"AZNEFT" PA INTENSIFYING OIL PRODUCTION IN AZERBAIJAN

 

Caspian Energy (CE): How would you evaluate the development of Azerbaijan's oil industry, and how do you see the perspectives of its further development?

Sabuhi Ahmadov, Director General of Azneft Production Association (PA): The oil industry is one of the key fields of Azerbaijan Republic, which is a strong base and guarantee of the strength of the social, economic and political independence of the country. Due to the fact that nationwide leader Heydar Aliyev paid so much attention to the development of the oil industry, the end of the 20th century - beginning of the 21st is considered to be the epoch that fortified the statehood of the country and provided acknowledgement of its authority on the international arena, as well as gave an incentive to the dynamic development of Azerbaijan's economy.

Those social and economic reforms and new oil strategy, which were elaborated by Azerbaijan's nationwide leader Heydar Aliyev, are being presently successfully implemented. The Contract of the Century signed on September 20, 1994 furthered the implementation of the new oil strategy and played a unique role in the development of the social and economic base of Azerbaijan. The successful introduction of requirements of the Contract of the Century gave an impetus not only to the development of the oil industry, but also the whole economy of the country. Large-scale construction-and-assembling operations within the Contract are still underway, with the oil production up. In 1998 our country launched piping Azerbaijani oil via the northern route to the Russian oil terminal of Novorossiysk. In December, 1998 we put into commission another line to carry oil - Baku-Supsa, and in March, 1999 the fisrt Azerbaijani oil reached the Georgian terminal of Supsa.

The Main Export Pipeline Baku-Tbilisi-Ceyhan (BTC) named after Heydar Aliyev, which was fully put into commission last year was the triumph of the new oil strategy, which was the outset of growth of Azerbaijan's authority both regionally and internationally.

Over $30 billion invested into Azerbaijan's oil sector triggered radical changes in improvement of the infrastructure potential of the oil industry that is one of the key fields of the country's economy. Due to that, we managed to increase oil production in the country. Only through the first six months of 2007, the oil production made up 21,000,274 tons that is by 46,8% up compared the corresponding period of last year. By the end of 2007 the country's oil production will exceed 40 million tons that will become a new top in the history of the national oil industry. I would like to point out that this figure is not a limit. This figure will be just beginning. Azerbaijan will soon bring the oil production by its maximum, i.e. this indicator will exceed 60-65 million tons. All that will facilitate not only the fortification of the country's economic strength, but also development of the other industries, and improve living conditions of our people.

The successor of the political course of Heydar Aliyev, President  of the country Ilham Aliyev defines all implemented and future activities in this field as following: "Existing oil contracts allow us to create conditions to improve oil and gas deposits. This is a very crucial issue. The agreements associated with Heydar Aliyev will further the increase in oil export up to 40-50 million tons and 10 billion m3 of gas that make our country one of the largest oil-exporting countries in the world market."

It is well known that Azerbaijan has always been considered as the land of oil. However, due to the discovery of gas deposits in the offshore field of Shah-Daniz in the Caspian sector of Azerbaijan, as well as development of this gas-bearing source jointly with foreign investors, our country has turned into a gas-exporting one.

In 2006 we put into commission the BTC oil export pipeline, while in the first quarter of 2007, another historical event took place - Azerbaijan launched the transportation of the gas produced from Shah-Daniz deposit via the Baku-Tbilisi-Erzurum Pipeline. Some calculations claim 1.2 billion m3 of gas reserved in the deposit.

Due to the resent presidency of Ilham Aliyev, who successfully continues carrying the line of political and economic transformations of nationwide leader Ilham Aliyev, Azerbaijan has managed to achieve the acceleration of the all-round development of the country. Particularly it is pleasant for us to mark new achievements in the field of development of oil strategy. Owing to the purposeful policy of Ilham Aliyev, a new epoch in all fields of the economy of the country, particularly in the oil and gas industry, began. The development is particularly felt in the operation of Aneft PA that is a department of the State Oil Company of Azerbaijan (SOCAR). I would like to particularly mark that all proposals and directions of President of the country Ilham Aliyev are being successfully put into force in order to turn SOCAR into a well-known international oil company. SOCAR presently has representative offices in a number of countries and takes all necessary steps to provide their normal activity. On account of purposeful activity of President of SOCAR Rovnag Abdullayev, all departments of the state-run company operate according to world standards.

 

CE: What are the resources the PA intends to utilize for intensifying oil production volumes in Azerbaijan? Does Azneft PA have plans to launch to commercial development of newly-discovered deposits in the Caspian at its own?

Mr. Ahmadov: To develop hydrocarbon resource remains, Azneft PA has determined main orientations of further exploration work in the country both onshore and offshore.

One of such perspectives areas is Turkan, a part of the Absheron oil and gas zone, in which we have launched drilling an exploratory well to determine oil and gas volumes.   

Oil inflows of commercial significance were discovered as a result of drilling wells in the southern and northern sections of Pirallahy Adasy and were later transferred to the operating well stock.

Carrying out exploratory drilling to study the pay section to determine availability of hydrocarbons is considered to be expedient.

We have received commercial oil inflows from the exploratory wells drilled on Zeyva section of the Siyazan monocline. Calculations indicate that the field is filled with additional oil volumes. Therefore, we consider that it is necessary to keep on drilling exploratory wells in this area.

We also have intensions to carry exploratory drilling works on Cahandar section situated in the western part of Azerbaijan this year. Presently we are carrying preparatory works to launch drilling wells.

At the same time we plan to resume drilling works on a suspended oil well in the northern-west wing (Shaftahal section) of Muradkhanly deposit this year.

We are carrying large-scale preparatory works for carrying out drilling works in order to study the oil-bearing capacity and tectonics of a vast section in the northern-west pericline of Alat-Daniz field.

In order to determine the oil-bearing capacity of the sixth reservoir of the oil-bearing section of the southern-east pericline of Bulla-Daniz deposit, we are carrying out preparatory works for exploratory drilling.

Taking into consideration the country's need in gas, we have included prospecting and drilling works on Babek area into the State Programme. In this regard we intend to carry out preparatory works for launching drilling wells this year.

We also have intensions to carry out prospecting and drilling works for studying the oil- and gas-bearing capacity of reservoirs on the structure of Bahar-2.

In order to make more precise the reserves on the perspective oil-bearing areas of Garabagh and Ashrafi, where gas condensate of commercial significance was found in lower reservoirs of their oil-bearing section as a result of the prospecting and drilling works carried out by foreign companies. Presently Azneft PA continues carrying out survey work there as well.

In addition, in the future Azneft PA intends to launch commercial development of the offshore field of West Absheron at its own, but only after necessary construction-and-assembling operations will be carried out and all necessary equipment will be installed.

 

CE: How efficient is the production on old deposits presently? Does the PA have intentions to modernize the equipment on these fields?

Mr. Ahmadov: Taking into account corresponding domestic prices, the prime cost of one ton of the oil produced from old wells by Azneft PA is AZN 198.5 on average. It is well-known that the price on energy carriers in the world market is too high. One barrel of oil costs more than $72. Taking into account both the prices and the country's economy being dependent on the oil sector, the oil production from old wells is of current importance. At the same time I would like to point out that in order to reduce the prime cost of the oil produced from old wells, oil and gas production departments of the PA are engaged in specific works to modernize oil equipment, as well as improve production conditions.

We plan to widely use and introduce screw pumps into the operation of Azneft PA. The use of screw pumps helps in increasing of well interrepair cycles, reduces in dead cycle times and repair costs, as well as oil production growth. The power consumption of these pumps is by 3-5 times less than the currently-operating centrifugal and deep-well sucker-rod pumps.

For example, the utilization of screw pumps by the Hajji Zeynalabdin Taghiyev Oil and Gas Production Department (OGPD) allowed them to increase oil production and interrepair cycle, as well as reduce power consumption.

Due to the enhancement of gaslift and airlift techniques, we plan to construct new gas-compressor stations and repair existing ones in the future.

In this context I would like to particularly mark the current program works on rehabilitation of Bibiheybatneft OGPD and Balakhanyneft OGPD that will trigger an increase in oil and gas production.

 

CE: Does the PA have intensions to construct and use new oil and gas infrastructure (platforms and other constructions) to increase oil and gas production?

Mr. Ahmadov: In order to increase oil and gas production, Azneft PA intends to construct 15 new fixed-site marine platforms. As these platforms are completed and put into commission, we plan to drill 55 wells on 5 fixed-site offshore units (FSOU) on Darvin Bankasy deposit, 4 wells on FSOU 55 and FSOU 57 on West Absheron field, 68 wells on Neft Dashlary (Oil Rocks), and 3 on FSOU 82 and FSOU 83 on Bulla-Daniz deposit.

Moreover, in order to increase gas production, we plan to drill 27 wells within the implementation of the new gas programme, therefore, FSOU 3, FSOU 4, FSOU 11, FSOU 13, FSOU 14, FSOU 15 and FSOU 19 will be extended for these purposes. To pipe both high- and low-pressure gas produced from Gunashli deposit, we have already launched laying underwater gas pipelines.

 

CE: What are the preliminary results of the implementation of the gas programme? What else are to be done within the mentioned programme?

Mr. Ahmadov: In order to put into effect concrete instructions to increase gas production, which were given by Azerbaijan's President Ilham Aliyev, SOCAR's President Rovnag Abdullayev gave commissions to Azneft PA to elaborate a relevant programme. Expedient utilization of technical, geological and financial resources, re-equipment of existing technical systems applying advanced theoretical and practical experience, modernization of production area, as well as putting into operation new wells and units that will further an increase in gas production by Azneft PA are among the chief aims of the programme.  It provides for improvement of the gas transportation and storing systems, implementation of additional repair and construction works, as well as wide spectrum of measures to be put into operation in both new and existing gas wells.

Presently the gas reserves of Gunashli deposit, which make 60% out of the total gas production by Azneft PA, are 65 billion m3. Some 41.5 billion m3 of gas has been produced from the field till date. 22 gas wells are currently being operated by Azneft PA on the deposit, in other words the daily gas production rate is 6.317 million m3 of gas. In addition, consumers are supplied with the associated gas at a volume of 4.403 million m3 per day, which was produced from oil wells. Thus, the daily gas flow rate from this field makes up over 11.700 million m3. The new programme provides for drilling of 17 wells additionally to the other six ones, drilling of which was approved earlier. As soon as the new wells are put into operation, the average daily gas production rate will reach 5.650 million3.

The programme also provides for uninterrupted, reliable and safe gas transportation from Neft Dashlary (Oil Rocks) deposit to onshore. It provides for the extension of Gas-Compressor Station 2, increase in its daily gas production by 3.6 million m3, as well as laying of a high-pressure gas pipeline from Neft Dashlary (Oil Rocks) deposit to Bahar field. As all these plans are implemented, in 2008 the annual gas production rate from Gunashli deposit will reach 6.9 billion m3.

Another important orientation of the gas programme is to increase gas production and delivery on the gas condensate fields of Bahar, 8 Mart and Bulla-Daniz at the expense of drilling new wells in accordance with up-to-date technical and production requirements and use of the existing infrastructure. Recent calculations say that the gas reserves of Bulla-Daniz deposit makes up some 10.5 billion m3, with the same figure on 8 Mart field and 2.105 billion m3 on Bahar.

The technical state, operating conditions and potential of the existing communications and pipelines in all the three fields create favourable conditions to increase gas production and delivery in great volumes. Taking into consideration the fact that the deposits need deep water drilling, the gas programme provides for applying state-of-the-art technologies and equipment, advanced world experience, as well as establishment of mutually beneficial relations with foreign companies during the development.

The gas programme provides for drilling 27 gas wells on Gunashli deposit. The daily gas production rate from these wells is expected to reach 5.350 million m3. Construction-and-assembling operations on the FSOU 11, intended for drilling of six gas wells, are over to date. We plan to launch drilling Well 78 and Well 59 from a platform until the end of 2007. The daily gas production rate from these wells will reach 700,000 m3. In addition, we have intensions to return eight wells from the Pereryv Suite to other gas units. The expected daily gas production rate will reach 2,000 m3.

The total gas production rate of the four wells, put into operation on FSOU 4 on Gunashli deposit, has reached 1,150 m3 and 102 tons of gas condensate per day. Due to transferring to other reservoirs of Well 112 and Well 197 on Gunashli field, their daily production rate has reached 590,000 m3 gas and 24 tons of gas condensate. At the same time, we have put into operation Well 88 with the daily production rate of 265,000 m3 of gas and 66 tons of gas condensate on Alat-Daniz deposit, Well 205 with the daily production rate of 140,000 m3 and 20 tons of gas condensate, Well 167 with the daily production rate of 45,000 m3 of gas and 2 tons of gas condensate on Bahar field.

 

CE: What do you think about the results of the PA's activity the beginning of the year, and over the last five years in general? What will be the forecasts and expectations of increase in oil and gas production in the coming years?

Mr. Ahmadov: A very important and urgent task was given to Azneft PA - to increase oil and gas production. Inspired by overall economic achievements of the country, as well as perspectives of development of the oil strategy, employees of our field year by year achieve improvements of all indicators on oil and gas production. In this context the achievements of oil industry employees over the first seven months of the year can be considered as positive ones. Being guided with instructions given by SOCAR's President Rovnag Abdullayev, as well as due to taking complex measures through January-July, 2007, the PA managed to achieve high economic indicators. The oil production program was exceeded expectation, i. e. the "black gold" production by the oil and gas production departments (OGPD) through the first seven months of the year made up 4,000,447 tons. Thereby, the plan was exceeded by 26,326 tons or by 0.6 %. In the reporting period the PA delivered 4,419,461 tons of oil to the state.

We observe serious progress in the gas industry of the country as well. The crisis that caught the field for a long time has been held up. Being guided by instructions and recommendations given by the President of Azerbaijan in this field, oil men regularly improve their activity on gas production. Taking into account the population's permanent need in "blue fuel", oil men have recently managed to achieve a serious positive change in the field of gas production. It sufficient to say that through January-July, 2007 the PA's departments managed to produce 3,190,850,000 m3 of gas versus the forecast at 3,170,200 million m3 that exceed the target by 0.6%, and the corresponding period of last year by 41.5%.

The figure on gas delivery was positive too. Departments subjected to the PA delivered "blue fuel" to the state at a volume of 2.809.273 million m3. In other words the production program exceeded by 2.6%, i. e. compared to the corresponding period of last year over fulfillment is 47.4%.

Putting into operation new wells, as well as maintenance and repair of old ones and returning them into operation are among the key priorities to increase oil and gas production volumes.

Improvement of procurement has recently allowed us to restore the out-of-operation well stock and put them into operation that will essentially influence increase in oil and gas production volumes. In 2007 we drilled 62 new wells, operation of which allowed us to produce 109,015 tons of oil. The current repair and overhaul program is being implemented. We put into operation 104 wells, which were in the out-of-operation well stock not long so ago. 39,406 tons of oil were produced from these wells.

The optimally-efficient operation and maintenance of the producing well stock, which consisted of 4,895 wells was one of the principal achievements on increasing of oil and gas production. As a result of geological and technical measures, we managed to produce 238,000 tons of oil.

I would like to note that we have elaborated the programme for complex activities for stabilization and partial increase in oil and gas production by oil and gas production departments of Azneft PA.

In order to increase oil and gas production, we are taking measures on laying off old wells and drilling new ones at Bibiheybatneft OGPD, carrying out large-scale construction-and-assembling operations to increase oil production at Absheronneft OGPD, construction a new gas-compressor station at  Balakhanyneft OGPD, modernization of the gas-compressor station at the Hajji Zeynalabdin Taghiyev OGDP, as well as putting into operation new wells at Neft Dashlary (Oil Rocks) OGPD.

Based upon the cited examples, I can state with confidence the fact that Azneft PA will successfully implement all programs approved by SOCAR, while oil and gas production will continue intensifying year by year.