CEIBC mull oil and gas production in Azerbaijan

Baku hosted (November 26) the session of the member companies of the Caspian-European Integration Business Club (CEIBC) about "Oil-gas production in Azerbaijan: realities and prospects", CEIBC said in its press release.

The event was held with participation of big foreign oil companies. Khoshbakht Yusifzade, Academician and the First Vice President of the State Oil Company of Azerbaijan for Geology, Geophysics and Field Development, chaired the session.

While addressing the session Khoshbakht Yusifzade emphasized that it was Club's traditional event that he took an active part in. "We are proud that we have such a Club which brings together Caspian-Black Sea countries and helps them to enter EU's markets", he said.

"I assume that such events should be held on regular basis", he said and noted the importance of CEIBC which has been operating for 10 years. According to him, the Club carries out an activity far beyond Azerbaijan. This activity enables to ensure private sector problems' solution that depends on states.

During the session K.Yusifzade provided detailed information about the activity that SOCAR had carried out for the last years. He noted that Azerbaijan had been producing oil for over 150 years and spoke about main stages of oil production in the country. According to him, the main stage of development of the oil industry of Azerbaijan after gaining of independence began with the signing of the Contract of the Century on September 20, 1994 under the presidency of all-national leader of Azerbaijan Heydar Aliyev. At that time Azerbaijan produced large oil volumes only on the shallow area of Gunashli field. A decision to invite foreign companies for the joint development of Azerbaijani fields was made due to the lack of the modern equipment. "It would take us 30-40 years if we developed new fields on our own forces", K.Yusifzade emphasized and noted that such practice is applied worldwide especially during development of offshore deep-water fields".

He noted that foreign companies signed another 32 PSAs with Azerbaijan after signing of the agreement on development of Azeri-Chirag-Gunashli fields. Secondly, if Azerbaijan produced 9 mln tons of oil and 5.5 bcm of gas in 1997, production rates in the country reached 50 mln tons of oil and 26 bcm of gas in 2010.

On the other hand, K.Yusifzade noted that Azerbaijan had got several oil pipelines such as Baku-Novorossiysk, Baku-Supsa and Baku-Tbilisi-Ceyhan (BTC). "They are as important as the contract of the century. If people used to find the construction of BTC not necessary in those years, its significance was observed in following years", K.Yusifzade said and noted that 200 mln tons out of 289 mln tons produced at ACG was transported by BTC. "If Azerbaijan's stake was inconsiderable within first years of production at ACG, it grew in further years after reimbursement of capital expenditures by the consortium. "144 mln tons out of total production volume at ACG falls to the share of profit oil of Azerbaijan. This year the volume of profit oil of our country totals over 20 mln tons", K.Yusifzade noted.

Speaking about the implementation of the oil strategy, K.Yusifzade also noted that Azerbaijani geologists revealed Shah Deniz field which was opened during the years of independence. "It has been one of the largest world fields where proved reserves total 1.2 trillion cubic meters of gas and 245 mln tons of condensate", K.Yusifzade said and noted that proved reserves of Azerbaijan had totaled 160 bcm of gas before that.

"If Azerbaijan used to import gas from Russia before, now we export gas to RF, Turkey and Georgia. In future we will supply gas to the European countries", he proceeded.
Addressing gas export issue, K.Yusifzade noted that Azerbaijan built Baku-Tbilisi-Erzurum gas pipeline and completed negotiations on Trans-Anadolu gas pipeline (TANAP). According to him, TANAP will be laid through Turkey right up to the Bulgarian border and bring Azerbaijani gas closer to transport corridors of Europe. K.Yusifzade noted that the construction of the gas pipeline would start in 2014 and be completed in 2018. A total of 16 bcm of gas will be exported along the pipeline. Of this total 6 and 10 bcm of gas will flow to Turkey and Europe respectively. "All of this is the result of our work with foreign companies", he noted.
Umid field was for the first time discovered in 2010 since the regaining of independence. Its reserves are estimated at 200 bcm of gas and 40 mln tons of condensate. The well #10 (11mm in diameter) produces 800,000 cubic meters of gas and 140 tons of condensate per day. The drilling of the third well #12 is currently carried out on the field. A total of 2550 meters have been drilled so far.
K.Yusifzade called the discovery of Absheron field another important event in history of Azerbaijan. "We discovered the field in 1960. We prepared for drilling operations in 1993 and the project was frozen because of the lack of financial resources. In 2000-2001 the consortium of foreign companies drilled a well which was closed later. A new agreement for development of the given field was signed in 2009. As the result of drilling of one well we discovered a gas field where reserves reached 350 bcm. The well production rate totaled 1 mln cubic meters of gas and 300 tons of condensate at a depth of 6400-6500 meters", he noted.

According to him, there are still many unexplored structures left in Azerbaijan. Exploration will be continued at Shafag, Asiman, Zafar and Babek structures. "I assume that it would be gas deposits as we mainly discover gas and gas condensate at a depth of 6-7 thousand meters", he noted.

Speaking about occupancy of semi-submersible drilling rigs (SSDR) in the Caspian with drilling of preliminary wells K.Yusifzade noted that a new SSDR would be ready in 2014. Lack of rigs tells on terms of development of such areas as Absheron, where we plan to drill the second well, as well as Babek, Nakhchivan, Nakhchivan, Asiman, Shafag and other areas.

According to him, only Umid, Absheron and fields that are under development in Azerbaijan have proved reserves reaching 2 trillion 550 bcm of gas. Meanwhile, forecasted reserves of Azerbaijan are estimated at 6 trillion cubic meters of gas. Proved reserves in Azerbaijan constitute 2 bln tons. Anticipated reserves make another 2 bln tons. All together, undiscovered reserves of Azerbaijan total 10 bln tons of oil equivalent.

Considering the indicators, it is seen that there are more gas reserves in Azerbaijan than oil. According K.Yusifzade, the reason for that is the discovery of shallow oil bearing fields (within 2500-3500 meters). The operations are now performed mainly at a depth of 6500-7000 meters where gas reserves lie mainly. "Therefore, only gas condensate fields have been recently discovered. Now we do not have an oil field where reserves could be compared to those of ACG fields". Meanwhile, K.Yusifzade did not rule out a possibility of discovery of such fields in future as science-technical progress develops.

"But there are also Mesozoic deposits. Such fields are strongly exploited in Arabic countries and Vietnam. Deposits of Muradkhanly, Jafarly and other fields refer to such fields in Azerbaijan. Advanced technologies are needed for production of hydrocarbons in Azerbaijan from Mesozoic deposits. SOCAR currently carries out a certain work in this direction together with foreign partners especially with ConocoPhilips and Petrovietnam", K.Yusifzade said and noted that SOCAR currently performs drilling on Goshadash field where gas flow was detected at a depth of 1500 meters.

"Thus, Azerbaijan has more opportunities for discovering gas fields", K.Yusifzade stated. "SOCAR applies new methods and negotiates with new companies in order to open new oil fields".

He emphasized SOCAR's being a global-scale company, construction of terminal in Kulevi, ongoing construction of Oil Refinery and petrochemical complex in Turkey, Petrol Stations in Georgia and European countries. He also noted about SOCAR's plans to be engaged in upstream in foreign countries in future.

In reply to the questions of CEIBC member companies, Khoshbakht Yusifzade noted that gas production in Azerbaijan would total 50 bcm per year in 2024.

Speaking about oil production decline at ACG, K.Yusifzade noted about the conduction of maintenance work at ACG platforms in order to prevent possible reoccurrence of accidents that took place in the Gulf of Mexico. "Every field has its age and history. When production falls on one field, the other should compensate its decline. No new fields have been recently discovered in Azerbaijan after ACG. Besides, Azerbaijan has never had such a huge field as ACG. The problem is that the production should have fallen so quickly, as we have not developed even half of the resources of these fields. President of Azerbaijan pointed out to these problems during the recent enlarged governmental session", K.Yusifzade noted.

According to him, 7-8 wells were drilled at ACG each year, Only 2 wells have been drilled there this tear. The reason is the accident in the Gulf of Mexico. Through drilling of two directional wells BP planned to compensate the volume of oil that was produced by the same 7-8 new wells. However, it did not happen. Contractors who undertook this obligation let us down. In the meantime, PB started bringing the conformity of its platforms to world standards and no one can stop this process. If an accident similar to that of the Gulf of Mexico occurs in the Caspian, the consequences will be colossal", he emphasized.

According to him, BP wells produce large oil and gas volumes. There is no impact on common production observed when the operation of SOCAR's well producing 80-100 tons stops. However, it really affects production when BP's well producing 2-3 mln tons in the Caspian stops. For instance, the operation of one well on Shah Deniz field was stopped for technical reasons. As the result, production on Shah Deniz reduced by 6 mln cubic meters of gas per day (from 27-28 mln down to 23 mln cubic meters per day).

The main goal is to make sure that production of the next year is not lower than the rate of this year, K.Yusifzade noted.

While addressing the session, Telman Aliyev, President and Chief Executive Officer of the Caspian-European Integration Business Club (CEIBC), noted that Khoshbakht Yusifzade had lent his support to CEIBC right from the first days of its establishment. He also provided information about CEIBC. According to him, CEIBC was established in June 2002 under active participation of Caspian Energy International Media Group and under support of large oil-gas companies operating in the Caspian-Black sea region. Ilham Aliyev, President of the Republic of Azerbaijan, has been an Honorary Chairman of CEIBC since 2002.

Since its establishment CEIBC has been promoting attraction of oil industry profits for the development of the non oil sector. CEIBC operates in 50 countries worldwide, carries out an active work in the direction of dialogue maintenance between state structures and private sector.

CEIBC honorary membership certificate was presented to Khoshbakht Yusifzade at the session. New CEIBC member companies received certificates as well.

Oil and service member companies of CEIBC made presentations during the event. Participating in the meeting of CEIBC were also executives of companies, representatives of diplomatic agencies from Russia, Kazakhstan, USA, Great Britain, France, Ukraine, Romania, the Netherlands, Moldova, Austria, Poland, Turkey, Georgia, Latvia, Lithuania, Iran and other countries.


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