AZNEFT'S PRIORITY- GAS PROGRAM realization

 

Caspian Energy (CE): Mr Ahmadov, how would you evaluate the current state of oil&gas production in Azerbaijan? What is Azneft PA's part in the further development of this sector?

Sabuhi Ahmadov, General Director, Azneft PA: The oil industry, being a leading sector of Azerbaijan's economy, is the powerful basis of social, economic and political independence of our country. The support to the oil industry by national leader Heydar Aliyev at the end of XX - early XXI century gave a good impetus to the reinforcement of state system and significant increase of Azerbaijan's influence at the global scale, as well as to the rapid development of our economy. Skillfully using our energy potential, he turned our Republic into the open and accessible country for foreign investors.

The successes of the "Contract of the Century" signed in 1994 in Baku are growing year by year and as a result Baku oil today is being transferred through Baku-Tbilisi-Ceyhan export pipeline to international markets. The daily throughput of this route reached 1 mbd so far.

During 2006 Azerbaijan first time produced 32 MT of oil. It is suggested to increase this amount through 2007 to 42-43 MT and to 50MT in 2008.

As you know, Azerbaijan long since was known in the world as the oil country. However, gas-rich Shah Deniz field discovered in Azerbaijani sector of the Caspian Sea and attraction of foreign capital to joint work under the project has turned our republic into the natural gas exporting country.

In 2006 we brought online Baku-Tbilisi-Ceyhan export pipeline and during the 1Q2007 another historical event, commencement of gas export from Shah Deniz through Baku-Tbilisi-Erzurum gas pipeline, has taken place. According to the last estimations, the field reserves total 1.200 trillion cubic meters of gas. With an account for reserves at other fields, Azerbaijan will be long time supplying domestic demand and delivering gas abroad.

As the years 1995-2005 were for the republic the period of attraction of investments to the country, starting 2005 Azerbaijan's economic potential, growing due to oil revenues, enables the country to invest in various projects, including those at governmental scale.

Azneft PA contributed greatly to these successes. The complex measures under the supervision of SOCAR's President Rovnag Abdullayev resulted in PA's successfully completing the work for the year 2006 and 1Q2007, making its contribution to development of the oil industry and achieving high indicators in oil&gas production.

During 2006 the oil production was 102.1% of the forecast, 158,141 ton of oil above the plan. The oil handover to the government during 2006 was 102.2% of the plan, 164,098 ton of oil in excess.

Oil&gas production departments of  Azneft PA fulfilled the 2006 gas production plan at 115.7%, 690,637 thousand cubic meters of gas were produced in excess; the gas handover plan was fulfilled at 116.8%.

One of the priority methods of oil&gas production increase is bringing new wells online as well as repairing and bringing idle wells online. So, due to bringing online 62 new wells and increasing production at 14 wells we produced additional 338,907 ton of oil during 2006. At the same time we brought online 4 new gas wells. We completed the scheduled objectives on well service operations. From the idle stock, 217 wells have been repaired and brought online, producing a total of 46,726.0 ton of oil through the year.

One of the factors enabling such achievements is the selection of optimum mode for operation of 4,830 wells in active stock. As a result of 5,778 geotechnical operations we obtained 684.0 ton of oil.

Azneft's Departments successfully completed their operations in the 1Q2007, producing 21,438.7 ton of oil and 15,825.0 thousand cubic meters of gas above the plan.

There is no doubt that a good deal of this work was done due to targeted and efficient use of up-to-date scientific achievements. Application of new technique and technology by the Production Association proved to be quite effective.

The oil&gas production was increased by enlarging offshore platforms and drilling additional wells upgrading of gathering and transporting systems at Gunashli field and bringing new gas horizons in operation.

 

CE: What are the tasks set by Azerbaijan's gas program? Which fields suggest development and which further? Which issues are pending their resolution? Where did you achieve the key success?

Sabuhi Ahmadov:  You know, Azerbaijan refused to purchase gas from Gazprom of Russia at $235 per 1,000 cubic meters. At the last year's government sitting President of Azerbaijan Ilham Aliyev assigned SOCAR to supply the republic's demand for ‘blue fuel' from its internal capacities, striving to increase gas production.

In a short time by the order of SOCAR's President Rovnag Abdullayev Azneft PA drew the relevant gas production increase program and submitted it to SOCAR. In accordance with this program Azneft PA shall transfer up to 8 billion cubic meters of gas per annum in 2008.

Due to this program, geotechnical and organizational actions took place in 2006, and rapid decrease of gas production was prevented; the daily gas production grow up 37%. The production increase came true chiefly owing to upgraded well-stream gathering and transporting systems as well as newly developed gas formations at Guneshli. We are planning to grow up gas production chiefly through drilling and commissioning new gas wells.

Azneft's Departments pay special attention to upgrading of gathering and transporting systems and gas compressor units in increase of gas production. In view of the increased gas production at Guneshli field and upgraded LP and HP gas gathering and transportation systems we scheduled some works for gas supply facilities. In particular, to increase the gas production at Guneshli field we will drill 17 wells and perform accompanying process operations. Furthermore, aiming at gathering currently flared gas and transferring it to gas compressor station (GCS) #2 at Oil Rocks we are planning the purchase and installation of two new 2mln m3/day capacity gas turbine compressors at platform #4. At present we perform some construction operations in this respect. In order to gather LP gas at Guneshli field we also scheduled to ring online field gas pipelines with total 15km total length and 500mm diameter. We are also designing to enlarge GCS #2 at Oil Rocks using 4 gas turbine units with 3.6 million m3/day total capacity.

To upgrade the transportation system we installed 18km long and 500mm diameter gas pipeline from platform #4 at Guneshli to GCS at Oil Rocks. Currently, the gas pipeline testing is on. We have also commissioned 26km long and 500mm diameter HP gas pipeline running from platform #14 at Guneshli to Oil Rocks.

At the same time we perform works to upgrade gas gathering and transportation systems at 8 March and Bulla-Deniz gas condensate fields. We scheduled drilling two of 350,000 m³/day each gas wells at 8 March field and two 1,500 thousand m³/day each gas wells at Bulla-Deniz field.

We have reconstructed two compressor stations in order to improve the gas lit system at Nariman Narimanov OGPD. At the moment we are upgrading the gas compressor station #4 for improving of gas transportation and gas lift systems.

In order to ensure the efficient and safe work of compressors running at gas compressor stations within the of gas transportation and gas lift systems at Gum Adasi OGPD we upgraded and commissioned 4 gas-engine compressors at CS #2, 8 gas engine compressor  at CS#1. At the moment we are upgrading 6 compressors at CS #2.

Alongside, we are planning the upgrade at CS #4 operated in gas lift system at Oil Rocks OGPD. The certain work is being performed to enhance the LP gas gathering and transportation system at Oil Rocks OGPD.

In compliance with the gas programme Azneft PA provides implementation of the whole range of construction works which, in particular, include expansion of the deep-water offshore platform (DWOP) No 11 at the Gunashli field; implementation of works for drilling of 11 additional wells at DWOPs No 3, 8, 14, 15 and 19; the development of the 500-mm Neft Dashlary-Bahar gas pipeline construction project; the development of 20-inch gas pipeline construction project to be carried out between the gas separation units; completion of woks on construction of a 1,800-m pipeline between DOPs No13 and 14 and a 1,620-m pipeline between DWOPs No13 and 15.

I would like to note the underwater pipelines at the Gunashli field have been constructed and started up. These are as following: the 2,400-m pipeline between DWOPs No13 and 14, the 1,360-m pipeline between the DWOPs No11 and 6 and the 1,450-m pipeline between DWOPs No8 and 13.

In addition, the testing of the 18,040-m ‘DWOP No4 - Neft Dashlary' gas pipeline has been completed. The assembling of the equipment at the pipeline terminals is underway now.

 

CE: Which fields does PA plan to develop in future? What onshore and offshore operations are carried out now in this regard?

Sabuhi Ahmadov: At the moment we implement works on drilling and commissioning of new offshore wells in the water area of the Western Absheron field. Upon completion of the required construction and assembling works to be finished in the near future, the given field will be put into explotation.

 

CE: Do the near-term plans of Azneft PA include commencing development of fields beforetime left by foreign investors?

Sabuhi Ahmadov: Ramco Company had to rehabilitate Muradhanly and Jafarly fields located in the onshore oil & gas areas of the Kura lowlands. However, technological works intended for one year have not been fulfilled and the company had to leave these fields. At the moment Azneft implements rehabilitation works at these fields, recovers wells and carries out works on drilling and commissioning of new wells.

As to offshore projects, foreign investors left the range of discovered fields located at the Azerbaijani sector of the Caspian Sea, in particular Karabakh and Ashrafi, upon completion of the exploration period. The exploration work is projected to be continued so as to go on commercial development of the fields as soon as all details of these operations will be coordinate with SOCAR.

 

CE: Has the PA undertaken steps to increase of resources for hydrocarbon production?

Sabuhi Ahmadov: To date the exploration works have been carried out at 239 offshore and onshore areas of Azerbaijan, which resulted in discovering of 78 new fields and oil and gas content at 122 areas.

Up to 1985 the headway of the exploration works used to make nearly 200,000 metres a year, whereas the annual growth of oil and gas resources amounted to 15-20 mln tonnes. Later the scope of the exploration works trended to gradually decline and reached the minimum. Surely, no growth of reserves is available without exploration drilling.

Azneft PA has identified the directions of exploration works both onshore and offshore so as to develop the residual hydrocarbon resources. One of the directions is to assess oil and gas reserves at the Turkan area located in the Eastern plain of the Absheron oil and gas bearing region.

The testing of exploratory wells in underway at the Pirallahy field so as clear up some geological matters. One more exploratory well is projected to be drilled at the Pirallahy field this year.

I consider expedient to carry implement exploration drilling to the low and medium horizons of the pay thickness of the Hovsany area.

I would like to stress, that in the past years the exploratory wells at the Zayva area yielded commercial oil streams and we assessed large volumes of recoverable recourses. I consider expedient to continue exploration at this area to discover oil and gas presence of the Paleogene formations.

It is also planned to drill a new exploratory well at the Jahandar area (the western part of Azerbaijan). The drilling operations at the Muradhanly field are projected to be recommenced this year. I mean the drilling of the well launched in 1990. Later the well was conserved.

The preparatory works for exploratory drilling at the Alyat-Deniz field are being carried out to study the oil and gas content and tectonics and confirm the primary assessment.

The exploratory drilling at the Babak field included in the State Exploratory Drilling programme so as to meet the gas needs of the country provides implementation of preparatory works in 2007 for further drilling operations. 

It is also projected to continue exploratory drilling at the Western Absheron area. The exploratory drilling will be carried out at the perspective Bahar field to discover oil and gas content. The exploration operations at Karabakh and Ashrafi fields will be continued to identify exact resources at both areas.

 

CE: What are Azneft PA's short-range priorities?

Sabuhi Ahmadov: In order to resolve social issues for our employees we were and are performing a considerable work. Through the past year our employees' salary was doubled. Furthermore, each day they receive money for food. We repaired old and build new canteens in administrative buildings and on sites; operated canteens have been provided with new furniture and equipment. On the basis of the order of the Cabinet of Ministers No. 66 dated March 16, 2001 each of 15,000 employees working offshore shall be either provided with products and hot meals or receive a compensation at his discretion.

Aiming at increasing the social security of employees, SOCAR and the Trade Union of Oil&Gas Industry Employees of Azerbaijan adopted a 19-section document on material assistance dated June 16, 2006. This document stipulates financial assistance to unmarried mothers, mothers with infant children and mothers of schoolchildren. This document also reflects the issue of care about employees taking their next regular vacation. According to it they shall be paid the allowance of 70% of the salary, thus creating good conditions for their decent rest and leisure.

The document set forth the whole range of social issues pertaining employees. During 1Q2007 alone 2,272.7 thousand manat was allotted for this purpose.

At the same time the Production Association is resolving all accommodation-related issues for its employees, issues tickets to ensure efficient and useful leisure for its employees and performs work for training new personnel and raising the skills.

It can be said that we in our interview touched upon the main priorities of Azneft PA. However, I think say the most important of them is the realization of the State Gas Program laid down by the President of Azerbaijan Ilham Aliyev before SOCAR and Azneft PA as well as the resolution of related issues.