• New deal to explore new Caspian opportunities
• Potential to support Azerbaijan’s long-term production SOCAR and BP today signed a new production sharing agreement (PSA) for the joint exploration and development of Block D230 in the North Absheron basin in the Azerbaijan sector of the Caspian Sea.
The PSA was signed in London, in the presence of Azerbaijan’s President Ilham Aliyev and UK Prime Minister Theresa May, by Rovnag Abdullayev, President of SOCAR, and BP’s Group Chief Executive Bob Dudley.
Speaking at the signing event Mr Abdullayev said: “We have a long tradition of successful cooperation with BP. I believe that the synergies between modern upstream technology and unique historical experience, embodied at both companies, create a solid foundation for our continued success. Being based on fair and equal conditions, today’s agreement will become an important milestone in the pursuit of the highest degree of efficiency in the joint development of the hydrocarbon resources of Azerbaijan.”
Mr Dudley said: “This agreement underpins a new joint effort by SOCAR and BP to explore further Caspian opportunities in support of long-term production in Azerbaijan. We have now been operating in the region for more than 25 years and believe there is still significant oil and gas potential there. We look forward to continuing to build on our significant business in Azerbaijan, working closely with SOCAR and others to explore and help secure the Caspian’s future for decades to come.”
Block D230 lies some 135 kilometres (84 miles) north-east of Baku in the Caspian Sea.
It covers an area of some 3,200 square kilometres and has not previously been explored. It has water depths of 400-600 metres and anticipated reservoir depths of about 3,500 metres.
Under the PSA, which is for 25 years, BP will be the operator during the exploration phase holding a 50 per cent interest while SOCAR will hold the remaining 50 per cent interest.
The signing of the PSA follows the Memorandum of Understanding for exploration of Block D230, which was agreed in May 2016.
Notes to Editors
• BP and partners signed their first PSA in Azerbaijan with SOCAR, covering the development of the Azeri, Chirag and Deepwater Gunashli (ACG) field, in 1994. Production from ACG began in 1997 and the field has since produced over 3.3 billion barrels of oil. In 2017, SOCAR and the ACG partners signed an amended and restated PSA that extends to the end of 2049.
• BP and partners signed a PSA for the development of the Shah Deniz gas condensate field in the Caspian in 1996 and production began in 2006. The major second stage of the development of the field, Shah Deniz 2, is scheduled to start production later this year.
• BP has also signed earlier two exploration PSAs with SOCAR: a PSA for the Shafag-Asiman offshore block was signed in 2010, and a PSA for the shallow water area around the Absheron Peninsula in 2014. Under both PSAs, seismic programmes have been completed and work continues for drilling plans.
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The Shah Deniz II gas sales contract with Spanish Gas Natural Fenosa was transferred to Italy's leading energy company Edison as part of a greater deal, including the acquisition of a gas grid in Italy.
The signing took place at SOCAR Tower with the participation of SOCAR, Azerbaijan Gas Supply Company (AGSC), Edison and Gas Natural Fenosa. Edison acquired a 25-year gas supply contract from the Shah Deniz II field. The supply is scheduled to start in 2020, following the completion of the Trans Adriatic Pipeline (TAP).
On the 13th of October 2017, Edison and Gas Natural Fenosa agreed to transfer the Gas Natural Vendita Italia (GNVI), an important gas grid in Italy. The transfer of Fenoza’s Shah Deniz II gas sales contract to Edison was subject to completion of this deal. In February, the European Commission has acknowledged the deal as being compatible with the antitrust regulation. Subsequently the acquisition of the GNVI and transfer of the gas supply contract were accomplished. This transfer demonstrated a constantly growing interest in Azerbaijani gas among major energy players in Europe.
Edison is a major Italian energy company in the field of electricity and natural gas supply, headquartered in Milan, with subsidiaries operating across continents. Edison has an integrated presence in the hydrocarbons sector from production to distribution and sales of natural gas and crude oil. In 2017, Edison covered 22% of gas import and 6% of gas production in Italy.
The Azerbaijan oil and gas production increased by 2.4% and 5.2% respectively in the first three months of the year. Positive dynamics in SOCAR's production was reached as a result of intensified drilling operations, the effective use of existing wells plus the recovery of inactive ones.
Between January-March 2018 SOCAR continued its comprehensive action plan, in order to maintain stable oil and gas production. The volume of drilling work in SOCAR increased by 14% compared to the same period in 2017 (13% in comparison with target figures). Accordingly, SOCAR carried out 40.5 thousand meters of drilling work on 15 wells during this period. 13 wells were drilled additionally by SOCAR's joint ventures. Geological and technical measures were taken in operational wells and 66 redundant wells were reactivated allowing SOCAR to stabilize the production process and produce 1.8 million tons of oil in the first quarter of 2018. The company's total gas production in the first quarter was approximately 1.6 billion m3, an 8% increase from 2017.
In the first quarter of 2018 oil production in the country increased by 2.4% compared to a year earlier, reaching 9.7 million tons between January-March. There was a growth in gas production too, which reached 7.3 billion m3, 5.2% higher than the figures for the first quarter of the previous year. The increase in production mostly occurred in March - with 5.8% in oil and 12% in gas production.
SOCAR Vice President for Field Development, Yasar Latifov said: ''For sustainable growth, SOCAR is implementing a comprehensive action plan on strategically important fields. The intensification of the drilling program, improvement of the management system, and further optimization of decision-making and risk management are among the significant measures. Historical experience and high professional skills of Azerbaijani oil workers create favorable conditions for successful implementation of these processes''.
In the first quarter of this year, five production wells were drilled and put into operation in the Azeri-Chirag-Gunashli field. In total , it is planned to deliver 12 production and 4 injection wells on ACG in 2018. Shah Deniz-1 drilling work is underway, and two production wells are expected to be completed this year. The drilling of a well within the scope of Shah Deniz-2 is already finished. The project is expected to establish five production wells within a year.
SOCAR Vice President for Geology and Geophysics, Bahram Huseynov said: ''To meet growing demand for natural gas in Azerbaijan, SOCAR takes important steps toward the development of new oil and gas fields. Garabagh and Umid fields are on the threshold of the next stage of their development and they will enter the front-end engineering design (FEED) phase soon. We are planning to drill the first operational well on the Babek structure. The engineering design on the early production scheme of Absheron field is in progress, and we are preparing for the Final Investment Decision on the project ''.
Crude oil export also increased in the first quarter of the year. SOCAR exported 5.7 million tons of crude oil, increasing it by 13.3% compared to last year. The growth in oil export can be attributed to various factors including the increase of SOCAR’s share in ACG.
The total export of oil and petrochemical products made up 413,000 tons for the first quarter of 2018, a slight change from last year’s amount. This is mainly due to a 21% increase in domestic demand for diesel, despite a 6.4% increase in production, as compared to the first quarter of the last year. The realization of diesel products remaining in reservoirs since 2016 in 2017 also contributed to the comparatively higher volume of the export last year.
In contrast, the volume of chemical products exported grew during the first quarter of 2018. The production of high-pressure polyethylene went up by 3% while the export volume rose by approximately 11%. Also, the production of butylene butadiene fraction increased by 11% resulting in a 12% rise in export.