NEWEST HISTORY OF AZERBAIJANIAN OIL
By signing, under the leadership of Azerbaijan Republic President Heydar Aliyev, historical contract of the century - Agreement on prospecting, development and production sharing on oil deposits "Azeri", "Chirag" and deepwater section of "Guneshli", Azerbaijan laid foundation for its long-term economic development. Nine years ago Azerbaijan showed itself as one of the major hydrocarbon producers and exporters. By 2010 the country will produce and export over 50 mln tons oil and 6.6 billion m_ gas annually. Two major projects - "Azer-Chirag-Guneshli" oil field development and "Shah-Deniz" (in addition to others), as well as two export oil-and gas pipelines Baku-Tbilisi-Ceyhan and Baku-Tbilisi- Erzurum provide such export chances for Azerbaijan.
ACG
"Azeri-Chirag-Guneshli" (ACG) contract was signed between Azerbaijan and foreign companies on September 20, 1994. American Amoco, Unocal, Pennzoil, Exxon, McDermott, British "British Petroleum", and Ramco, Norwegian Statoil, Russian LUKoil, Turkish TPAO and Delta Oil from Saudi Arabia were among agreement participants, which then formed the Azerbaijan International Operating Company (AIOC). Later consortium participant companies' list underwent some changes; contract shares were redistributed and re-bought. American "McDermott" "bowled off", Japanese "Itochu" entered AIOC, two oil giants - British Petroleum and Amoco consolidated. American Mobile entering the consortium, consolidated with Exxon, which already was project participant. Besides, new names appeared in AIOC: Devon Energy (former Pennzoil); British Ramco left the project in 2000 selling its share (2.0825%) to Saudi-American alliance Delta Hess for $ 150 mln. And in 2002 Russian LUKOIL sold its share in the project for $ 1.375 billion to Japanese INPEX.
At present the followings are project participants: BP (operator- 34.1367% share holding), Unocal (10.2814%), SOCAR (10%), INPEX (10%), Statoil (8.5633%), ExxonMobil (8.006%), TPAO (6.75%), Devon Energy (5.6262%), Itochu (3.9205%), Delta Hess (2.7213%).
During the past nine years (from the moment of signing) 4 presidents headed AIOC: Terri Adams, David Prichard, John Legat and David Woodward, who is up to now head of operational company.
In November of 1997 pursuant to intergovernmental agreement between Azerbaijan and Russia, first oil from contract area was transported though Baku- Novorossiysk pipeline to Black Sea port Novorossiysk (Russia) for further export to world markets. At that time the sole export pipeline was unofficially named "North" route.
Within the frames of first stage called "Project of Early Oil Extraction" "The Chirag 1" platform was installed on Chirag field, from which 17 wells have already been drilled, and the 18th is being drilled. Besides, Sangachal terminal was constructed up to world standard and put in commission. Italian company Saipem constructed two underwater pipelines: 24" oil pipeline till terminal in Sangachal and 12" gas pipeline till gas-compressor station in "Oil Rocks".
In April of 1999 "Project of Early Oil" was successfully completed following putting in commission terminal in Georgian port Supsa and oil pipeline Baku-Supsa. From this moment AIOC became owner of second export oil pipeline called "western route". Almost the whole oil produced on ACG with volume equaling to 155 thousand barrels/day is transported though this pipeline. Cost of the entire ACG project development amounts to 15 billion dollars. Its reserve is estimated to equal to 720 mln t oil and 99 billion m_ gas. On "Chirag" oil-field "Chirag-1" platform, producing oil at present, is installed. During 2002 AIOC produced over 6.4 mln ton oil from "Chirag" oil-field.
"Araz-Alov-Sharg"
The followings are partners under this project: BP (operator) - 15%, Norwegian Statoil - 15%, American ExxonMobil - 15%, Turkish TPAO- 10%, Canadian Alberta Energy - 5% and SOCAR - 40%. The amount of necessary capital investments to the project is $ 4 billion.
At present BP physically is not capable to launch drilling on this block. The fact is that semi-submersible drilling rigs are now at work, and others (with lower class) are unsuitable for such operations. Therefore company still continues studying technical data obtained on the block, and plans future activities, continues consultations with Azerbaijani government. Pursuant to contract signed between BP and SOCAR, drilling of first exploratory well on the block had to be started long ago. But after July incident in 2001 when patrol vessels of Iranian naval forces under the threat of force use compelled Azeri investigation vessels to leave the region, BP as a project operator stopped all activities and didn't return to block. Though BP didn't inform SOCAR that it considers "Iranian" incident force-majeure, but stated that work on "Araz-Alov-Sharg" would be stopped until Azerbaijan and Iran agree about ownership of the disputable oil-field.
SOCAR specialists consider south-Caspian block "Araz-Alov-Sharg" very perspective. Following research of sea-floor sediments on the block by SOCAR on BP demand, specialists come to conclusion about existence of hydrocarbons in huge volume. Researched uncovered so called "living oil". It means hydrocarbons lie not too deep. Detailed interpretation indicated that oil occurrence pool is very large. In this sea part active oil travel occurs, which increases chances for striking commercially attractive raw material volumes. It's possible that drilling of first exploratory well on "Azeri-Alov-Sharg" will be conducted with new semi-submersible drilling rig (SSDR) DSS-20, which is installed in Baku by Danish company Maersk.
New SSDR will be ready by the end 2003.
"Absheron"
The followings are "Absheron" project partners: American ChevronTexaco (operator) - 30%, SOCAR - 50% and French TotalFinaElf - 20%. Sum of project realization investment amounts to $ 3-4 billion. Gas reserves are estimated up to several hundred billion cubic meters.
According to Khosbakht Yusifzade, vice-president of SOCAR on geology and geophysics ChevronTexaco doesn't want to drill second exploratory well on the block. The decision is based on economically unattractive hydrocarbon volume. Company officials very reservedly state about further works, saying that at present "Absheron" perspectives are discussed in close cooperation with SOCAR and other partners. ChevronTexaco and TotalFinaElf have obligations before Danish Maersk for use of oil-rig DDS-20. But according to competent sources the company will resell them to interested parties. Drilling of first exploratory well on "Absheron" cost $ 78 mln. It's the most expensive well drilled in Azeri sector of the Caspian Sea. ChevronTexaco paid 60% from this amount, and its partner TotalFinalElf - the remaining 40%.
"Atashgah-Yanan-Tava-Mugan-Deniz"
Japanese company JAPEX owning 22.5% share holding is project operator. The followings are also contract participants: SOCAR -50%, Japanese INPEX - 12.5% and ITOCHU with Teikoku each 7.5 %. Total amount of capital investments equals to $ 2.3 billion. Block reserves are estimated to 75-80 mln ton oil.
Consortium of Japanese companies in Azerbaijan (JAOC) will close its office in Azerbaijan by the end of 2003. JAOC didn't discover commercially attractive hydrocarbon volumesin the second well on "Atashgah" structure. Its project depth increased several times, drillers expected that the deeper the more, but alas. At present consortium prepares report on the conducted activities for SOCAR. JAOC already gave drilling rig "Gurtulush" to its owner Franco-American Transocean SedcoForex.
JAOC and SOCAR will have to agree about compensation amount for consortium's refusal to drill (or drilling-in) of first exploratory well on contract block. JAOC considers that geological challenges met during drilling of first well, are sufficient reason for refusal from drilling-in. SOCAR insists that JAOC didn't fulfill obligatory part of the contract - first well drilling.
"Hovsan-Zikh"
Russian LUKOIL and SOCAR own equal shares 50x50 in this project. Investments of Russian part have to amount to $250 mln. According to Sate Oil Company's returns, residual reserves in "Hovasani-Zikh" equal to 17-20 mln ton oil.
Following coordination of all matters with Azerbaijan Republic Ministry of Ecology and Natural Resources, it would be clear whether contract on onshore block "Hovsan-Zikh" comes into force. At present chief ecological department didn't agree with Russian side on all matters within the frames of "Hovsan-Zikh" oil-and-gas operations. Contact signing is not sufficient. LUKOIL and SOCAR must reach compromises on determination of "exceptional sites" in "Hovsan-Zikh". "Exceptional site" determination is allocation of useful and vacant areas free from settlements and objects of strategic importance. The parties already settled these issues, now only insignificant technical and legal details to be decided in new future, remain.
"Zafar-Mashal"
Contract was signed between American ExxonMobil and SOCAR on April 27, 1999. 50% share holding of project belongs to State Oil Company and 30% to ExxonMobil. In 2000 20% was sold to American Conoco (at present ConocoPhilips). Project investments amounts to $2 billion, expected oil reserves - to 140 mln ton, 100 mln of which is in "Zafar" and 40 mln in "Mashal".
At present project shareholders expect construction completion of new SSDR DSS-20, which will drill two exploratory wells on the site. By the time of contract signing insignificant activities were conducted on the site. Joint Venture Caspian Geophysical established by SOCAR and transnational Schlumberger completed three-dimensional seismic survey (3D) in block. Seismic survey was conducted from JV new vessel "Gilavar". Total area of explored block is 850 km_. "Zafar-Mashal" structures were discovered as a result of seismic survey in 1961, and first geophysical work started in 1985 and 1987. Exploration drilling wasn't conducted on the block. Depth of productive attitude bed is 3500-3800 m.
The entire project exploration period is divided into two parts - 3 years for its main part, during which foreign contractor will conduct three-dimensional seismic survey of 643 km_ area and drill 2 exploratory wells. Then contractor has right to prolong exploration period 3 times, each for year. Every year contractor will have to stake one well.
"Inam"
"Inam" project shareholders are: SOCAR- 50%, BP - 25%, RD/Shell - 25. under contract conditions, in case of oil reserve discovery, "Inam" oil-field will be exploited 25 years. Expected oil reserves are 1.4 - 2 billion barrels. Project investment amounts to $1.7 - 2 billion.
In February of 2001 INX-1 drilling from SSDR "Dede Gorgud" was suspended on the mark 4442 meters (project depth of well is 5025 m.) due to anomalous high inlet pressure. Drilling rig "Dede Gorgud" withstands pressure up to 700 atmosphere, but on INX-1 it was higher. Therefore it was decided to drill-in the well with SSDR "Istiglal", the equipment of which is designed for higher pressure. However, after drilling only 108 m "Istiglal" also had to stopp drilling. Several SOCAR specialists consider that technological potential of "Istiglal" designed for pressure up to 1100 atmosphere, permit further drilling. Therefore they can't understand why BP decided then to suspend drilling. There is another version of drilling interruption: SSDR "Istiglal" had to work on another field under the schedule. According to David Woodward, Azerbaijani branch President of British-American BP, project operator, "we have several variants for optimal completion of first exploratory well drilling on perspective structure "Inam". According to him, during some months BP will coordinate one of these variants with project partners. At present geologic-engineering prospects are conducted to resume first well drilling in 2004.
"Kursangi-Garabagli"
Contract was signed on December 15, 1996 and ratified by Milli Majlis on April 16, 1999. Agreement conditions provide rehabilitation, exploration and development of contract block. Total contract area is 450 km_. Oil-fields are located in Salyan region of Azerbaijan at a distance of 150 km from Baku. According to SOCAR, during oil-field exploration period since 1962 app. 9 mln t oil was extracted. "Garabagli" oil-field has been developing since 1960, and during exploitation period 5.1 mln t oil was produced. State Oil Company specialists think that residual oil reserves on the contract site amount to 152 mln t. Agreement validity is 25 years. Project investments equals app. to $1 billion. Operation company shareholders are SOCAR (50%), two Chinese companies - China National Oil & Gas Exploration and Development Corp. (CNODC) and CNPC (Hong Kong) Ltd. (CNPCHK) per 25%.
Chinese Great Wall intends to drill 18 wells on the contract site during a year. At present the company produces oil of so called K&K grade (density 26 degree API, sulfur content 0.27%). During first quarter SOL produced 87.784 thousand ton oil, which is 11.984 thousand ton more than the same period last year.
"Kurdashi-Araz-Deniz-Kirgan-Deniz"
Contract on block exploration and development of offshore fields "Kurdashi"- "Araz-Deniz" and "Kirgan-Deniz" was signed on June 2, 1998 in Baku between SOCAR 50%, Italian Agip - 25%, Japanese Mitsui - 15% , Turkish TPAO -5% and Spanish Repsol - 5%. Reserves of each structure were estimated 90-100 mln t oil.
The block is situated on the offshore site of Nijnekurinsk basin towards Neftchala-Khilli-Babazanan-Garabagli-Kurovdag. There are there known anticlines: "Kurdashi", "Araz Deniz" and "Kirgan-Deniz". Water depth ranges from several meters up to over 600 meters. Main development objects are in Pliocene pay section at depth from 4 to 6 thousand meters.
Italian company Agip Azerbaijan B.V in 2001 refused third exploratory well drilling on block "Kurdashi" - "Araz-Deniz" and "Kirgan-Deniz". Italian company shareholders adopted decision on inexpediency of project activities continuation and paid indemnity to SOCAR at the amount of app. $ 20 mln.
SOCAR showed no enthusiasm to Agip decision. On project partners meeting in 2001 matter on activities expediency was discussed. Agip provided to partners result data of first and second well drilling, and they were "unfavourable". Company management adopted initial decision on inexpediency of drilling third well on block "Kurdashi", however shareholders had to tell the final word. They said - no.
"Mishovdag-Kelameddin" - "Padar"
PSA on "Mishovdag - Kelameddin" was signed on September 12 lat year. Parties' share holding in this contract was as follows: American Moncrief - 49.7%, PetOil (Turkey) -35.3% and SOCAR-15%. But already at the beginning of 2003 the partners changed and now they are: Canadian Nations Energy - 85%, SOCAR - 15%. There are 790 wells (200 oil) on "Mishovdag" oil-field and 190 on "Kelameddin". Contract term is 25 years with further 5 years extension possibility.
Karasu Operation Company (KOC) intends to conduct three-dimensional seismic survey of the whole contract site for structure investigation. International geophysical PetroAlliance Company fulfilled pilot stage of the activities on demand of KOC. Before it, two-dimensional survey for KOC was conducted by SOCAR trust "Azneftegeophysrazvedka". This year 3 wells will be drilled on rehabilitation site ("Mishovdag- Kelameddin") and one - on exploration site ("Padar-Kharami"). Turkish company TPIC will conduct drilling. Agreement on "Padar" block was signed in Washington between SOCAR and American company Moncrief Oil on April 27, 1999. in PSA on "Padar" SOCAR owns 20%, Moncrief Oil - 64%, ISR Oil - 16%. But as in the previous contract in 2003 the list has changed. At present project shareholders are: Nations Energy - 80%, SOCAR -20%. Expected investment to the project not less that $ 500 mln. Block "Padar" is located in Hajigabul region of Azerbaijan to the north-west from Low-Kurinsk cavity. It's situated between onshore perspective "Kurovdag" (has been developing since 1955), "Mishovdag" (since 1956) and "Kelameddin" (since 1977) oil-fields, which are now being developed. During exploitation period over 55 mln ton oil was produced from three oil-fields. Contract territory of block comprises "Boyuk Harami", "Kichik Harami", "Padar", "Girlik" and "Kurtalish" structures. Prospect work was conducted there in 1958-70. On "Boyuk" and "Kichik Harami" small commercial oil and gas inflow was obtained, but exploration works were not completed and structures were not put into exploitation mainly due to infrastructure lack.
"Muradkhanli-Jafarli-Zardob"
Muradkhanli Operational Company (MOC) headed by British Ramco, worked on the oil-field. Pursuant to contract Ramco had to drill two exploratory wells on the site. However failure from the first well which appeared "dry", reduced company optimism, and it decided not to drill the second one. In July 2001 Ramco returned to SOCAR rehabilitation sites "Muradkhanli-Jafarli-Zardob", and on November 28, 2001 after expiration of project exploratory period company decided not to prolong it. Expected oil reserves are 60 mln ton oil and necessary investments amount to $1.2 billion.
SOCAR started rehabilitation of some parts on "Muradkhanli-Jafarli-Zardob"oil-field. On rehabilitation sites returned by Ramco, on the demand of Azerbaijan Republic Ministry of Ecology and Natural Resorses, all wells belonging to SOCAR were frozen. Ramco explained that wells of Sate Oil Company are in terrible state, pollute site and damage environment. In accordance with contract company had to increase oil production on rehabilitated oil sites. However operational company couldn't drill two exploratory wells, but also didn't complete activities on rehabilitation sites. According to specialist estimation, total daily output of some commercially attractive wells on the site may be up to 600 ton per day. After restoration of potentially high output well #101, the drilling of which was stopped in 2001, its output may equal to 150-200 ton/day. In SOCAR the officials said that company can't afford finances from its budget for activities on this field. It's possible that works here will not begin till mid 2004. At present on "Muradkhanli" app. 100 ton oil id produced daily.
"Lankaran-Talish-Deniz"
"Lankaran-Talish-Deniz" block partners are: TotalFinaElf- 35%, SOCAR -25%, German Wintershall - 30%, Iranian OIEC- 10%. Total investments amounts to $2 billion. According to SOCAR specialists, contract block reserves are app. 110 mln ton oil.
TotalFinalElf has drilled only one exploratory well on the site, and after misfortune decided to refuse further work here, though contract provided drilling of the second well. Therefore TotalFinalElf paid indemnity to SOCAR at the amount of $ 20 mln.
"Nakhchivan"
SOCAR and ExxonMobil have equal shares in the project. Investments for "Nakhchevan" development amounted to $2 billion. Expected reserves are 110 mln ton oil and 85billion cubic meters gas. Oil-and gas block "Nahchivan" is located at a distance of 85 km to the south from Baku. Contract area is 280 km, depth of water in some places reach 800 m.
American company ExxonMobil refused further use of SSDR "Istiglal" due lack of commercially profitable oil reserves on the first exploratory well on "Nakhchivan" block. At the same time, during first well drilling a lot of data was obtained about the whole oil-and-gas block. Even two core samples were selected, which is usually done during second well drilling. Geological prospects indicate that there are many hydrocarbons on the field. Company has much expectations for the second well. ExxonMobil intends to drill the second well from rig DSS-20, which will be ready not earlier than the end of 2003. in accordance with world practice to find oil and gas sometimes it's necessary to drill 8 or10 wells, or even more. For example, before oil was discovered in the North Sea, app. 200 "dry" wells were drilled. Therefore failure with first well in "Nakhchivan" is no wonder. ExxonMobil should once again study stratigraphical horizons, on which tree-dimensional seismic survey (3D) was conducted: first of all to specify situation of the structure itself and to select optimal location for the second well.
"Oguz"
On structure "Oguz" there exist considerable condensate accumulation. Sea depth on the block ranges from 20 to 300 m. In PS contract SOCAR and ExxonMobil have 50% each. According to SOCAR geologists expected oil reserve is 100 mln t. Block "Oguz" discovered in 1977 by Azeri oilmen, is located on the sea at a distance of 90 km from Baku between "Guneshli" and "Oil Rocks" oil-fields.
ExxonMobil doesn't intend to drill the second exploratory well on perspective "Oguz" strcture. In July 2001 after drilling first exploratory well on "Oguz", ExxonMobil decided to suspend it due to lack of commercial oil inflow. The company stated that it doesn't intend to continue activities, "since contract doesn't provide drilling other wells on the structure, thus ExxonMobil has fulfilled its obligations."
Nevertheless, State Oil Company expanded for ExxonMobil project exploratory period till the end of 2003. SOCAR considers that Oguz Operating Company has some unfulfilled obligations. But ExxonMobil said "Under unfulfilled obligations SOCAR perhaps meant periodical reports about work. We mustn't conduct any other activities." Thus it remains unclear why SOCAR expanded exploratory period.
Meanwhile, one of SOCAR specialists stated, if ExxonMobil decides to drill the second well, it will have to study in details the site, in particular to conduct additional three-dimensional, or better four-dimensional seismic survey (4D).
"Savalan-Lerik-Deniz-Jambul-Dalga"
Partners on "Savalan" block contract are SOCAR (50%) and American ExxonMobil (30%). 20% of share holding remains free. Block "Savalan" comprises four structures "Savalan-Dalga-Lerik-Deniz-Janub". Total area of block located in the southern part of the Caspian Sea, is 850 km_.
Iran, proposing to divide the Caspian Sea to five equal parts, states that part of "Savalan" block falls to its sea sector. While Baku insists that borders of national sectors should correspond to coastlines of each Caspian state. ExxonMobil officials informed that company doesn't intend to launch works on "Savalan" for a while. "Since 20% of project remains free, and Azerbaijan parliament didn't ratify contract, our company position is to wait. We can't tell how long it will take." American company representative stated that ExxonMobil, as a private company, has no intention to participate in settlement of disputable matters between Azerbaijan and Iran. "Only governments of two countries should settle it", he emphasized. According to SOCAR representatives, in a view of any division method, offshore block "Savalan" will remain in Azeri sea sector. Therefore American company ExxonMobil shouldn't doubt the project stability. However, SOCAR specialists consider that ExxonMobil hardly will launch activities on this perspective structure: "Savalan" wasn't studied, there is no detailed picture of bed attitude and oil travel. First, huge means are required for project realization: seismic survey with maximal resolution, geological-geophysical investigations should be carried out, structure model must be formed, and only following these procedures the sire reserves can be estimated. In case extracted hydrocarbon volumes will be commercially profitable, the whole project, including exploration drilling, will require not less than $2 billion investment.
"Shah-Deniz"
Production sharing agreement on "Shah-Deniz" field development was signed in Baku on June4, 1996. it was ratified by Milli Majlis and came into force on October 17 of the same year. Exploratory and development test wells drilled on "Shah-Deniz" during 1997-2001 proved that this gas condensate field is of world class.
Shareholders of gas project are: BP-25.5%, Statoil -25.5%, SOCAR -10%, "Lukoil" -10%, TotalFinaElf -10%, OIEC -10% _ TPAO - 9%. "Shah-Deniz" project cost is $3.2 billion. $1 billion will be spent on construction of gas pipeline Baku-Tbilisi-Erzurum, $2.2 billion on gas producing platform installation and construction of some objects on Sangachal terminal.
On April 19 on "Shah-Deniz" field drilling of first from three advanced bores was conducted from semi submersible drilling rig "Istiglal". The well is located on the north-east wing of "Shah-Deniz" structure, at depth of app. 101 m. project depth of the well is 7244 m. App. 170 days required for its drilling and temporary shutting. The well id drilled from sea floor template, which will be installed in March under drilling rig "Istiglal" for advance boring of production wells. Fulfillment of advance boring program till TPG500 platform installation, enables to speed up production of first gas volumes, to increase rapidly gas and condensate extraction - right after platform exploitation, thus bringing profit both to Azerbaijan and to "Shah-Deniz" project partners.
The following activities are expected on the incoming stages of "Shah-Deniz" project:
Awarding of the main contracts - II quarter 2003; Platform construction commencement - II quarter 2003; Terminal construction commencement - IV quarter 2003; South-Caucasus pipeline construction commencement - II quarter 2004; First gas supply to Turkey - III quarter 2006.
"Phase-1" of "Shah-Deniz" development includes:
Project on development, production and transportation with total investments $3.2 billion.
Project on development and production includes platform TPG-500 with 15 nests for wells, equipment for production, drilling and accommodation blocks, which will be installed at depth of 105 m. Project provides underwater preparation of the field with five wells, which will be drilled later at depth of 300 m, construction of two underwater pipelines each with extension of 100 km - 26"gas pipeline and 12" condensate pipeline from platform TPG-500 to the terminal in Sangachal, rigs for gas and condensate preparation on coastal terminal.
"Shah-Deniz" project shareholders expect that within "Phase-1" 178 billion m_ gas and 2 mln tons condensate will be produced annually (14.6 mln barrel) during maximum production period. Extracted "Shah-Deniz" reserves are 625 billion m_ gas and 101 mln tons (750 mln. barrel) condensate. Even larger hydrocarbon reserves exist in deeper productive horizons. Total production potential is app. 16 billion m_ annually, which can be obtained during further development stages.
All matters concerning SOCAR share on Phase-1 project development financing by European Bank for Reconstruction and Development, are already settled. EBRD will provide SOCAR credit for this purpose. Settlement of these matters will enable to continue work within the project frame and lifts main question till its sanctioning. Main loan pledge for EBRD can be natural gas potentials which will fall to SOCAR share and will be exported to liquid markets - Turkey and perhaps further to Europe.
Credit period depends on payback period of "Shah-Deniz" project Phase-1, and rate hardly exceeds LIBOR+4%.
"South-West - Gobustan"
"South-West-Gobustan" field consists from 3 blocks with total area 604 sq. km. All these blocks are part of fields "Shikhzakirli", "Sheynatud", "Vukrut", "Donuzlug", "Nardaran", "Ilkhichi", "Gerbi Gajiveli", "Sundi", "Shargi Gajiveli", "Turagay", "Kenizdag", "Gerbi Duvanni", "Duvanni", "Solakhay" and "Dashgil" which were developed and abandoned due to insignificant oil extraction. On ninth of them 137 exploitation wells were drilled, they are closed at present. Besides, other 250 prospect and test development wells were drilled. Capital investment to exploratory works on contract territory amounts to $51 mln. Total estimation of capital expenditures in the project is $470 mln. Extracted block reserves are 115 mln barrel oil and 530 billion foot gas (totally app. 206 mln barrels oil equivalent).
At present project shareholders are SOCAR - 20%, remaining 80% are divided between Chinese CNPC and CNODC and Rosco.
Investments for fulfillment of minimal working program for 2003 will amount to $15 mln. However, this sum can be increased depending on work volume. Minimal working program is expected to be finished by November 2003. At present major repair of six wells on the block has already been finished and three of them provide gas. Daily output of wells ranges from 13 to 15 thousand m fuel. Total drilling well stock is 262 state.
"Yalama"
Agreement on exploration, development and production share on perspective block D-222 on Azeri sector of Caspian Sea was signed on July 3, 1997 in Moscow during official visit of Azerbaijan head to RF. Following ratification by Milli Majlis on December 10, 1997 the agreement came into force. Expected investment to the project amounts to $2.5 billion. Structure reserves are 130 mln tons oil. Under contract conditions, LUKOIL will have to drill on the contract site not less than 2 test development wells with project depth app. 3000m. Block D-222 is a part of the major perspective structure in north-east part of the Caspian Sea. "Yalama" is located on equal parts of Azeri and Russian sectors of the Caspian Sea at a distance of 30 km from coast. Sea depth on the perspective structure "Yalama" ranges from 80 to 700m. Probability of commercial hydrocarbon reserves discovery is very high.
In April LUKOIL increased its share in Yalama for 20%. SOCAR president Natig Aliyev and LUKOIL president Vagit Alekperov signed a package of agreements on additional conditions of perspective offshore block D-222 ("Yalam") exploitation and development located in Azeri sector of the Caspian Sea. The parties agreed on negotiation conditions and signed agreement on LUKOIL share increase from 60% up to 80% at the expense of SOCAR share, which at present has only 20%. LUKOIL also expanded contract area from 1, 287 km to 3, 037 km. As a result of negotiations parties agreed about expansion conditions and signed corresponding agreement. In the second half year of 2004 on contract site D-222 drilling of first exploratory well using floating semi submersible drilling rig, is due.