FOREIGN JV UPSTREAM ACTIVITY SURGES IN AZERBAIJAN

Foreign joint venture activity is humming in Azerbaijan's upstream petroleum sector.

State Oil Company of the Azerbaijan Republic (Socar) and McDermott International Inc., New Orleans, disclosed further details of agreements signed last month in Baku for joint ventures to pursue marine and onshore construction and shipyard work in the Caspian Sea region. Socar and McDermott Azerbaijan Marine Construction Inc. (MAMC) have established two ventures, MacShelf, which will perform turnkey engineering, procurement, and marine and onshore construction, and MacDock, which will repair, upgrade, and maintain vessels and drilling rigs.

In other action involving Azeri joint ventures:

Socar and a unit of Ponder Industries Inc., Alice, Tex., disclosed an agreement that could lead to workovers of more than 2,000 onshore and offshore Socar operated wells.
Socar and Hallwood Caspian Petroleum LLC, a jointly owned subsidiary of Hallwood Energy Partners LP (HEP) and Hallwood Consolidated Resources Corp. (HCRC), both of Denver, agreed to form a JV to enhance production from and further explore offshore Mashal field, about 50 miles southeast of Baku in the Caspian Sea.

MACSHELF, MACDOCK DETAILS

Akhmed Zeinalov Socar vice-president of construction, and William L. Higgins, McDermott International executive vice-president and MAMC group executive, disclosed details of the two JVs after a signing ceremony at the Offshore Technology Conference in Houston (OGJ, May 9, p. 18).

Socar is to hold 60% interest and McDermott 40% in the MacShelf and MacDock JVs. The two companies will jointly manage both ventures.

The Socar-McDermott MacShelf JV will lease and operate parts of Shelf-proektstroi (SPS) fabrication yard on the Caspian Sea about 16 km south of Baku plus a fleet of 30 marine construction vessels owned by Kaspnefteflot (KNF). SPS and KNF are owned by Socar. MacDock is to operate from a shipyard, also near Baku and leased from KNF.

Socar and McDermott emphasized the JVs are not dependent on participation by another McDermott unit in a group of companies led by a unit of Amoco Corp. negotiating with Socar for rights to develop Azeri and Chirag fields in the Caspian Sea. However,

Azeri-Chirag development likely will be the first offshore construction projects to be tackled by MacShelf and

MacDock.

Zeinalov said in an interview following the OTC ceremony that, based on Socar's extensive participation in upstream and downstream oil and gas activity in the former Soviet Union, the two JVs will be very competitive in bidding for projects in the Caspian

region.

Higgins said MacShelf and MacDock JVs represent an important step in the ultimate development of the Caspian's oil and gas fields.

"First, they put together the technical expertise and operating experience of two well seasoned organizations," he said. "Secondly MacShelf and MacDock show the world that Socar is ready to work in cooperation with western companies."

Zeinalov said the JVs will be able to perform at or above standards set by international oil and gas companies.

OTHER SOCAR DETAILS

Socar, reorganized in 1992, is an integrated company capable of constructing, operating, and repairing upstream and downstream, onshore and offshore oil and gas facilities. It was the largest supplier of production and development technology to the former Soviet Union and today continues to supply integrated services for oil development, mainly in the Caspian Sea region, and development of oil and gas fields off Azerbaijan.

Socar's 272 acre SPS fabrication yard was completed in 1986 and includes pipe mills, a plate girder shop, node and brace shop, pile rack, and jacket assembly area. The facility includes 34 acres of covered shop space serviced by 72 overhead cranes. The offshore fleet to be operated by MacShelf includes a 2,756 ton capacity derrick barge, a deepwater pipelay barge, and a dynamically positioned diving support vessel, as well as smaller pipelay and crane vessels, tugs, supply boats, and specialized construction equipment.

The KNF shipyard to be operated by MacDock can fully drydock and repair derrick and pipelay barges, semisubmersible drilling rigs, supply vessels, tugs, and other vessels. It boasts three floating drydocks with capacities of 6,615-16,537.5 tons as well as a foundry and fabrication, electrical, mechanical, carpentry, and machine shops.

PONDER'S AGREEMENT

Under the Socar-Ponder agreement, signed May 1 in Baku, Ponder International Services Inc. is to provide Socar with certain oil field services and lease or sell Socar various types of oil and gas equipment.

The first work plan covered by the deal is workover of 17 wells in Guneshli field, where Socar has indicated as many as 365 wells could need servicing. Another 2,000 Socar operated wells could be included later.

The agreement was signed May 1 in Baku after several months of negotiations.

Joe Ponder, president of Ponder International, said his company will be paid on the basis of services performed and equipment leased or subleased to Socar at agreed prices determined by reference to Ponder Industries' published price book.

Under the accord, Ponder will be paid either in U.S. dollars in a bank of Ponder's election or by delivering the total amount of hydrocarbons equal to the invoice amount of services and equipment furnished by Ponder.

Ponder will be required to use appropriate Azeri personnel in performing the work. In some earlier activities, Ponder worked with Azeri personnel very successfully and at reduced cost. The agreement is for an indefinite period with the right of termination by either party upon 30 days' written notice.

HALLWOOD'S JV

Hallwood's JV is for a term of 25 years and requires Hallwood Caspian to spend $5-65 million under a three phase development plan.

Mashal, formerly known as Muddy Hill field, was discovered in 1954 and has produced 50 million bbl of oil.

The agreement will be submitted for approval to the HEP and HCRC boards and to appropriate authorities to register the JV under Azeri law.

Hallwood Caspian and Socar will recover capital costs proportionally from 70% of net revenues from production exceeding 2,700 b/d of oil from the field. Current production is 1,750 b/d.

During the first phase of the joint venture, the remaining 30% of profit will be divided 60% Hallwood Caspian and 40% Socar.