Elf details Caspian Sea exploration plans

April 13, 1998
Azerbaijan Caspian Fields, Exploration Licenses [209,752 bytes] A shortage of drilling rigs is causing major headaches for foreign operators with exploration licenses in the Caspian Sea off Azerbaijan, says the Azeri unit of Elf Aquitaine. One semisubmersible built to western standards is currently operational, and another is being upgraded and is due to be completed in September-but both rigs are then booked solid through 2000.
David Knott
Senior Editor
A shortage of drilling rigs is causing major headaches for foreign operators with exploration licenses in the Caspian Sea off Azerbaijan, says the Azeri unit of Elf Aquitaine.

One semisubmersible built to western standards is currently operational, and another is being upgraded and is due to be completed in September-but both rigs are then booked solid through 2000.

François Chappelle, head of exploration at Elf Petroleum Azerbaijan BV, said a "rig club" of foreign operators in Azerbaijan is looking to upgrade one and possibly two more semisubmersibles. Elf is operator of one license area and partner in another. Chappelle said seismic surveys over both licenses have revealed substantial exploration targets, with drilling on one slated for 1998-99 and the other beginning in 2001.

Azeri E&P status

Nine offshore licenses and three onshore licenses have been granted by the Azeri government to groups including foreign firms, under production-sharing contracts signed during 1994-97.

Last year, Azerbaijan produced 9 million metric tons of oil and 6 billion cu m of gas. State Oil Co. of Azerbaijan Republic (Socar), responsible for all existing production and partner in joint ventures with foreign firms, aims to raise the country's oil output to 80 million tons/year by 2020.

Gunesh* field is Socar's main producer, yielding 4.4 million tons in 1997. The shallow section of the field has been developed by Socar with about a dozen platforms, which send oil to shore via Neftanye Kamni field.

AIOC project

Azerbaijan International Operating Co. (AIOC) is developing three Caspian fields-Chirag, Azeri, and deepwater portions of Guneshli-which have combined reserves estimated at 4-5 billion bbl of oil.

AIOC is a 12-company consortium led by BP Exploration Operating Co. Ltd., which began oil production from Chirag field in November 1997 at a rate of 7,500 b/d.

Chirag's oil is produced with a new topsides installed on an existing jacket and then moved to shore via Neftanye Kamni. From there, the oil is sent to market by pipeline from Baku to Russia's Black Sea port of Novorossiisk.

AIOC is working to install more facilities to increase output from Chirag and bring Azeri field and the deepwater area in Guneshli on stream. Two processing platforms and up to eight drilling platforms are planned (OGJ, Jan. 30, 1995, p. 31).

Cipco license

Caspian International Petroleum Co. (Cipco) secured a license in 1995 to explore the Karabakh and Khamden prospects, which have postulated reserves estimated at 85-150 million tons of oil.

Cipco comprises: Lukagip, a 50-50 joint venture of Lukoil and Agip SpA 52.5%; Pennzoil Co. 30%; and Socar, Lukoil, and Agip 7.5% each.

A well on the Cipco license area last year was said to have encountered gas reservoirs. A further two exploratory wells are required by yearend 1999. First production from the finds is anticipated in 2005.

Shakh Deniz

BP is also operator of a group that holds the Shakh Deniz production-sharing contract, where a large undrilled structure is lined up for drilling in October.

Shakh Deniz interest holders are BP 25.5%; Statoil AS 25.5%; Lukoil, Elf, Iran's Oil Industries Engineering & Construction (OIEC), and Socar 10% each; and Turkish Petroleum AO 9%.

Seismic data was acquired on Shakh Deniz last year, to detail a structure with potential to hold reserves of 1.5-5 billion bbl of oil and 1.4-1.8 tcf of gas.

North Absheron

North Absheron Operating Co. (NAOC) secured a production-sharing contract in 1997 to explore the Dan Ulduzu and Ashrafi prospects.

NAOC acquired seismic data on its license area in 1997 and drilled a wildcat that flowed 3,300 b/d of oil on test in February 1998 from the Ashrafi structure. A second wildcat is planned in Dan Ulduzu at yearend.

The NAOC license has a reserves potential postulated at more than 1 billion bbl of oil and 1.4 tcf of gas. NAOC partners are operator Amoco Corp. and Unocal Corp. 29% each; Itochu Corp. and Socar 20% each; and Saudi Arabia's Delta Nimir 2%.

Other licences

Elf is operator and 40% interest holder in a production-sharing contract secured last year to explore the Lenkoran and Talysh Deniz structures. Partners are Socar 25%; Deminex GmbH, OIEC, and Total 10% each; and Petrofina SA 5%.

Lukoil secured a production-sharing contract last summer to explore the Yalama structure near the Russian offshore boundary and, in February 1998, sold its interest to the Lukagip joint venture.

Now Lukagip is 60% interest holder and operator with 40% partner Socar. The structure is thought to hold reserves of 350-700 million bbl of oil.

Late last year, the government ratified a contract with Mobil Corp. for further appraisal and development of Orguz discovery, a satellite of Neftanye Kamni appraised with two wells.

Orguz reserves are estimated at 300 million bbl of oil and 700 bcf of gas. Mobil is operator and 50% interest holder, with Socar also holding 50%.

Around the same time, Exxon Corp. won a contract to explore the Nakhitchevan area, where the Filetov structure is thought large enough to have reserves of 730 million bbl of oil. Exxon is operator and 50% interest holder, with Socar holding 50%.

Chevron secured the Absheron license area late last year, which contains the Tagyev structure, thought large enough to have reserves of 14 tcf of gas and 2.2 billion bbl of oil. Partners are operator Chevron 30%, Total 20%, and Socar 50%.

Also, in September 1997, Agip and Socar signed an agreement in principle for exploration of Kurdashi license area, which contains the Kurdashi, Araz Deniz, and Shirvan structures.

Three onshore projects involve rehabilitation of aging fields: Ansad, by Turkey's Attila-Dogan 31.85%, Malay- sia's Land & General Sdn. Bhd. 17.15%, and Socar 51%; Kalamadin, by the Azerpetoil venture of Turkey's Petoil 50% and Socar 50%; and Umbaki and Karadag fields by Turkish-U.S. company BMB, which holds 100%.

Exploratory drilling update

Chappelle noted that the Dada Gorgoud semisubmersible, built in Finland and reassembled in Baku, was upgraded to work for AIOC in Azeri/Chirag/Gunesh* by a McDermott International Inc. joint venture with Socar, known as Macdock.

Dada Gorgoud is currently moored inshore for upgrading work to enable drilling in deep water under contract to NAOC.

A second Socar-owned semisubmersible, Shelf 5, is undergoing a $200 million upgrade in Baku. The cost is being shared by the rig club comprising members of the NAOC, AIOC, Cipco, and Shakh Deniz consortia.

Shelf 5 will work for BP on Shakh Deniz, which Chappelle classifies as undrilled, although six attempts were made by Soviet drilling rigs to reach the structure but failed.

The sixth well reached the flank of the structure, having been drilled to 5,500 m TVD, but the main Shakh Deniz objective is more than 5,500 m deep.

The Shakh Deniz license carries an obligation to acquire seismic data over the entire block and to drill two wells in the first 3 years of the license.

Shelf 5 is slated to drill the two wells in 1998-99. The exploration phase can be extended by 1 year, in which one more well would be required.

On Lenkoran-Talysh block, Chappelle said, the Soviets shot 2D seismic but drilled no wells. Three-dimensional seismic data were acquired by Elf over the license area last year.

Elf has earmarked drilling on Lenkoran-Talysh for 2001. Chappelle said the rig club is looking into upgrading two other rigs, Shelf 3 and Shelf 7, which are sister vessels to Shelf 5.

Elf is committed to drill two wells in the first 3 years of exploration on Lenkoran-Talysh, with a further two due if the exploration phase is extended.

Elf plans to acquire seismic data over Lenkoran-Talysh this year and expects to drill the two obligation wells in 2001-02 with the Shelf 5 semi.

An AIOC official said Socar is looking to arrange for Shelf 3 to be brought into dock for upgrading later this year, once Shelf 5 has been completed.

Chappelle said Lenkoran and Talysh prospects are smaller than Shakh Deniz. Elf reckons the two structures are large enough to hold combined reserves of 350-700 million boe.

Azeri potential, exports

All Azeri blocks awarded to date have boundaries based on the outer edges of structures. Other prospects have been identified by Soviet seismic teams, but these are thought not to be as big.

Chappelle said Azerbaijan's potential offshore reserves are estimated at more than 7 billion boe. Companies seeking further contracts include Unocal, Agip, Amoco, Japan National Oil Co., and Royal Dutch/Shell.

Export of produced oil remains a major concern for foreign operators in Azerbaijan. AIOC's exports are routed through a converted 115,000 b/d capacity products line to Novorossiisk, and railroad export capacity from Baku is 20,000 b/d.

A 115,000 b/d pipeline from Baku to Supsa, southeast of Novorossiisk on the Black Sea coast, is under construction. Completion is expected by yearend.

AIOC and the government are still undecided about a potential route for further export pipelines. But AIOC will need an additional 600,000 b/d of export capacity by 2001 to handle anticipated peak output from Azeri/Chirag/ Guneshli.

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