Thus, the Absheron field will somewhat compensate for the natural decline in production that exists and continues in the Azeri-Chirag-Guneshli block, the President added.

Unique innovations

The platform for gas production from the Absheron field can be considered unique. Unlike most other large projects implemented by local and foreign companies in Azerbaijan, innovative solutions have been developed specifically for this project to control the platform from the outside – from the module located on Oil Rocks. From this module, which will be upgraded for the Absheron project, a group of operators will control the entire process of gas production at the field and operations on the platform, which will significantly save time and money. The module is located 34 km from the well and 3 km from the platform, which will ensure safety and quality during gas production, processing and transportation.

In addition, for the first time in the Caspian Sea, as part of the Absheron project, the pipe-in-pipe technology will be used for laying pipelines from the production platform. Moreover, specially made multilayer insulated pipes will be used. To this end, the production facilities of the Caspian Pipe Coating (CPC) pipe insulation enterprise were upgraded. The pipeline will be laid using the Israfil Huseynov pipelayer.

Successful results of exploration drilling actually gave a second chance to the Absheron field. Total President Arnaud Breuillac, assessing the results of joint efforts, noted: "Absheron is one of the largest gas condensate fields in Azerbaijan and the largest field discovered by Total over the past 10 years."

This recognition has a special significance after the failure of the first contract for the implementation of the Absheron project signed back in 1997. At that time, SOCAR, Chevron and Total participated in the project. The contract area covered approximately 160 square miles. The estimated volume of investments in the project was estimated at $3-4 billion, and the initial forecasted hydrocarbon reserves - at $1-3 trillion cubic meters of gas and 150 million tons of gas condensate. However, an exploration well drilled in 2001 revealed only small inflows of gas. Chevron (the operator of the project) refused further development of the field despite the assurances of Azerbaijani geologists about the presence of significant hydrocarbon reserves in this area. The main reason that put an end to the first contract for the implementation of Absheron, according to domestic experts, was the wrong choice of the drilling point by the project operator. Re-exploratory drilling 18 years later confirmed that geologists were right, giving the project a second chance for life.

“Natural gas will remain one of our main energy sources for many years to come. To this end, we are currently implementing major gas projects in the country. The launch of Shah Deniz-2 and the start of gas production from the Absheron field will ensure our gas potential for the next years,” President I. Aliyev said.

Expansion of exports

President of Azerbaijan also disclosed plans for gas to be produced from the Absheron field at the second stage of development. As it turned out, due to these volumes, the country plans to increase supplies to Turkey.

"Gas, which will be produced at the second stage of development of this field, will be supplied through the TANAP pipeline to Turkey and can be sent to other markets," Aliyev said.

Mr. Aliyev stated that the volumes of gas supplied through the TANAP gas pipeline to Turkey from the Shah Deniz Stage 2 development are increasing annually. So, if a year earlier Azerbaijan was ranked 4^th or 5th in terms of gas supplies to the Turkish market, now it is on top of the list. “This is of great importance both for us and for Turkey,” the president said.

I. Aliyev also said that the Azeri-Chirag-Guneshli block of fields also possesses “very rich gas reserves”. "It is conventionally called 'deep gas', and now the State Oil Company of Azerbaijan, together with its partners, is carrying out appropriate work to develop these deposits," president said.

At the same time, active works are underway to develop the Karabakh field. In March 2020, SOCAR and Equinor confirmed the discovery of the field following the results of appraisal drilling. Geological oil reserves of the contract area are initially estimated at more than 60 million tons, and recoverable reserves - at more than 21 million tons of oil and 13 bcm of gas.

The production of the first oil from the Karabakh field is planned to begin in the IV quarter of 2022, the first gas - in 2023. It is expected that the peak production from the Karabakh field will be reached in 2026. At the same time, at its peak, it is planned to extract more than 5,000 tons of oil and a maximum of 4.5 mcm of gas from the field every day.

“The Karabakh field is one of the richest hydrocarbon deposits in Azerbaijan. Its peculiarity is that there are more oil reserves, and this is of great importance for keeping production at a stable level. This is the first oil field discovered in Azerbaijan during the period of independence. The field will annually produce at least 1.5 million tons of oil and 1.5-1.8 bcm of gas,” Mr. Aliyev said.

The development of the Umid-Babek offshore block is also progressing as planned. The operating company Umid Babek Operating Company (UBOC) is going to start exploratory drilling on the promising Babek structure in the fall of 2021. Based on the drilling results, a plan for the development of the shallow water part of the structure, as well as exploration work in deep water, will already be prepared.

In addition, UBOC will start production of the first gas in the third quarter of 2022 as part of the second phase of development of the Umid field. Currently, the design of the Umid-2 platform is underway, detailed engineering of the support block is at the final stage, and a drilling rig supplier has been selected.

At the same time, in order to avoid delays in the development of the Umid field, UBOC plans to accelerate production from the Umid-1 platform. To this end, two wells will be drilled, work on one has already begun. This will increase the daily gas production from the Umid-1 platform from 2.4 to 6.6 mcm. In general, the production of 51 bcm of gas and 5.3 million tons (41 million barrels) of condensate is forecasted from the northern wing of the Umid field.

However, the biggest expectations of SOCAR and BP are associated with the discovery of large gas deposits at the Shafag-Asiman structure, where an exploration well is currently being drilled. “This field also has great potential. Of course, drilling will show the exact amount of reserves. However, I remember when I was still working in SOCAR, our specialists noted that the volume of gas reserves there is approximately 400-500 bcm,” President Aliyev said.

Drilling of the first exploration well at Shafag-Asiman has already begun, and BP expects to receive the first results by the end of December 2020.

“The Shafag-Asiman structure is a very promising block in terms of reserves that can be comparable to the resources of the large Shah Deniz gas field. These are our predictions,” Bakhtiyar Aslanbeyli, BP Vice President for Communications and External Affairs for the Middle East and Caspian said.

If these forecasts come true, Azerbaijan will be able to significantly replenish the gas resource base, increase its export potential and ensure its economic and energy security for many years.

“Today, the lion’s share of the country's economy is associated with the oil and gas sector, and this will be so for many years after that. It does not mean that other sectors of economy are not developing but no matter how they develop, they will not be able to bring in the same income as oil and gas in the future. At the same time, our new projects - Absheron, Karabakh and others will continue to confirm the important role of the oil and gas factor,” I. Aliyev believes.

Along with the discovery of new fields, the most anticipated event in the second half of 2020 is the full-scale launch of the Southern Gas Corridor (SGC) with a length of 3,500 km, marking the beginning of Azerbaijani gas supplies to Europe. At the moment, the construction of the fourth component of the SGC - the Trans-Adriatic gas pipeline - is 98% complete. Commissioning of the system is planned for 4Q2020. Project participants do not expect problems with the timely launch of the Southern Gas Company.

With the necessary oil and gas infrastructure and a very favorable geographic location, Azerbaijan will retain its leading role in the Caspian region for many years and will be able to compete with other players in the gas market, which will only intensify in the coming years.