COPAL leaves agreement on use of Heydar Aliyev rig

The agreement was signed in February 2001 between Exxon Azerbaijan Operating Company (EAOC), COPAL and SOCAR.

Under an appropriate agreement EAOC and COPAL agreed upon investing $150m in the construction of a new SDR which belongs to Maersk, a Danish company, to fulfill their drilling commitments under the projects on the exploration of the fields Nakhchivan (EAOC and SOCAR), Zafar-Mashal (EAOC, ConocoPhillips and SOCAR) and Absheron (‘OPAL, Total and SOCAR).

It undertook a commitment to drill 4 wells (Nakhchivan and Safar-Mashal two in each), with the duration of 219 days each, while COPAL drilling of 1 well on Absheron well with the duration of 219 days.

EAOC and COPAL committed to pay approximately $70m to EAOC and COPAL during the drilling.

However, by the end of construction of the SDR COPAL and SOCAR agreed on refusal by COPAL from drilling the second exploration well on Absheron bloc in connection with absence of commercial reserves in the contract area and repayment of compensation by COPAL to the SOCAR in the amount of $20m. Then 219 drilling days belonging to COPAL under the agreement were purchased by Lukoil Overseas Operating Company, an operating company on exploration of Yalama offshore bloc at $20m.

Nevertheless, in accordance with the terms of agreement, COPAL continued to be its member and carry out legal commitments, in particular, if Lukoil Overseas Operating would refuse from drilling on the Yalama bloc and return back its obligations on use of riling days of COPAL.

Heydar Aliyev SDR was put for exploitation in October 2003 and around a year it spudded the first exploration well on Zafar Mashal. Later within 240 days he rig drilled the first exploration well on Yalama bloc.

As Lukoil Overseas Operating fully used 219 drilling days purchased earlier from COPAL, the company decided to leave it following the implementation of all legal commitments under the agreement. Upon formal agreement among partners and transference of the rest drilling equipment worth around $3.5m to the Oil Fund of Azerbaijan, COPAL and its contractor
Chevron Overseas Exploration Ltd. will be liquidated and the results of unsuccessful drilling activities by the American corporation Chevron in Azerbaijan on search of hydrocarbons in the Azerbaijani section of the Caspian.