PROFESSIONAL STEPS IN DRILLING

Caspian Drilling Company Limited JV (CDC) established between State Oil Company of Azerbaijan Republic (SOCAR) and American GlobalSantaFe Corporation (GSF) has been operating in the Caspian region for 8,5 years, - General Director of JV Shaik Bakirov announced. Over the stated period the company has won the recognition of the largest oil companies and international associations.

70 wells for 8 years

Over the period of its activities whilst utilizing the upgraded Semisubmersible Floating Drilling Units (SFDU) "Dada Gorgud" and "Istiglal" CDC has drilled approximately 30 exploration wells at 14 perspective structures and fields, as well as more than 30 predrilling wells in the Caspian. So, since 1997 there have been drilled about 70 wells which average depth 4500-5000 meters that makes generally 300.000 meters of digging. It is a very notable figure for two units taking into account stand-by periods used for upgrade and repair works. (for 8 years the units were idle/stand-by for 2 years).

CDC participated in opening of "Azeri-Chirag-Guneshli" and "Shah Daniz" fields and also discovered the perspectiveness of such fields as "Absheron", "Nakhchivan", "Garabagh", "Ashrafi" and "Dan Ulduzu".

Despite "Dada Gorgud" and "Istiglal" were constructed respectively in the 1980s and 1990s both units have been kept in good operating condition so far. During the period "Dada Gorgud" has been upgraded four times, and "Istiglal" - twice. Suffice it to say that over the time of JV activities an International Independent Company of Offshore Inspection had been invited to evaluate condition of the drilling units to ensure that the requirement of drilling contractor in an impartial evaluation by the third independent company is met. As a result of regular precautions taken and services maintained the units have been performing operations in compliance with requirements of Global Santa Fe (GSF).

Training is conducted both for expatriate and local drilling personnel. The Company has succeeded in preparing qualified specialists in drilling operations but since "Istiglal" has been on stand-by commencing from August 31, 2004 approximately 90 trained specialists left the Company for other SFDU and platforms installed at FCG and "Shah Daniz" fields. And of course, such a process had a negative impact on Company's operations with reduction of trained personnel on the rigs by 40%. In the meantime the Company hired young engineers among graduates of Oil Academy and SOCAR employees with basic knowledge of English and understanding of drilling business. Presently we have been involved in negotiations with BP Azerbaijan on signing new long-term contracts for both units. The key aspects of those contracts have been already stipulated. The contract works will commence by 1 August 2005. CDC is confident that newly hired personnel with cope with any drilling challenges.

Drilling market in the Caspian

The perspectives of geological survey in the Caspian shelf for SFDU are very low. The volume of operations for such units is not that high. "Dada Gorgud" and "Istiglal" could be rather effectively involved in drilling operation in the deepwater sections of Caspian at about 700 meters depth. Both units are mobile and fast for implementation of those operations.

If we carefully consider the drilling market for SFDU in the Caspian shelf, it will be obvious that ACG and "Shah Daniz" fields have certain advantages. CDC units at stated fields will be needed after installation of production platform.

"My opinion is if oil price keeps high the operators will opt for SFDU for underwater production operations at "Garabagh", "Ashrafi" and "Dan Ulduzu". Each of them has approximately 40-50 mln tons of fuel equivalent.

When we opened these fields the oil price was low and the production was commercially unprofitable. But today as the oil price increases the infrastructure has grown at the account of oil production from ACG. In this connection the production on fields with low hydrocarbon reserves does not require huge investments. It is our future, because both of our units are able to produce oil underwater", - said Shaik Bakirov. The field of greater interest for "Dada Gorgud" and "Istiglal" is "Kapaz", "Yalama" (in case of successful results of the first prospecting well drilling), "Nakhchivan", "Zafar"-"Mashal", Alov-Sharg and the perspective areas in the Iranian sector of the Caspian. Both units can be effectively used for prospecting operations in Kazakhstan sector of the Caspian up to 70 meters of the sea depth. All those plans make company optimistical about the future.

Investments perspectives

All foreign companies have already defined how far it is profitable and good for them to operate in Azerbaijan. Foreign people who moved here a couple of months ago tend to like Baku and wish to stay for longer periods. There is a good climate in Baku and the city is in no way inferior to any European city. There are good schools and the conditions for living are better and prices are cheaper than in Europe and the USA. Certainly major companies encounter some negative cases of state barriers but such problems are existent everywhere in the world. The largest investments into floating drilling rigs in the Caspian region are accompanied by some element of hazard. The hazard is geographical if there is a lack of new perspective structures and in this case it will be difficult to revert the invested capital. Since the Caspian Sea is a closed region and demobilization of drilling units into other oceans and seas is expensive some new rigs should be constructed. This is the only investment problem in drilling business.

"It seems to me that there is time to introduce the drilling vessels in the Caspian region and not units. Their movement will be much easier. Therefore, investments into floating drilling means are not perspective", - he said.

But in spite of all GSF has incorporated in its personal strategy activities in the Caspian Sea and as a result the Company is to sign a new contract with BP on provision of drilling service.

"I think that oil business should turn out beneficial for Azeri population. Without this all those operations on development and production of oil are not even necessary. There is a feeling that people see the benefits from oil and gas production and it will increase even greater in future.

At present the priority subject in oil business of Azerbaijan is a process of nationalization, i.e. replacement of expatriate specialists by local ones. As a result, reduction in number of expensive expatriate specialists will bring to increase of our revenues," - Shaik Bakirov