Azerbaijan's Caspian exploration heating

Elf/Total's AzeriCaspian PSC [27720 bytes]

Exploration continues to heat in Azerbaijan's Caspian Sea sector, and French and Japanese companies have taken on key roles.

France's Elf Aquitaine and Total have signed a 30-year production-sharing contract (PSC) with Azerjbaijan's state oil company covering exploration and production of a tract in the southern Caspian.

Meanwhile, a group of Japanese companies is poised to sign an agreement with Azerbaijan's government covering exploration of two blocks in the southern Caspian.

Elf/Total

Elf and Total's PSC covers the 420-sq km Lenkoran-Talys Deniz block in the Caspian Sea 300 km south of Baku in 20-100 m of water.

The contract spells out all technical, legal, environmental, and commercial requirements for exploration and subsequent development of the area.

It also includes an exploration program calling for 3D seismic surveys and drilling two exploratory wells in 3 years.

Elf is operator with a 65% interest in association with State Oil Co. of Azerbaijan Republic (Socar) 25% and Total 10%.

Elf and Socar are negotiating with other international oil companies-reportedly Mobil Corp. and Deminex AG-to take part in the project.

Work will get under way when the final group is formed.

In June 1996, Elf acquired a 10% interest in a PSC operated by BP Exploration on Shah Deniz permit about 100 km to the north in the Caspian.

In addition, Elf and Total both say they are stuyding other PSCs with Socar in Azerjbaijan.

Total, in particular, is seeking a project in which it would be operator.

Japanese group

A group of Japanese companies led by Japan's state-owned Japan National Oil Corp. (JNOC) is awaiting results of a seismic survey Azerbaijan's Socar is conducting on Blocks B and C in the southern Caspian 500 km south of Baku.

Other participants in the group are Itochu Corp., Japan Petroleum Exploration Co., Japan Energy Corp., Indonesia Petroleum Ltd., and Teikoku Oil Co.

If the results, which are expected shortly, prove promising, JNOC will sign a memorandum of understanding (MOU) with the Azerbaijan government for exploration on the two blocks.

According to JNOC, this could be as early as February. It added that the results will determine which of the existing members of the group will remain with the project.

The 7,400 sq. km. area was estimated by one survey conducted during the era of the former Soviet Union to contain a postulated oil resource of as much as 7 billion bbl of oil.

After the MOU is signed, a company will be set up to direct operations. Costs for the next 3-5 years is estimated at 20 billion yen.

If exploration yields any commercial successes, production could begin around 2007-2012, JNOC said.

Itochu's role

Kotaro Morishita, executive director of the Baku office of Itochu Oil Exploration, noted in Baku that "1996 had opened the first page in cooperation between Japan and Azerbaijan."

He said Japan's main efforts in Azerbaijan have consisted of getting Itochu linked up with the Azerbaijani International Operating Co. (AIOC), which is implementing a project to develop Azeri, Chirag, and Guneshli oil fields. AIOC is a group led by a unit of Amoco Corp. The first well in that project, 1 Chirag, was spudded last year (OGJ, Nov. 4, 1996, p. 44).

The "second historical event" took place Dec. 14, 1996, when a PSC was signed with AIOC to cover the prospective Dan Ulduzu/Ashrafi structures (OGJ, Dec. 23, 1996, p. 32). Itochu received a 20% stake in that PSC.

Another foreign group, led by Pennzoil Co., has agreed to further explore and develop the Karabakh structure in the southern Caspian.

Morishita said the most important current talks between Socar and Itochu concern the construction of a gas compressor station in Bakhar field and the revamp of a gas-fired power plant in Neft Dashlary (Neftyanye kamni) field, which is under risk of flooding.

He said Itochu had been highly instrumental in organizing visits to Azerbaijan by a string of Japanese governmental delegations, resulting in the opening, by the Japanese Ministry of Foreign Trade and Industry, of a $100-million credit line to insure export and import operations between Japan and Azerbaijan. Furthermore the Ex-Im Bank of Japan has arranged a banking credit deal worth $100 million with the International Bank of Azerbaijan.