"SHAH DENIZ" ASPIRES TO NEW WORLD RECORD
THE AIM IS SUPPLYING OF THE FIRST GAS TO TURKEY ON SEPTEMBER 30, 2006
Gas export project at Azerbaijan "Shah Deniz" gas condensate field initially laid the foundations of long-term relations in the Caspian-Black region. The partners on "Shah Deniz" project are BP Azerbaijan (25,5%), Statoil (25,5%), SOCAR (10%), LUKAgip (10%), NICO (10%), Total (10%) and TPAO (9%) provide by facilities to project creation of East-West energy corridor connecting the Caspian Sea with Turkey and further with European countries. The deposits of "Shah Deniz" will provide by blue fuel not only Azerbaijan but also Georgia and Turkey.
Not much and not little
"Shah Deniz" project is the project which development and construction are continued fast. If we take into consideration the operations implemented from the opening of "Shah Deniz" field thus far, "Shah Deniz" would aspire to world record. I.e. there was no term in the world that from the opening of gas field till receiving of industrial gas stream took 7 years and 3 months. We can compare it only with "Trol" field locates in the North Sea that has been commissioned later. If "Shah Deniz" has to be commissioned on schedule it will be world record.
Unfortunately, the expenses took place on the base of BP's project charges' its fast growth, and "Shah Deniz" also plans to get one of the leading place (pls. look at previous issue of CASPIAN ENERGY). Last year, the project became expensive in November 2004 when the partners of "Shah Deniz" project declared about increasing of project cost which estimated at that time $3,2 bn - for 25%.
At present, the president of BP Azerbaijan Rob Kelly declared on March 11, at the first project's presentation regarding the "Shah Deniz" development that capital charges on project Stage-1 are estimated approximately at $4,1 bn.
However, partners' experts on "Shah Deniz" project ongoing the estimation both the cost and the schedule of operations because the latter also reflects the influence to its tariff. Each partner separately study the accounts provided by BP. Final cost of Stage-1 development will be determined on next meeting of partners in March 31.
This year, the partners on "Shah Deniz" gas condensate field's development will spend up to $1,3 bn. Totally, since the realization of project till the end of 2004 spent $2,1 bn.
"Up stream" implementation, "Shah Deniz" field Stage - 1 development divided into four stages.
The first stage includes the drilling operations. At that moment, with the aim of industrial gas flows receiving during TPG-500 platform assembling, there were drilled three advance bores (within 2003-2004). Commonly within the frame of Stage-1 is planned to drill 14 wells. The cost of these wells will make $800 mln.
The second stage means by construction of TPG-500 platform. The platform constructing on design of Technip is the third platform in the world. Two previous operate in the North Sea. The cost of marine structures on project Stage-1 of "Shah Deniz" field's development including TPG-500 platform and underwater pipelines is estimated at present at $2,2 bn.
The third is the building of three underwater pipelines with length 100 km. of each. In particular, the speech is about 26 inch pipeline, 12 inch condenser and 4 inch monoethenoid pipeline (for struggle against hydro formation). The construction of these pipelines will be begun on July 2005. And last, the fourth stage id the building of "Shah Deniz" field's area in Sangachal terminal. In this case, there is considered the construction of two complexes units.
Having in presence
Platform TPG-500 is constructed in two building yards in Zykh (Baku suburb) and dry floating dock. "Yusif Ibrahimov" dock which owner and operator is "Caspian Shipyard Company" (SOCAR structure) is the largest dry dock in the Caspian region for supporting of marine operations. This is alone and enough big dock which is able to get the hull of TPG-500 with weight at 14 thousand tons. The programme of modernization was fulfilled by BP, and the operations on modernization has been implemented by Caspian Shipyard Company JV (SOCAR / Keppel Fels). In operation also took part 3 local subcontractors which are Building Company TML, Rigblast Energy Services Ltd (RESL) and Baku Constructing Company (BCC).
After modernization of dry floating dock "Yusif Ibrahimov" the four sections of TPG-500 platform's hull have been assembled on demanded place and united to single floating hull.
At the presentation Rob Kelly noted that the operations by docking ongoing with forestalling of the schedule to 5,5%. At the present time the assembling of whole section fulfilled for 90%, the main equipment set and carrying out the final welding before working of machine processing. On April 1, the construction will be transferred to building yard in Zykh for completely assembling of platform bearings and completion of upper constructions preparing.
After delivery to the main building yard by construction of platform TPG-500 in Zykh on combined hull will be set the rest dwelling blocks, drilling assembling and the rest two parts of the hull. After opening of navigation in the North Caspian, there will be delivered the rest two parts of the hull from Singapore. These are the parts where will be placed the part of equipment for initial processing work of gas and condensate recovered.
At that moment, building yards in Zykh-3 and Zykh-4 are almost ready for receiving of platform's upper constructions and their reaching up to the single integration. There had been completed the assembling of bearings and continued their rigging out in Zykh building yard. The first bearing is planned to be set on April 7.
Commissioning trials on "Shah Deniz" field are planned to period from the third quarter of 2005 to the end of the third quarter of 2006. However, the trials of drilling equipment has already carried out. At present, mechanical trials of drilling equipment have been completed, exploitation trials fulfilled to 40%. In area are continued the rigging out of dwelling blocks.
In Zykh area all operations have also fulfilled on schedule. Remarkable, the modernization of building yardmeets to all international standards will be belonged to Azerbaijan after project's realization.
TPG-500 is unique and firstly platform in the Caspian Sea, and after arriving to point of destination it will sink the bearing constructions to water itself.
Concerning the area on receiving of gas at Sangachal terminal then the operations by construction are implemented with forestalling of schedule to 6%, and works by purchasing of materials and engineering operations on schedule.
At present, the foundations of all tanks completed to 100%, and the steel for construction of tank is on the way. There are carried out the construction of living quarters, electrosetup, pipeline construction. In terminal needs to lay 7 thousand pipes of different diameters. The constructions of other units are continued, in particular commutation hall, assembling by utilization of waste heat. There is completed the setting of generators, air compressor, gauge component of condensate, columns' stabilization, heat exchange. There has been raised the body of economizer of hot oil (the highest construction in the area with height at 20 floors dwelling house), internal pipes and flange of chimney. The supplies of equipment are implemented from Italy, Japan, Corea, Switzerland, USA, Great Britain. At Sangachal terminal serving approximately 4 thousand persons (80% is the citizen of Azerbaijan).
SCP is not still BTE
Despite to high rhythm of the project fulfillment regarding the world standards the construction operations, which purpose is providing by gas supplying to Turkey in September 30, 2006 and it remains behind from the schedule of "Shah Deniz" project. If we take into account the expansion of the volume of the up stream constructions, drilling operations and the terms of completion of the South Caucasus Pipeline (SCP) is possible to note that present, the progress on project makes 51% under the forecast at 52,5%. According to Rob Kelly the steps have already taken for schedule fulfillment with forestalling in the future.
The South-Caucasus Pipeline (middle stream) with length 690 km is the part of export main line Baku-Tbilisi-Erzurum and it begins from Sangachal passes through the territory of Azerbaijan and Georgia, its finish on Georgian - Turkish border that makes 690 km. Financing and construction of the pipeline are implemented by the partners on "Shah Deniz" project.
Financing and construction of other pipeline from Georgian - Turkish border to the existence gas distribution network in Erzurum (Turkey) with length 280 km. and fulfilled by Turkish state pipeline company Botas.
Regarding gas the export infrastructure should be ready earlier of producing infrastructure, and taking into consideration that SCP trenching with Baku-Tbilisi-Ceyhan pipeline on behalf of the same contractors (CCIC in Azerbaijan and Capac/Petrofac) in Georgia. The shareholders of the project are considered to save their time and to complete the construction till the end of 2005 - at the beginning of 2006.
The construction operation on SCP has already completed to 61,5%, however, at that moment, there was planned to complete the operation to 65%. SCP in Azerbaijan side (442 km) serve approximately 2 thousand persons (75% is the citizen of Azerbaijan).
Since September 30, 2004, in Azerbaijan side the quantity of passageways under the roads and rivers make 1500 unity. The passageway under the Kura River creates the most difficult problems. There was accepted a decision to build a mini tunnels. Two (one in Azerbaijan, other in Georgia) were placed under the Kura river closer to Azerbaijan-Georgian border, and one more in the West part of Georgia.
The length of pipeline in Georgia approximately 248 km., using manpower is 2800 persons (70% is the citizen of Georgia). The most quantity of manpower busy, Rob Kelly explains the hard Passage Mountains' areas in the West part of Georgia where the units will be built more. Passageways' quantity under the roads and rivers in Georgia is 800.
SCP construction is completed by control-indicator station in Georgian-Turkish border.
The certain work in a Turkish part was done by Botas, which has wide working experience in construction of gas pipelines. As declared by Caspian Energy Rob Kelly, the route of the pipeline is chosen, the ground is bought, the document on influence on an environment is authorized. In January the contractors on construction of two Turkish sites of the pipeline till 140 km everyone were selected. At the beginning of March the third contractor on construction gas compressor station was selected.
According to the diagram, the Turkish site should be handed over in September 2006. The total cost of works changes within the limits of $400- $500 mln. At present, the mobilization of engineering to physical construction began, and in summer will be begun the construction operations and finished for less than after 12 month.
In searching of new consumers
Large gas condensate "Shah Deniz" field locates approximately in 70 km from the coast, in the southern part of Azerbaijan sector of the Caspian Sea. The contract on development of "Shah Deniz" field is valid till 2030 with an opportunity of prolongation for 5 years.
The field was opened in summer of 1999. The accounts which have been carried out from that time show, that field's balance stocks make about 38 trillion cub. foot of gas (approximately 1,6 trillion cub. meter) and 2,1 bn. bbl of condensate.
Within the framework of Stage - 1 project, when on field the platform will be established, there is planned to extract about 8,5 bn. cubic metre of gas per one year or daily 140 thousand bbl of fuel equivalent, including 45 thousand barrels of condensate. In future, the volumes of produced condensate will be increased proportionally to increase of gas production. For the first year is planned to take 5 bn. cubic metre of gas. Accompany such volume to gas can about 25 thousand bpd of condensate. The latter, instead of gas will be pumped to building of Baku-Tbilisi-Ceyhan oil pipeline (BTD).
The partners have already accepted the decision on drilling in August, 2005 of the fourth outstripping well with using of "Istiglal" and sea floor template, on which the platform TPG-500 will be established.
However, Gas Purchasing and Selling Agreement for pump stations can be signed between the partners of the project "Shah Deniz" and BTC Co. pipeline company. According to Rob Kelly, before start-up in operation, Baku - Tbilisi - Ceyhan does not require this gas. And BTC Co. has an opportunity to use alternative fuel. In this occasion the negotiation proceeds.
Within the framework of Stage - 1, the project "Shah Deniz" is planned to take 12 trillion cub. foot of gas (0,3 trillion cub. meter). However, nobody excludes, that in the future of figure will change, as it was in a case with development of other sea fields in the Caspian Sea.
At once after ending of operational well's drilling, the drilling rig will proceed on other, the southeast block "Shah Deniz" for a bookmark of an estimated well SDX-4. Well will be drilled on the large depths, than outstripping to open Nadkirmakin and Podkirmakin retinue, that can allow to increase the field's forecasting reserves.
The increasing of gas reserves entails search of the new markets of its selling. Now, subcommittee, as the PSA part, considers the matters on marketing gas to Europe. "The marketing is not present, i.e. we do not negotiate with any countries, but certainly we spend the analysis of the markets to find the new consumers", - has emphasized Rob Kelly. The work is conducted to learn, where there will be a deficiency of gas in subsequent 7 years, so that further to direct there attention of the shareholders and to begin negotiation. "While negotiation to begin early, because the drilling of 4 estimated well and appraising of opportunities for Stage - 2", - has continued Rob Kelly.
Now partners under the project also consider the legal party of the project Stage - 2. The matter is fact that before gas selling to other country having the legislation, including the laws on a competition, there is necessary to take into account a legal basis in these countries. Therefore, at present there is an analysis both market and legislation of those potential countries - importers of Azeri gas.
Shareholders of the project are ready to consider all variants, Rob Kelly thinks, planing, making an estimation of extraction reserves for the subsequent stages, and only after that any negotiation on sale of new volumes of gas from "Shah Deniz" field will be possible.