Development of Chirag and Azeri fields in Azerbaijan's share of the Caspian Sea is likely to be based on North Sea methods.
These will involve a dramatic change from the way Azeri oil field developments have been conducted so far, says Peter Wells, BP Exploration Operating Co. Ltd. senior adviser to the Azerbaijani president.
BP is one of eight companies negotiating a $7 billion development project in Chirag and Azeri fields with the government of Azerbaijan.
Its partners are Amoco Corp., Pennzoil Co., Unocal Corp., Den norske stats oljeselskap AS, Ramco Energy Corp., McDermott International Inc., and Turkish Petroleum Corp.
Negotiations have taken several about-faces, including the removal of nearby Guneshli field from project plans (OGJ, Nov. 8, 1993, p. 38).
Latest change was the decision to award Russian state oil company Lukoil a share in the project, from the Azerbaijani government's 80% holding.
Wells told a London conference the structure holding Chirag, Azeri, and Guneshli fields is like a North Sea formation in depth but not in reservoir complexity.
Survey,i by BP and State Oil Company of Azerbaijan (Socar) revealed the oil-water contact in the structure at about 3,500-3,300 m, while the top of the structure is at about 2,500 m.
Wells said, "There are some major faults running longitudinally along the stratum that are difficult to resolve from existing data, but nevertheless it is a big, simple structure."
DEVELOPMENT PLAN
The development plan prepared by Socar and the foreign group calls for a number of drilling platforms spread throughout the length of the fields. The platforms would be built during 5-10 years, depending on the pace of production buildup required.
Several processing platforms also are to be required, a main one at the center of the development with two satellites. They would separate oil and gas offshore and move them by pipeline separately to shore.
Wells estimated $5-10 billion investment would be required in the project during the 5-10 year period. Other facilities also would need to be built, including an onshore oil and gas terminal.
Wells said, "There is an enormous resource out there for the future if the infrastructure develops apace. We should not forget that this is a landlocked sea where we cannot tow in structures from Korea. We have to build them in the Caspian."
Gas is destined for the national grid, where it will make up some of the shortfall between demand and supply. Some crude oil is likely to be exported, but the volume has not been determined.
"There is no history of crude oil exports from Baku - only products," Wells said. "This is an interesting aspect for us wishing now to export crude oil and quite a step change for Azeri oilmen, who are used to refining everything on site."
There are two major refineries in Baku with total capacity, of 500,000 b/d. This capacity is the same as the peak oil production figure for Azerbaijan, reached about the time of World War II.
CASPIAN VS. NORTH SEA
Combining the Caspian Sea territory belonging to Azerbaijan, Turkmenistan, and Kazakhstan yields a province on the same scale as the North Sea in terms of potential reserves.
However, Caspian Sea territorial borders have not been internationally agreed, apart from that settled in a treaty between Iran and the Soviet Union.
Besides fields already developed off Azerbaijan, a number of structures have been identified but barely, examined by seismic survey, Wells said.
"BP's maps are based on our own mapping and not on a Soviet map, since there are a number of maps published which vary enormously in numbers and locations of prospects indicated," he said.
"There are a large number of fairly large structures out in the Caspian. Most of these lie in deep water, even by modern standards. We are exploring in other areas of the world in this kind of water depth, greater than 300 m, but we are not developing yet."
Wells said what makes Caspian opportunities in less than 200 m attractive, in comparison with North Sea projects, is the relatively low cost of new oil supply.
Offshore U.S., U.K., or Norway it costs about $12,000/b/d to bring on new productive capacity. By comparison, new productive capacity is estimated to cost $4,000/b/d among members of the Organization of Petroleum Exporting Countries.
"Azerbaijan sits somewhere in between," Wells said. "So on a cost basis alone - that is, not including what might be taken as tax - it is very attractive compared with other opportunities we might find - in the North Sea, for example."
OIL TARGET
Guneshli, Chirag, and Azeri fields hold estimated reserves of more than 3 billion bbl of oil.
Among other fields worth noting, Wells said, are Neftyange Kamni or Neft Dashlary. It held 1.5 billion bbl of original reserves, of which 45% has been recovered. And there is Shak Deniz, a very large undrilled structure south of the main trend of fields.
"Onshore around Baku the legacy, of lack of investment and lack of maintenance is all too visible," Wells said. "Baku was the main center of production of beam pumps in the Soviet Union and still is. The collapse of this industry, in Azerbaijan has caused serious shortages of beam pumps in Siberia.
"There is no shortage of environmental problems on the ground with oil leaking out of numerous pipes and gathering stations. Certainly the chaotic appearance of the oil field is due to lack of investment and lack of maintenance during the last 30-40 years."
Three semisubmersible rigs are working in the Caspian. One built to a U.S. Pacesetter design is said to be the subject of a refurbishment proposal by the BP group.
Wells said, "The two others are heavily Soviet-modified designs and are considered to be unsafe by everybody who has inspected them. That is not to say they could not be modified, but they require much more investment than the other rig."
Guneshli is the first North Sea style development in the Caspian Sea. This was initially developed at its northern edge by Socar using "...one of their own jackets standing in about 70 m of water, two standard rigs, an accommodation unit, and very rudimentary topsides.
Now, Guneshli has 14 similar platforms at 2 km intervals, developing an area which in the North Sea would be produced from one platform. Multiphase flow from Guneshli is sent to Neft Dashlary where oil is removed and gas vented.
The multiplatform development arose because Russian drilling technology used in Guneshli limits the drilling radius to 1 km from the rig.
PIPELINES
Azerbaijan's pipeline system has been developed since 1930.
One pipeline moves Neft Dashlary oil from an onshore terminal into the national oil grid. Another pipeline from the north brings crude oil from Siberia to Baku's refineries.
One gas pipeline brings in gas from Iran.
Pennzoil is said to have been working on a project to install compression so Guneshli gas can ashore. Compression has been installed, but the export pipeline to the adjacent offshore Bakhar gas field is not complete.
"So they are importing gas and venting gas," Wells said.
There are two pipelay barges in the Caspian Sea at present. One is being upgraded by McDermott International Inc. for Pennzoil, ready to lay pipe in as much as 100 m of water. The other requires upgrading.
CONSTRUCTION
Guneshli field topsides were built in Astrakhan along the northern Caspian. There is no topsides construction yard in Azerbaijan and no supply base.
The Shelf Projectstroi yard at Karadag, Azerbaijan, was built to handle Guneshli development. The yard has four slipways capable of handling jackets for 200 m water depths.
Wells said there is enough steel in one of the Guneshli jackets to build three North Sea type jackets.
"There are also enough nodes on site to build five more jackets," he said. "Things are just produced, and they are assembled later. There is no question of just-in-time policies."
Wells estimated the Azeri marine fleet is made up of 300 vessels ranging from a 5,000 metric ton capacity crane barge to supply boats.
"The crane limitation of 5,000 metric tons is quite different to what we are used to in the North Sea, where lifts of 10,000 metric tons are quite normal," he said. "The low capacity of the crane barge means modules will have to be hooked up offshore in the old way."
The only means of getting heavy equipment into Baku is the Vol,a-Don canal system, which enters the Caspian Sea in Astrakhan. Maximum barge length on the canal is 146 m, maximum draft is 3 m, and max width and clearance are 14
"The system is closed from November to March and anyone who misses their window will not get their kit in until next year," Wells said. "It is a horrendous challenge for people like ourselves planning to bring in major modules of equipment."
Getting production out of Azerbaijan is more of a political question than a technical question. A number of export pipeline routes have been proposed, but all have political problems.
"We do not know where the export pipeline will go," Wells said. "We know there will be a pipeline exporting crude oil but we do not know where it will end up. All options cost about the same-$1.5-2 billion. Technical difficulties are about the same in each case."
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