Russian petroleum giant pulls out of Caspian project

Following the announcement, a source at SOCAR told TREND agency that the decision had been made due to the failure in the fulfillment of duties undertaken within the framework of the contract. However, SOCAR didn't rule out the involvement of another foreign company to operate the concession.

The bone of contention between SOCAR and LUKoil implies the Russian company's failure to meet environmental requirements. Some estimates reply on 100 million U.S. dollars, which are needed to address environmental issues on the block; the contract itself was expected to work out to 250 million U.S. dollars.

The Hovsan - Zygh concession, covering the entire area of 128 sq. km - with rehabilitation part of 60 sq. km and exploration sector of 68 sq. km - is believed to contain up to 25 million tons of residual reserves of recoverable crude oil.

SOCAR and LUKoil signed the failed PSA, which granted both partners a 50% stake apiece, on January 9, 2001; Milli Majlis (Azerbaijan's parliament) ratified the agreement on June 12, 2001.