Baku to the future?

The high-profile promise held by the Caspian Sea to become the next great offshore oil and gas province, to judge by the abundance of project news coming out of the recent Caspian Oil & Gas conference in Baku, is ever closer to coming to fruition-if still hinging on several sizeable "ifs."

Jun 15th, 2001

The high-profile promise held by the Caspian Sea to become the next great offshore oil and gas province, to judge by the abundance of project news coming out of the recent Caspian Oil & Gas conference in Baku, is ever closer to coming to fruition-if still hinging on several sizeable "ifs."

Plans by BP PLC to gear up on its giant Shah Daniz development were moved ahead by the award to Technip SA of a front-end engineering design (FEED) contract for the natural gas-condensate field, to be based on the French contractor's TPG 500 production jack up concept.

The Technip deal, one of four contracts forming BP's $2.6 billion Stage 1 project at the field, follows an award to KCA Drilling Ltd. of a FEED contract for the construction and commissioning of drilling facilities for Shah Daniz.

A BP spokeswoman said that, "subject to governmental, intergovernmental, and sales and purchase agreements [the company] expects sanctioning of Stage 1 Shah Daniz by [BP] and [its] partners by the end of the year." Construction could then start early next year, with first flow in late 2004.

Newbuild drill rig

Future drilling, always problematic in the landlocked Caspian, will be helped by Maersk Contractors SA, which announced that construction is set to begin this summer of a deepwater semisubmersible drilling rig contracted to Exxon Azerbaijan Operating Co. LLC and Chevron Overseas Petroleum Azerbaijan Ltd. for a 3-year drilling program in the Caspian starting in 2003.

The DSS 20-CAS-M semi will be built at Keppel FELS' Singapore yard and the Caspian Shipyard Co.'s Baku facility in Azerbaijan.

These items of news, along with word that-most significantly-construction of the $2.8 billion Baku-Tiblisi-Ceyhan oil export trunkline is now being forecast to begin in the second quarter of next year, bode well for the Caspian's "new golden age" of oil and gas. But as ever, hurdles remain.

The BTC trunkline, crucial to export from Azerbaijan International Operation Co.'s vast Azeri-Chirag-Guneshli oil development, is now, in part, in the hands of the Georgians- (see related item, Newsletter, p. 9). All keeping to plan, first oil from ACG field is expected at the end of 2004.

Pipeline waits on Georgia

The head of Azerbaijan state oil companyState Oil Co. of the Azerbaijan Republic's foreign investment division told the Baku conference the pipeline consortium, led by SOCAR and BP, was ready to start in on detailed field engineering work for the trunkline-favored by the administration of US President George W. Bush for development of an East-West energy corridor-so long as Georgian authorities grant it access to the necessary land corridor.

Shah Daniz, similarly, is still waiting for multilateral approval, as well as sales and purchase agreements to fall into place, before it can get genuinely out of the gate.

The other key outstanding "if," expressed most baldly by BP's head of procurement in the region, Stephen Loss, pivots on the dearth of high-end contractors in Azerbaijan. Despite BP suffering procurement bills 30% higher because of import costs, Loss admitted BP's current spending with Azeri companies is "very small," because there are "only a few contractors [in Azerbaijan] with the capability of carrying out high-value service contracts."

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