Iran to explore disputed Caspian area

National Iranian Oil Co. has formed a consortium to conduct a seismic survey of the southern Caspian Sea.

NIOC, Royal Dutch/Shell, and London independent Lasmo plc have agreed to acquire 1,000 km of 2D seismic and conduct geological and geophysical studies of the previously unexplored area. The three firms will be equal partners in the 18-month study.

The announcement has reignited the long-lived dispute over Caspian boundary definitions, with Azerbaijan claiming that some of the area to be studied is within its territory.

The NIOC agreement

On Dec. 14, Lasmo announced the formation of the consortium to conduct a joint exploratory survey of the southern Caspian with the Iranian state oil firm and Shell.

Lasmo, participating through its subsidiary Lasmo Petroleum Development BV, said the area covered by the agreement has not been decided firmly yet. But the study is expected to cost about $19 million, to be shared by the international oil companies.

In addition to conducting the seismic and geophysical studies, the firms plan within 6 months to identify prospects where seismic data already exist and to select two additional prosepctive areas.

The group will have preferential rights to select up to four blocks in the area. It has 12 months after the study has concluded to negotiate service agreements.

British Petroleum Co. plc may join the agreement at a later date, says Lasmo.

Chris Wright, Lasmo's director of new business, said, "The study program represents a major strategic entry into the Iranian Caspian for Lasmo. We will be looking at this agreement as a base on which to build further interests in the Iranian upstream sector."

Azeri reaction

The five countries bordering the Caspian-Azerbaijan, Iran, Kazakh- stan, Russia, and Turkmenistan-have long disputed how to divide the sea's resources (OGJ, Sept. 29, 1997, p. 39).

Azerbaijan immediately protested the announcement by claiming that some of the area to be studied is within its littoral boundaries.

A press release from the republic's foreign ministry read, "Azerbaijanellipse believes that the unilateral, unjustified act by Iran undermines positive tendencies noted in talks over the Caspian's status and could negatively affect the spirit of cooperation in the region."

Iran's foreign ministry countered the Azeri charge by stating that it had no legal basis. Azerbaijan then upped the ante by announcing a tender for three oil fields thought to be in the diputed area.

State Oil Co. of the Azerbaijan Republic (Socar) opened tenders Dec. 16 for the D-43, D-44, and D-74 offshore oil fields. However, Azeri President Heydar Aliyev said it was still unclear which areas the Iran contract encompassed and admitted that it was possible that the three fields on offer would fall outside the area Iran plans to explore.

Aliyev reportedly warned that the signing of the agreement might make it more difficult for Shell and Lasmo to win contracts in Azerbaijan. He claimed to have warned the companies "officially" before they signed the NIOC accord, but said they ignored the warning.

According to local press reports, Aliyev said both firms are hoping to receive a portion of the remaining 20% interest in Alov field in the Azeri sector of the southern Caspian, but that this is now out of the question.