TIME TO DEAL WITH REALITY

SOCAR announced new reserves of gas condensate at the Shafag-Asiman bloc in the Azerbaijani sector of the Caspian Sea after the exploration drilling.

Despite the lack of detailed information about the discovered reserves, the discovery is expected to play an instrumental role in the further development of Azerbaijan's gas industry and strengthen the country's position as a reliable gas exporter.

“This [discovery] will make a valuable contribution to increasing our proven hydrocarbon reserves. We believe that this field will meet the local needs of Azerbaijan, as well as contribute to our export obligations and ensure the energy security of the region and the world. At current and subsequent stages of the operation of the Southern Gas Corridor (SGC), it is possible to transport gas from the Shafag-Asiman field,” SOCAR’s experts said.

Successful exploration

The reserves of the Shafag-Asiman field are estimated at 500 billion cubic meters (bcm) of gas and 65 million tons of condensate. Although the agreement for the joint development of the field was signed with BP back in July 2010, exploration drilling of the SAX01 well began in January 2020. The operation was carried out at a sea depth of 623m by the Caspian Drilling Company using the Heydar Aliyev semi-submersible drilling rig. The purpose of the exploration work was to open the Fasila producing zone. Finally, based on the results of comprehensive studies on the SAX01 well, the first gas condensate reserves were discovered at the depth of 7,189 m. Now an additional appraisal well will be drilled from SAX01 to clarify the estimated reserves.

“Today we are working on several new projects with our traditional partner - BP. One of them is the promising Shafag-Asiman gas structure, where we have successfully completed the drilling of the first well. Discovery of the first gas condensate in the deep water section of the Azerbaijani sector of the Caspian will make a valuable contribution to increasing our proven hydrocarbon reserves and to ensuring the energy security of Azerbaijan and other countries. I congratulate the Azerbaijani people, Azerbaijani oilmen, BP and SOCAR on this success,” President Ilham Aliyev said.

He noted that the joint operation of BP and SOCAR is strategic. BP is the largest foreign investor in Azerbaijan's oil and gas industry. "Azerbaijan's proven natural gas reserves can be an additional source for the Southern Gas Corridor and its last link, the TAP pipeline," said Mr. Aliyev.

Discovery of the new field is fully compatible with Azerbaijan’s ambitious plans to increase the gas production to 50bcm by 2024 and the capacity of the Southern Gas Corridor at least twice.

According to SOCAR estimates, in the next decade, oil and gas prices will be higher, which requires the accelerated exploration and development of fields in order to ultimately receive large revenues from the sale of hydrocarbons.

So said so done

Discovery of a new field will undoubtedly strengthen the position and prolong the life of the Southern Gas Corridor (SGC) - the largest regional project to deliver natural gas to Europe. This means that the success of the Azerbaijani-British geologists will directly contribute to the welfare of all countries involved in the SGC project, primarily including our closest neighbours and friends: Turkey and Georgia.

Another neighbour of Azerbaijan–Armenia–has remained isolated from such large-scale international projects as a result of almost 30 years of occupation of Azerbaijani lands. Even the defeat of Armenia in the Second Garabagh War last year will no longer help Yerevan to join the previously implemented regional projects. At the same time, no matter how paradoxical it may sound, with the liberation of its territories, Azerbaijan also freed the aggressor from the heavy burden of its own occupation policy. Now Armenia has a real chance to get out of the regional isolation, if Yerevan remains committed to the post-war agreements and renounces its revanchist sentiments.

Today Azerbaijan, Russia and Armenia continue the negotiations on unblocking regional communications. Meanwhile, for the first time in the past 30 years, Azerbaijan has given permission for the temporary transit of Russian gas to Armenia through its territory.

The North Caucasus-Transcaucasia gas pipeline had to be repaired. Earlier, during the repair works, Russia had to simply stop the gas supplies to consumers in Armenia. This time, the Russian Gazprom Export (a subsidiary of PJSC Gazprom) asked to arrange supplies through Azerbaijan.  Despite the short period since the signing of the trilateral statement of the leaders of three countries and doubts about Armenia's further actions, Azerbaijan showed its commitment to the terms of agreements again and confirmed the transit of gas to Armenia.

According to a short-term agreement signed between SOCAR and Gazprom Export on March 16, SOCAR will receive gas from the Russian company and will deliver it to Georgia, from where the fuel will be exported to Armenia.

“Russian gas supplies to Armenia will be temporarily carried out through Azerbaijan due to the scheduled preventive maintenance works on the North Caucasus-Transcaucasia gas pipeline. The works can take about three weeks. After that, the gas will be transported through the previous route across the border of Russia with Georgia,” explained Gazprom Export.

Later, the supplier clarified that in order to fulfil its contractual obligations for the supply of natural gas to Armenia, the new route through Azerbaijan will operate from March 18 to April 15, 2021.

The North Caucasus-Transcaucasia gas pipeline was commissioned in 1988 and runs through difficult geological environment. The pipeline is used to deliver gas to Georgia and then in transit to Armenia.

The last time Russian gas supplies to Armenia were suspended in mid-January 2021 due to the repair works on the Krasny Most-Sevkar-Berd gas pipeline on the Armenian-Georgian border. Then it was decided to use the reserves from the Abovyan underground gas storage facility for 1-2 days. However, even in such a situation, Gazprom-Armenia urged residents to save as much gas as possible.

According to experts, Armenia’s gas reserves allow the country to meet the internal market demand for one and a half months, but the consumption of half of the volume from storage facilities can put the country's energy security in risk.

Gazprom-Armenia believes it is unreasonable to use the gas reserves from the Abovyan storage facility during the repair of the North Caucasus-Transcaucasia gas pipeline, as "these are strategic reserves to be used to regulate daily and seasonal irregularities in the supply and sale of gas, as well as in the event of accidents and other emergencies. This volume is not designed to cover the shortage of supplies in such large volumes."

Another chance for Armenia

The volumes of Russian gas transit through Azerbaijan have not been reported, but for the clarity sake, in January 2021, Gazprom Export delivered 310mcm of gas to Armenia. In addition, the transportation of Russian gas through Azerbaijan will be subject to an appropriate transit fee, which is a commercial secret.

Despite the commercial side, Azerbaijan's consent to transit Russian gas to Georgia for Armenia also has a certain political significance, demonstrating the readiness of Baku to open communications in the region.

"The readiness of Azerbaijan to maintain stable gas supplies to Armenia from Russia or any other country is another indicator of Azerbaijan’s positive and humane position after the Second Garabagh War," the former US Ambassador to Azerbaijan Matthew Bryza said.

He noted that this step proves again that Azerbaijan is trying to help Armenia to reintegrate with its neighbours and heal the wounds of the war through economic cooperation and growth.

“It would be very wise for Armenia to take advantage of this opportunity. Unfortunately, the political crisis has caused such a psychological shock in Armenia that its leadership and even ordinary citizens often cannot understand what wonderful opportunities are available for them. In particular, the November 10 agreement, which states that all transport communications in the region will be open. There are many opportunities now in terms of infrastructure projects that can benefit Armenia as well. I hope that Armenia will use this opportunity,” Bryza said.

It is difficult to assume whether Armenia takes advantage of new opportunities. Armenian politicians calling for revenge in Yerevan do not want to see the prospects of returning to the normal way of life. At the same time, one way or another, they will have to realize the simple truth: peace with neighbours and regional cooperation will bring much more dividends to the country to strengthen its independence and prosperity than groundless accusations of everyone and everything in own economic failures.