By OGJ editors
HOUSTON, Feb. 18 -- OAO Lukoil subsidiary Lukoil Overseas Holding Ltd. has exited the Zykh-Govsany field-rehabilitation project in Azerbaijan with the approval of its 50:50 partner State Oil Co. of the Azerbaijan Republic (SOCAR).
Lukoil said in a news release that the "main reason for the decision is the incompatibility of the project's economics with the benchmarks established in the company for the rate of return. This is due to the significant costs of environmental rehabilitation of the contract area and the high degree of depletion of reserves."
The 25-year contract, which covered rehabilitation, prospecting, and production sharing of Zykh and Govsany fields on the southern Apsheron Peninsula, was signed Jan. 9, 2001, but never implemented, although in recent years Lukoil, under an understanding with SOCAR, carried out development of the fields on its own. Zykh field was brought on stream in 1936 and Govsany field in 1948. There are 15 wells operating in the fields, which produced about 250 tonnes/day of oil in 2001.
Currently, Lukoil is participating in two major developments in the Caspian Sea off Azerbaijan. It holds a 10% interest in Shah-Deniz gas and condensate field operated by BP PLC and an 80% interest in the D-222 (Yalama) concession 93 miles northwest of Baku, along with SOCAR (OGJ Online, Mar. 10, 2003).
