Caspian Sea Projects Advancing After Aliyev State Visit To Washington

Exxon's caspian prospect

Three new production-sharing agreements (PSAs) have been signed with U.S. companies for exploration and development in the Caspian Sea off Azerbaijan. An exclusive agreement was concluded with a fourth U.S. company.

The agreements were signed Aug. 1 during a meeting at the White House attended by Heydar A. Aliyev, president of the Republic of Azerbaijan, Azeri officials, officials of the State Oil Co. of the Azerbaijan Republic (Socar), Vice President Al Gore, the U.S. State Department, and officials of Exxon Corp., Mobil Corp., Chevron Corp., and Amoco Corp. and their units. But, as the Azeri deals were advancing, another Caspian Sea deal had fallen apart.

No vacation

While Aliyev was in Washington, President Clinton and House and Senate leaders met with the Azeri chief executive, who was pressing for lifting of a prohibition banning U.S. aid under Section 907 of the Freedom Support Act of 1992. He also wants most-favored nation trade status and other governmentally backed measures seen as beneficial to Azerbaijan.

Section 907 bars U.S. assistance until such time that it can be proven to the U.S. Congress that Azerbaijan is not using offensive actions toward Armenia over control of the disputed Nagorno-Karabakh enclave in Azerbaijan. A cease-fire has been observed since 1994. Aliyev maintains a peaceful solution can be reached with the help of the U.S. and other co-chair members of the Organization of Safety of the Council of Europe (OSCE)-Minsk group, which includes Russia and France.

On Aug. 2, Aliyev held private meetings in Houston with energy companies and selected members of the news media, including Oil & Gas Journal.

New deals

The PSAs with units of Exxon, Chevron, and Mobil cover blocks and/or structures known as Nakhchivan, Absheron, and Oguz, respectively.

And Azerbaijan awarded exclusive rights to Amoco to explore and develop the Inam prospect in the Caspian Sea, about 120 miles south of Baku.

Chevron's Absheron block is about 25 miles southwest of the unitized Azeri-Chirag-Guneshli (ACG) field (see map), currently under development by the Azerbaijan International Operating Co. (AIOC) and partners (OGJ, July 21, 1997, p. 23).

First ACG oil is slated in September, with ouput moving via the 850-mile, 100,000 b/d, northern route early oil pipeline from landfall at Baku via Russia and separatist Chechnya to the port of Novorossiisk on the Black Sea.

Chechnya, which emerged a winner in an armed conflict with Russia lasting almost 2 years, in July agreed to cooperate and allow oil to be shipped by the pipeline through its territory, easing AIOC fears of potential problems in the region and concerns that the line would be used as leverage in Chechnya's dealings with Moscow.

Nakhchivan

Exxon Exploration & Production Azerbaijan Ltd.'s deal calls for defining exploration, development, and production-sharing terms on the Nakhchivan structure, formerly referred to as D-3.

Exxon is continuing talks with Azeri officials for a deeper-water block due east, Block D-9/D-38. A deal could be made later this year, Exxon said.

Nakhchivan, in about 300-1,600 ft of water, is about 60 miles south of the capital of Baku and about 30 miles south of the existing Bulla Deniz natural gas and condensate field and southwest of Shah Deniz block.

Terms call for Socar and Exxon to hold a 50% interest each. Exxon will operate.

Inam

The deal between Amoco Caspian Sea Petroleum and Socar calls for "broad cooperation...in the upstream and downstream sectors."

Amoco said negotiations will now focus on commercial terms under which Amoco and Socar intend to jointly explore and develop the Inam prospect in the southern portion of the Caspian Sea.

Also, Amoco and Socar will form joint working groups to define their further cooperation in exploration, evaluation, development, and production; transportation and export and trading of crude oil; marketing of petroleum products; and other areas agreed to by the parties.

Amoco and Socar are participants in the AIOC, and Amoco has a 30% interest in the Ashrafi-Dan Uldulzu project operated by the North Apsheron Operating Co. (OGJ, Dec. 23, 1996, p. 32).

Oguz

Mobil Exploration & Producing Azerbaijan Inc.'s PSA covers the Oguz Block, totaling 227 sq km, about 61 miles east of Baku.

Negotiations are continuing with Socar on other areas.

Mobil will operate and hold a 50% interest; Socar holds the remainder.

Terms call for exploration drilling to be completed on Oguz during the next 3 years.

Mobil took part in a 3D seismic group shoot off Azerbaijan that involved gathering data over an area totaling 9,800 miles. Data interpretation identified the prospectivity of Oguz.

Chevron's agreement

The deal represents Chevron's first major oil venture in Azerbaijan.

Terms call for Chevron to be operator.

Absheron, formerly known as the Tagiyev Block, is about 40 km southwest of ACG field and covers 160 sq miles. Water depths are 800-1,200 ft.

Chevron, with a 30% interest, plans a 3D seismic program to augment data collected earlier.

Exploratory drilling is expected to begin late in 1999.

Rosneft's pull-out

Russia's Rosneft, soon to be put up for sale (OGJ, Aug. 4, 1997, Newsletter), has backed away from an estimated $1 billion development of Kyapaz field, known as Serdar by Turkmenistan.

Rosneft officials, in exiting the deal on Kyapaz, indicated the agreement was preliminary and not binding.

After the pull-out, Azeri officials said they were in disbelief that a problem had arisen.