PHASE 1 OF THE CONTRACT OF THE CENTURY IS FULFILLED AT 30%

REALIZATION OF BAKU-TBILISI-CEYHAN AND PHASE-2 FULL FIELD DEVELOPMENT OF AZERI, CHIRAG, GUNESHLI EMBARKED

The ceremony was held at the Sangachal Terminal Expansion area on September 18, to celebrate the start of the construction phase of the BTC project. This is a major milestone in the realization of the pipeline, which will export crude oil 1,760 kilometres from Azerbaijan and the Caspian region, through Georgia, to Ceyhan on the Turkish Mediterranean coast.

Congratulations on this historic occasion were sent by the presidents of the USA and France, prime ministers of Great Britain and Norway, countries which companies are partners in installation of the Main Export Pipeline. During the ceremony heads of three countries unveiled memorial plaque to mark this occasion and buried in the ground steel capsule with a statement for future generations. There also took place laying of the symbolic “first portion of the pipeline”.

As the head of Azerbaijan Republic Heydar Aliyev noted in his speech, construction of the pipeline worth $2,95 billion would not only transmit “big Caspian oil” to get outlet to international markets and yield significant profits to all project partners, but would also transform world oil rivers. According to the Azerbaijani leader addressing to the project partners, “we are not simple eyewitnesses but also participants of grandiose historic occasion”, since MEP Baku-Tbilisi-Ceyhan would contribute its mite to strengthening security on Caucasus.

BTC is a pipeline predominantly 42 inches in diameter, with eight pump stations and 98 valve stations. The project will require an investment of $2.95 billion. The pipeline will cross more than 1500 rivers and will climb to a high point of 2,700 metres before returning to sea level at Ceyhan. The construction of the pipeline will take 30 months to complete. The physical construction work will commence in the first quarter of 2003 and will be completed by the fourth quarter of 2004 ready to export first oil by Spring 2005.

On the 18th September, the Steering Committee for the development of the Azeri, Chirag and deepwater portion of the Gunashli (ACG) fields in the Azerbaijan sector of the Caspian Sea sanctioned the construction stage of Phase 2 of the ACG Full Field Development project.

The Steering Committee includes representatives from the State Oil Company of Azerbaijan (SOCAR -10%) and a representative from each of the nine foreign oil companies who are participants in the project - BP (operator -34,%), Unocal (10,3%), LUKoil (10,0%), Statoil (8,6%), ExxonMobil (8%), TPAO (6,8%), Devon (5,6%), Itochu (3,9%), Delta Hess (2,7%).

The Phase 2 project is a $5.2 bn development plan. It is the second major step after the Early Oil Project in the implementation of the ACG Production Sharing within the Agreement (PSA) towards achievement of the ACG Full Field Development. Some $3.8bn of the $5.2bn will be spent on the construction of facilities and pre-drilling, and the balance of the sum will be spent on development drilling during the subsequent production period.

BTC

• On August 1, 2002 the BTC Owners signed the required documents in London to formally create "The Baku-Tbilisi-Ceyhan Pipeline Company" ("BTC Co"). The signature process was witnessed by representatives from each of the BTC Host Governments - the Azerbaijan Republic, Georgia, and the Republic of Turkey. The President of the State Oil Company of the Azerbaijan Republic ("SOCAR") is chairman of the BTC Co Board of Directors and BP is the operator of the project.

The BTC Co Shareholders are currently: BP (38.21%); SOCAR (25.00%); Statoil (9.58%); Unocal (8.90%); TPAO (7.55%); Eni (5%); Itochu (3.40%); and Amerada Hess (2.36%). In addition, TotalFinaElf has acquired the right to purchase a 5% interest in BTC Co and this transaction will be finalized soon.

• Major contracts have already been awarded for the construction phase - for pipelay in Azerbaijan to Consolidated Contractors International Company (Greece) and for pipelay in Georgia and facilities in both countries to a Spie Capag (France)-led joint venture with Petrofac (US). The tender list was approved in late 2001 by all of the BTC partners. The contracts were awarded on a fixed-price lump sum basis. BOTAS, the Turkish state pipeline company, will continue as the Lump Sum Turnkey contractor for the Turkish section of the pipeline.

• On August 28 2002, BOTAS was granted by BTC Co. the Completion Certificate for the detailed engineering phase of the Turkish section of BTC. Subsequently BOTAS was issued the notice to proceed with the land acquisition and construction phase in Turkey, which became effective on September 10, 2002. The tender process for the construction contracts for the Turkish section of the BTC pipeline will be concluded by BTC Co and BOTAS in the near future and will be followed by the award of contracts by the end of September.

• Full Environmental and Social Impact Assessments (ESIAs) have been conducted for the BTC project and submitted to relevant government bodies in the three countries. The ESIAs describe the existing environmental and social conditions along the pipeline route, the design, construction and operation of the lines, the predicted effects of these activities and the measures which will be taken to prevent, minimize and mitigate any potential adverse effects on the ecology and population.

The project remains firmly within the original budget and schedule which provides for it to be completed in time for first oil from the Phase 1 development of the Azeri-Chirag-Gunashli oil field, which is planned for the first quarter of 2005.

ACG Phase 2

In phase 2 the East and West areas of the Azeri field in the ACG contract area will be developed, and in conjunction with Phase 1 (Central Azeri) it will complete the Azeri field development. Phase 2 facilities will be integrated with Phase 1 facilities to create an Azeri offshore and onshore development complex. Phase 2 development will be followed by Phase 3, which will be focused on the development of Deepwater Gunashli.

The Phase 2 project comprises two 48-slot production, drilling and quarters platforms, an additional 30" oil pipeline to the Sangachal Terminal, expansion of the existing onshore terminal at Sangachal, and expansion of the Phase 1 gas compression and water injection platform.

The start of first oil production from the West Azeri and East Azeri platforms in the second quarter of 2006 and the first quarter of 2007 respectively will add production of more than 20 million tonnes per year (420 thousand barrels per day).

Phase 2 reserves expected to be produced during the PSA period are 210 million tonnes (1.6 billion barrels). To achieve this production up to 96 additional production, water injection and gas injection wells will be drilled followed by approximately 113 additional sidetrack wells through the life of the Azeri field.

The Phase 1 strategy, which awarded the fabrication of the Phase 1 facilities to five international contracting companies, is delivering good performance with 30% of the project completed and is on track to first oil production in 2005. So far the project is employing and has trained more than 2,300 Azerbaijanian local staff. Phase 2 has learnt from the success of this strategy, and is also benefiting from a very similar design to the Phase 1 project - especially the Sangachal facilities, the 30" pipeline and elements of the offshore facilities.

These factors have been taken into consideration during the fabrication and engineering tendering process, which reaches conclusion during October and November. Interim awards for the deck fabrication contracts are expected to be awarded shortly, with full award for these and other key contracts in October and November 2002.

Additional entity for deck building will be modernized, construction of additional deck and foot will be implemented on the construction yard of "Shelfproyectstroy". As before, will be employed pipelayers, crane and transport and other ships of SOCAR/COM (Caspian Oil Marine) marine.

The detailed Environmental and Socio-Economic Impact assessment for Phase 1 was approved in January 2002. Phase 2 Environmental and Socio-Economic Overview document is being prepared for approval in December 2002.

In order to complete the construction of the Phase 1 and Phase 2 projects in an efficient and optimised way, an internal decision was taken following the approval of Phase 2, to combine the two projects into one and manage it as the Azeri Field Development Project.

JAPANESE INPEX JOINED BTC PROJECT

On 18 November Baku-Tbilisi-Ceyhan pipeline operator (BTC Co.) declared achieved agreement on 2,5% interest in BTC Co.'s shareholding purchased by Japan based INPEX. INPEX's share will consist of BP's and TPAO's (state-owned oil company) interests to come in effect in October of the current year.

Among other partners of Kashagan consortium that are as well current partners in BTC Co. there are ENI and TotalFinaElf (TFE). TFE joined BTC Co. short before and on 17 September this transaction was certified.

On the first session of board of directors of BTC Co. Natig Aliyev the President of Azerbaijan State Oil Company (SOCAR) was elected the Chairman, Michele Taunshend out of BP - the Chief Executive Director for BTC Co.

Turkish sector of the pipeline will be built within the framework of the turnkey construction Agreement at the fixed price concluded by Turkish government and BTC Co. shareholders. BTC Co. recently issued "Notification on commencement of operations" to BOTAS, Turkish state pipeline operator responsible for construction of whole Turkish sector of BTC lengthened at 1070 km.

This notification on commencement of construction works came into force on 10 September. Operations in Turkey are divided on three groups: on north, central and south portions of the rout. Single contracts will be concluded for pumping stations, coastal and marine components of marine terminal in Ceyhan.

Presently, investigation of environmental and social exposure comes to the end. For this aim there will be held meetings and discussions with wide circle of interested persons including officials of government and local bodies, scientists, non-governmental organizations, mass-media and local community. In the recent future finalizing studies will be submitted to consideration and approval to government organizations of Azerbaijan, Georgia and Turkey.

KAZAKHSTAN BECOMES THE CENTER OF OIL PRODUCTION ON THE CASPIAN

AZERBAIJAN ANNOUNCES COMMENCEMENT OF CONSTRUCTION OF MEP BAKU-TBILISI-CEYHAN

Two important events (from the day of announcing discovery of "Shah Deniz" field in Azerbaijani sector of the Caspian) happened this year - parties in PSA of North Caspian declared Kashagan Commercial Discovery and BP sanctioned construction of strategy oil-pipeline Baku-Tbilisi-Ceyhan and realization of the project "Phase-2" full field development of "Azeri-Chirag-Guneshli" field.

On 1 July Italy's company-operator "Agip-KCO" and Kazakhstan's state-run "Kazmunaygaz" signed instrument "Recognition of Kashagan commercial discovery". As to this instrument, recoverable oil reserves of Kashagan are estimated to be within 7-9 billion barrels, that is more than one billion tone. This is the largest oil field in the world discovered in past 30 years and therefore today recognition of commercial reserves of Kashagan - is one of most important news in the world oil market.

Geological oil reserves on Kashagan are estimated to be 38 billion barrels, recoverable reserves - 7-9 billion. Information about recoverable reserves can revise and grew - depending on results of additional survey and introduction of new production technologies. Consortium funds over $7 billion to the project - survey and development of coastline infrastructure, construction of industrial entities. During development of the project the president of Kazakhstan laid dawn condition to shareholders: wide attraction of local contractors, utilization of associated gas, wild-life conservation, cooperation with the state-run oil-gas company and first oil in 2005. Next year Kazakhstan, whose interests in the project are represented by "Kazmunaygaz", will gain bonus of $50 million. From 2006, when commercial oil production to begin, this figure is anticipated to grow.

"From this project Kazakhstan will gain $150-250 million bonus, depending on production rate. Considerable amounts will be allotted to social projects, nearly 8 thousand job opportunities will be created", reported Lazzat Kiinov, the president of state- run "Kazmunaygaz".

An official out of the company-operator reported that consortium partners employed Kazakhs and, moreover, drew local companies to contract operations. At present, Kazakh producers received order at $180 million. "We will draw best resources to successfully realize the project," told Pietro Kavanna, deputy board chairman of managing committee.

In turn, Kazakhstan is going to train its experts during development of Kashagan. According to the head of "Kazmunaygaz", north part of the Caspian contributes over hundred of promising oil and gas fields, therefore in the future qualified oilmen will be in need.

Announcing of commercial significance of Kashagan field positioned in north of the Caspian and 70 km to south-east from Atyrau coincided the end of 24 months long contract period of estimation.

Completion of difficult work necessary for Declaration of commercial significance of the Kashagan field proves outstanding know-how and joint knowledge brought through cooperation of Contractors and Kazmunaygaz.

At present Contractors prepare plan of developing Kashagan field to continue operations with cautious to fragile environment of North Caspian.

Contractors proceed exploratory operations on other structures of contract area of North Caspian: Kalamkas (2002), south-western Kashagan (2003), Aktoty (2003) and Kayran (2003).

Contractors in PSA for North Caspian are ENI (operating through Agip CCO that holds 16.67% stake), BG (16,67%), ExxonMobil (16.67%), Inpex (8.33%), Phillips (8.33%), Shell (16,67%) and TotalFinaElf (16.67%).

Recently managerial head of the British-American partnership BP sanctioned construction of the Main Export Pipeline Baku-Tbilisi-Ceyhan, reported Alan Dann, company's official, to journalists.

But BP's solely consent, as sponsor group operator, is not enough. It is necessary all shareholders in the sponsor group to give concession for start of pipeline construction. At present partners in the sponsor group are SOCAR - 25%, BP- 34,76%, Statoil - 8,71%, Unocal - 8,90%, TPAO - 6,87%, ENI - 5%, ITOCHU - 3,4% Delta Hess - 2,36% and TotalFinaElf - 5%.

Baku - Tbilisi-Ceyhan company (BTC Co) has been founded this summer to perform further operations within the scope of realization of MEP Baku-Tbilisi-Ceyhan project, Media Press quoted British-American BP, the operator of the sponsor group founded to finance MEP construction.

Hence, BTC Co. shareholders will study bidding proposals of different companies and take joint decisions concerned with the project. This company will act as funds borrower from international finance bodies. Funds for pipeline building will be portioned in proportion 30 and 70. This means 30% of project cost is to be paid by BTC Co., remaining part - to be taken from foreign banks.

SOCAR considers that Azerbaijan, in consideration of its stake in MEP, will not face any problems with acquittance for loans taken for pipe laying. Azerbaijan in the project can be represented by affiliated commercial company to SOCAR, the latter, in consideration of its participating in many foreign agreement for development of Azerbaijani shelf, is proved to be solvable structure.

For information, main work aimed at choosing rout and engineering is already completed. 10 miles channel the pipeline will run along has already been defined. In July the Turkish state-owned pipeline operator BOTAS, subcontractor on the Turkey territory, was notified about the beginning of construction. The same time saw signing of contracts for equipment supplies.

After sanctioning the project, September will see land acquisition the pipeline is to cross over. Pipe procurement is slated for the third quarter of 2003.

Production and export in Kazakhstan

From the first sight coincidences seem accidental - construction of one more regional oil pipeline alternative to Kazakh-Russian CPC, and also discovery of commercial sound Kashagan field in the North of the Caspian.

It is known that Kazakhstan's current output is nearly 35 million tones a year, this year's projected output of the state monopoly "Kazmunaygaz" is 7 million tones. In 2006 "TengizChevrOil" JV will produce up to 22 million tones of oil, relatively "KazMunayGaz"s share will make 4,4 million. The state-owned company also holds 50% stake in "Kazakhoil-Aktobe" which is engaged in development of Alibekmola, Kojasay and Urikhtau fields with recoverable oil reserves of 70 million tones total. In long lead time "Kazmunaygaz" plans to increase output from participating in development of Caspian shelf and foreign projects.

As deputy akim of Atyrau region of Kazakhstan Farhad Yergaliyev has noted recently making speech on the second international oil-gas summit in Astrakhan, "today country's oil resources total 930 million tones, of which Tengiz field is responsible for 780 million tones, 55 million tones - Korolevskoye, 95 million tones - Bakenbayevskoye. But as to RIA "Avers", Kazakhstan, where now 75 fields of which 39 are under development, expects discovery of another several large fields on the Caspian shelf.

Intensity of the Caspian shelf and strategy of western companies - main investors, directed at alternative export decisions give rise to another problem - where to export oil to. As to deputy director of the international-legal department of foreign affairs ministry of Kazakhstan Bulat Sarsenbayev, now throughput of country's pipelines makes 50-60 million tones of oil a year, this is insufficient for the country. Therefore Kazakhstan began engineering of feasibility study for several projects which will allow efficiently providing the country with energy resources, demand on which will twofold increase in coming two years. Now 14 large fields of Kazakhstan experience hydrocarbon production. Sersanbayev also noted that Kazakhstan studied possibility of participating in several projects alternative to the Caspian pipeline consortium. In the recent future, he told, CPC's capacity will be insufficient to transport Kazakh oil. Today's capacity of CPC makes 28 million tones of oil a year. After construction of the second part of CPC it will reach 60-70 million tones.

The official of foreign affairs ministry of Kazakhstan did not reveal what these projects are, but one of them will be the project for construction of the pipeline extended from the Karachaganak field positioned on Kazakhstan shelf of the Caspian. He also noted that Kazakhstan, like so far, is going to actively develop fields of Western Kashagan.

Next there are "but" and "if". If Kazakhstan openly announces on reasonability to export its oil through Baku-Ceyhan pipeline which is under construction (for which large credits are already allotted), she would run into opposition of its main export partner - Russia whose axis of export policy is monopolizing of all Caspian pipelines. Though the very fact of BTC's existence allows Kazakhstan skillfully struggle for its today's export interests against Russia, which expands its pipeline grid. For Kazakh oil the Baltic pipeline system Kirishi-Primorsk and also pipe branch Sudokholnaya-Rodionovka are already completed, the later allows Kazakh oil to obtain its own market in Europe.

"But" is implied in the fact that decade later production on the Azerbaijani mega-structure "ACG" will drop, development of gas condense "Shah-Deniz" has not begun yet and there is no new commercially sound oil discoveries in Azerbaijani sector. Therefore BTC financiers set sights on the rich Kazakh shelf, it would be difficult to obtain credits for BTC without Kazakh oil. But probably, the experience shows, World Bank has already announced to grant $500 million, the same amount is expected to be allotted by the European Bank of Reconstruction and Development.

The fact that the project has been "launched" without American giants ExxonMobil and ChevronTexaco, which could not actually support undertakings focussed on founding so wide advertised by them alternative grid of export oil-gas pipelines, also says in favor of Baku-Ceyhan.

Another positive fact in BTC is that some major players in Kazakhstan also joined the project - ENI and TotalFinaElf ("Kashagan" field), each of them securing 5% stake.

At present the sponsor group of the BTC project is as following: SOCAR - 25%, BP- 34,76, Statoil - 8,71, Unocal - 8,90, TPAO - 6,87, ENI - 5, ITOCHU - 3,4, Delta Hess - 2,36 and TotalFinaElf - 5%.

For information: as regards construction of export oil pipelines from Kazakhstan and Caspian region the first vice-president of "Kazmunaygaz" Timur Kulibayev says, "we proceed from priority of multivectoral export routs." The feasibility studies of projects for construction of export pipelines Baku-Tbilisi-Ceyhan (BTC), Western Kazakhstan-Chine, rout Kazakhstan-Turkmenistan-Iran are on the stage of examining and engineering.

In accordance to earlier achieved agreements concluded with country-participants to BTC project, to examine terms and conditions of participating the Kazakh group of companies is founded (CGC). The group is made up of America's ChevronTexaco, French TotalFinaElf, Anglo-Dutch Shell, British BP and other companies. Following preliminary feasibility researches there will be taken decisions as to Kazakhstan's participating in BTC project.

The project Western Kazakhstan-Chine envisages construction of the oil pipeline along the routing Atyrau-Kenkiyak-Kumkol-Atasu-Druzhba. Projected pipe length will make 2800 km against minimal guaranteed throughput of 20 million tones a year. At present engineering of the feasibility study that evidences feasibility of pipe construction, is completed. In consideration of perspective of steadily growing Chine energy market, realization of the project promises significant economic benefits to oil policy of both states.

Export rout Kazakhstan-Turkmenistan-Iran is the most rational and economically sound to transport Kazakh oil to Asian market. Certainly, there are certain political difficulties but I think thanks to serious support of alliance of large oil producing companies as well as of managerial head of transit countries, the project for transporting Kazakh oil to terminals of Persian Gulf will come to life. I think, this is a matter of time, says Kulibayev.

"KASHAGAN" FIELD WILL BEGIN IN LATE 2005 KAZAKHSTAN'S DEPUTY

PRIME MINISTER AND ENERGY AND MINERAL RESOURCES

MINISTER VLADIMIR SHKOLNIK

Mr. Minister, how do You assess today situation of the oil and gas industry of Kazakhstan, what is strategy of development of this sphere of the economy till 2010?

To date, there have been identified 202 oil and gas deposits in the republic. As of 1 January 1995, residual recoverable petroleum reserves, except for prospects of the Kashagan field, on A+B+C1 categories have been as follows:

• oil - 2.2 billion tons (N2 - 864.3 million tons);

• gas - 1.8 trillion cubic meters (C2 - 145.4 billion cubic meters);

• condensate - 690.0 million tons (C2 - 15.9 million tons).

The spotted oil reserves of the industrial categories have been revealed in six administrative districts. Four western districts hold more than 90 percent of the residual recoverable oil reserves of Kazakhstan, including reserves of the Tengiz and Karachaganak fields.

On condensate, the main prospects are connected with the Karachaganak, Zhanazhol and Imashevskoye fields.

For a predictive period, a feature of the development of the oil and gas sector of the nation's economy in the subsoil use area will be a progressively increasing curve of oil production in the country. First, it will be conditioned by not putting into service of new major deposits but transiting the developing fields to qualitatively other stage of the development - from trial and pilot to large-scale industrial. Such tend is observed on all regions of the republic. These are the Tengiz and Royal fields in Atyrau Oblast, Karachaganak in Ural Oblast, Karazhanbas and North Buzachi in Mangistau Oblast, South Kumkol and Akshibulak in Kyzyl Orda Oblast.

As a result of the state's policy in this sphere as well as execution of the plans by economic subjects with the overall growth of oil output on all regions, substantial shifts will be in placing production capacities on petroleum output for the predictive period. For example, a share of Aktyubinsk Oblast will rise from 19 to 31 percent in the aggregate balance of oil production. At the same time, a share of Kyzyl Orda Oblast will reduce to 10 from 13 percent. Despite slight reduction of the share of Atyrau Oblast from 40 to 35 percent, one should take into account that it is of temporary nature and in future, growth of the production capacities at the Tengiz field will guarantee the dominant share of Atyrau Oblast in the aggregate balance of oil production within the country.

The largest accretions of the hydrocarbon production in Kazakhstan will be secured at the expense of the Tengiz and Karachaganak projects for the period.

The increase of the oil production at Tengiz will be conditioned by its transition from 2003 from pilot to full field industrial development, namely putting new production capacities on hydrocarbon preparation into operation, commencing development of the second project and, correspondingly, drilling as well as implementing pilot technology for pumping gas into the bed.

The expansion of oil activities at the Karachaganak field is linked with the approval in 2000 of a new Technological Development Scheme and the completion of basic cycle of the work on major repair at wells at the first stage of its realization. In further, it will be provided with drilling new wells, building and putting into operation new objects of the field infrastructure system as well as implementing cycling-process.

The ministry connects definite contribution to the development of oil activities on subsoil use with implementation of new projects onshore - Alibekmola deposit (Aktyubinsk Oblast), Kyzylkia deposit (Kyzyl Orda Oblast), Royal (Atyrau Oblast), as well as fulfillment of the Uzen field rehabilitation program under a World Bank's loan and solution of some subsoil use-related issues at deposits belonged to Aktobemunaigaz JSC. Detailed planning indexes of the projects will be received in course of preparation of appropriate project documents.

Over the first ten months of 2001, 32.8 million tons of oil and gas condensate has been produced in Kazakhstan.

Today the gas industry of the Republic of Kazakhstan is on the upbeat. Gas production grows year after year that is an outcome of the purposeful policy of the Government. The basic deposits are oil ones with content of an enough high gas factor. Oil-producing enterprises reduce amounts of associated gas flaring, introduce productions on processing and liquefying gas. The oil-producing enterprises more and more introduce gas electric power productions, build capacities on petrochemical product output.

In other words, it traces a clear desire of the producing companies to tap the associated gas for gas supplies in the country and output of definite products that along with economic profitability for the producing enterprises is incontrovertible aspiration of the Government to utilize the gas and post considerable proceeds and to increase job opportunities.

The gas sector development strategy of the Republic of Kazakhstan is to increase gas production, to utilize it in further, to rise export of salable and liquefied gas, and to supply the domestic market. The immediate aspiration of the state is to increase participation of Kazakhstan-based enterprises in the development of hydrocarbon deposits and to increase participation of Kazakhstan-based specialized service enterprises.

Today, how much do oil companies and joint ventures produce oil and gas? On what conditions?

In Kazakhstan, there are about 30 oil companies developing and exploiting oil and gas deposits.

What is a share of the foreign capital in the nation's oil and gas projects?

The major projects with the participation of the foreign capital are the following:

• The Karachaganak Field Exploration and Development Project; participants are Agip (32.5 percent), British Gas (32.5 percent), ChevronTexaco (20 percent), Lukoil (15 percent);

• The Agip North Caspian Operating Company N.B., an international consortium developing the Kazakh shelf of the North Caspian.

The appropriate Production Sharing Agreement was signed on 18 November 1997 between the Government of Kazakhstan and the International Consortium of Contractor Companies on the North Caspian (Agip, BG, BP, Mobil, Shell, Statoil, Total, Inpex, and Phillips). The interest participation of the nine contractors in the project was as follows:

As a result of the sale of the stakes by British Petroleum and Statoil, today the consortium shareholders are the following:

• TengizChevrOil JV was established in April 1993 as a parity joint venture (50/50) for development of the Tengiz oil field. (It is one of the major fields found over the past twenty years).

Today project shareholders are ChevronTexaco (50 percent), Exxon Mobil (25 percent), and Lukarco (5 percent).

Today, what is a mechanism of interaction between the Energy Ministry and the oil and energy companies of the country?

A mechanism of interaction between the Ministry of Energy and Mineral Resources of the Republic of Kazakhstan and energy companies is built on the basis of the Law on Electric Power, the Regulations on Ministry of Energy and Natural Resources, and other normative-legal acts.

The ministry develops and realizes government's policy in the energy sphere, develops state standards of electric and thermal power quality, promotes development of competition in the wholesale and retail markets of electric and/or thermal power and their operation, work out normative-legal acts regulating relations in the power industry.

The ministry carries out government's energy supervision over activities of the energy organizations, grants licenses for types of activity within its competence, takes control of execution of the licensing terms by licensees. It also participates in privatization of state-owned property, provides effective operation and development of the power complex, organizes preparation of the energy institutions to work in a autumn-winter period, participates in forming government's pricing and tariff policies in the energy.

The ministry is an organ of the government administrating state-run enterprises in the area of their activities as well as an organ exercising functions of the legal subject of the state-run property.

Moreover, the ministry participates in regulatory bodies of joint stock companies with state's participation: general meetings, board of directors, revision commissions.

The relations of the ministry as an authorized entity with oil companies are conducted in accordance with the signed subsoil use contracts and PSAs.

At which stage today is preparation of documents meaning involvement of companies operating in Kazakhstan in the Baku-Ceyhan project?

In accordance with an Exclusive Task granted by the Government of Kazakhstan on 9 December 1998, Chevron, Exxon Mobil, Shell and Kazakhoil performed a survey of the Trans Caspian Transportation System within 1999-2000 that is designed for building an oil pipeline from West Kazakhstan under the Caspian Sea through Azerbaijan, Georgia and Turkey to the Mediterranean Port of Ceyhan. As a result of the work done, it was found possible competition of that project subject to confirmation of adequate oil reserves.

By 7 November 2000, at the initiative of the Government of Kazakhstan the Executive Task participants confirmed at their last meeting the expiration of the Task as well as decided to expand the group make-up to carry out further surveys.

On 19 January 2001, the Government of Kazakhstan invited the oil companies to meet to bring up participation issues in studying, preparing and implementing the Baku-Tbilisi-Ceyhan (BTC) Main Export Pipeline Project. The meeting defined a circle of companies that had agreed to continue studying the terms of participation in the project (KazTransOil, Kazakhoil, Agip, BP Amoco, Exxon Mobil, Kazakhturkmunai, Nations Energy Karazhanbasmunai, OKIOC, Shell, and Texaco).

On 15 March 2001 the said companies signed a Memorandum on establishment of the Kazakhstan Group of Companies and Joint Working Group to exchange non-confidential information about the MEP project and carry out assessment of legal, commercial and technical conditions of the MEP project. In further, if expedient, the Memorandum participants can form a group of investors for implementing individual or joint participation or acquiring a possible interest stake in the BTC project.

With intent of extra studying of the possibility of the implementation of the project to transport Kazakh oil through the Aktau-Baku-Tbilisi-Ceyhan (ABTC) route, Kazakhstan's national Oil and Gas Transportation Company has signed a subsidy agreement with the U.S. Trade and Development Agency to fund additional surveys and integrate the available data. For reasons beyond control of the Kazakh side, the surveys that were to start in early September 2001 are delayed.

With the object of obtaining an additional information about the BTC project, the Kazakh side offered British Petroleum as a leader of the BTC project and the State Oil Company of the Azerbaijan Republic (SOCAR) to conduct presentation of the Draft Engineering Phase for the Kazakh potential participants of the project.

As it was mentioned above, the Kazakh companies will individually take a decision to join the BTC project or not. Some companies have been holding consultations with SOCAR on terms and conditions of commercial agreements to acquire stakes in the project.

Pursuant to the Memorandum on Mutual Understanding on the ABTC project that was signed on 1 March 2001 in Almaty, it was prepared an agreement draft between the Republic of Kazakhstan and the Azerbaijan Republic on oil transportation from Kazakhstan to Azerbaijan and on across Georgia and Turkey through the ABTC export system. Today the document is being agreed in ministries and departments of the Republic of Kazakhstan. Afterwards, it will be forwarded to governments of Azerbaijan, Georgia and Turkey.

How does unsettlement of the Caspian status issue impact on attraction of investments into the oil and gas sector?

A gargantuan oil discovery over the past 30 years in the Kashagan structure, offshore Kazakhstan set off business activity of world's major oil companies which offer their services in relation to exploration and development of the other perspective blocks of the Caspian Sea. A volume of investments into exploration and development of the Kashagan discovery is planned for 2002 at several hundreds of millions of American dollars.

Really, to date the Caspian legal regime has not been determined. However, taking into account a complex nature of the Caspian Sea problem as well as interests of the other Caspian coastal countries, in its policy towards future implementation of subsoil use rights on the hydrocarbon exploration and development at disputable territories Kazakhstan stipulates the right of the sides "on joint exploration and development of the perspective structures and deposits should the modified medium line passes through them." Such the attitude will allow foreign companies to make investments in offshore oil operations with safety.

How is the question of building alternate routes of Kazakhstan's oil and gas pipelines being solved?

Today throughput of the pipeline and export terminal system of the Republic of Kazakhstan does not meet production capacities. With the opening of the Caspian Pipeline Consortium's (CPC) oil pipeline as well as the Aksai-Greater Chagan-Atyrau and Kenkiyak-Atyrau pipelines, the problem related to insufficiency of the export capacities will be solved.

Oil production at the Kashagan field is expected to commence in late 2005. Critical production volumes requiring construction of a new export pipeline will be reached by the years 2007-2009. That is why construction of new export pipelines is not the immediate requirement. Kazakhstan and the oil-producing companies have enough time to appraise and prepare most profitable projects. Principally, consideration of various options of building new export systems has begun since 1992. Over the years, few projects of construction of new export oil pipelines have been studied-first in the way of ideas and then technical and economic specification in some degree.

Currently, all these projects are being carried to a pre-engineering state of preparedness. Legal and commercial conditions of the oil transportation via transit countries will be of no small importance in selecting export direction for the Kazakh oil. Today the Government of Kazakhstan is making much of this aspect. Our task is to create conditions that would secure unimpeded, stable transit in the selected directions as well as maximum benefit for our oil-producing companies.

Building export gas pipelines is an essential factor for boosting gas output and posting export revenues. As it is known, there are a number of potential country-importers of the Kazakh gas, which markets suffer supply deficits. In our view, definite political and economic factors do not allow us at the moment to take any concrete decisions on these or those directions. In all likelihood, expanding existing gas pipelines to export to the Russian Federation and to transit through its territory is the most realistic option.

What a route will be used for transportation of gas?

As it was said above a potential route for exporting Kazakh gas is a number of country-importers. What a way will be used for the export, time will show. Anyway, gas pipelines will be built given political and economic factors, in interests of the Republic of Kazakhstan.

What are the following plans on exploration of the Kazakh shelf of the Caspian Sea?

As to future exploration of the prospects in the Kazakh sector of the Caspian Sea, taking of a decision about is exclusively a prerogative of the President of the Republic of Kazakhstan.

Whether Kazakhstan would insist on a zero-throw technology in the Caspian Sea?

The Kazakh portion of the Caspian Sea belongs to zones with high environmental sensibility. So, it is naturally throws of drilling wastes in the sea is out of the question when offshore oil operations are carried out that is bound by our legislation. All activities should be performed on the so-called zero-throw principle. However, in future it does not exclude burial of the drilling wastes in other slices of the earth's surface laying lower than the sea bottom, in case of approval of an appropriate legislative act.

CHEVRONTEXACO FOR REALIZATION OF ALTERNATIVE EXPORT ROUTS FOR CASPIAN ENERGY RESOURCES - PRESIDENT OF CHEVRONTEXACO, EURASIA GAY HOLLINGWORTH

Caspian Energy: Mr. Hollingworth, Chevron-Texaco's play in the Caspian region is quite intensive today. What export rout for the Caspian oil do you consider is the main one?

Gay Hollingworth: Main routing for us today is the oil pipeline of Caspian Pipeline Consortium (CPC).

At present, CPC remains the largest project in Kazakhstan and Russia with direct foreign investments. We step by step commission different elements of the pipeline system, terminal in Novorossiysk and each of five original oil refineries. At present, two oil refineries are commissioned and CPC moves 30 thousand tons of oil a day (nearly 240 thousand barrels a day). Next month another two oil refineries will be put into operation that will increase daily throughput of the grid up to 50 thousand tones of Kazakh oil and 20 thousand tones of Russia oil (over half of million of oil a day). Till the yearend the latest refinery in Kalmykia will be put into operation and CPC will gain its original throughput of 28 million tones of oil a year (nearly 600 thousand barrels a day).

Caspian Energy: In your opinion, is the pipeline grid of the Caspian region sufficient to export all Chevron-Texaco's oil?

Gay Hollingworth: Certainly, over the project life CPC's throughput (ultimate capacity is 67 million tones a year) can become insufficient to move whole Caspian oil, therefore additional pipelines will be in need. In any case, ChevronTexaco is for realization of alternative grid of export oil- and gas-pipelines in the Caspian region. In the order of priority of realization they can look as following:

o Tengiz-Novorossiysk (CPC);

o Baku-Tbilisi-Ceyhan;

o Kazakhstan-Iran ;

o And the pipeline to Chine

The first direction is already realized, recently the consortium of companies for "Azeri", "Chirag", "Guneshli" will sanction construction of the Baku-Ceyhan pipeline.

Caspian Energy: But ChevronTexaco have not yet joined the Sponsor Group for the project?

Gay Hollingworth: Yes, we have not yet entered this project, since some disputes as to some terms in the negotiation process remain. However, we deem this project is the quite promising alternative direction in the Caspian region.

Caspian Energy: As much as I know, the time to join the BTC project is limited by its shareholders?

Gay Hollingworth: I think, in the recent future CPC pipeline will be the main export rout for ChevronTexaco but as time will go by, when reserves of South and North Caspian are finally assessed we will speak on oil transportation through the BTC. But over the time this pipe can be insufficient too. And, I think, at that time we can speak on two additional pipelines - to Iran and Chine, though they seem gepothetical still, but American Ambassador does not will to hear of that.

Caspian Energy: What do you think as to realization of the Trans-Caspian project?

Gay Hollingworth: Time for this project will also come, first for the oil pipeline, then - for gas pipeline. They will be part of the Caspian pipeline grid as logical extension of BTC grid.

Caspian Energy: But opponents think that from the technical (deep waters of Kazakh sector) and ecology (active geodynamic of the region) points this project is quite difficult for realization?

Gay Hollingworth: I think realization of this project is not related with any technical difficulties and as well as from the economical point this project is quite difficult. Today, there are technologies of pipe-laying in deep waters, so I do not think this is a problem.

Another matter is the fragile ecosystem of the Caspian, rich fish wealth, the factor that most Caspian littoral nations live at the expense of fishing says of necessity to introduce the latest pollution-free technologies. So, as far as Kazakhstan does not produce large oil volumes, crude can be transported by tankers. ChevronTexaco is experienced in sea oil transporting, therefore I think this project will be realized step by step.

Thank you for blitz-interview

CASPIAN LEGAL STATUS: "FINALIZING OUTCOMES OF NEGOTIATIONS DEPEND ON DISPOSITION OF PARTIES"

THINKS AD INTERIM OF KAZAKHSTAN IN AZERBAIJAN OYRAT BAYGARIN

Interview granted by ad interim of Kazakhstan in Azerbaijan Oyrat Baygarin to Caspian Energy

Сaspian Energy: How do you assess today's relations of Azerbaijan and Kazakhstan within the scope of achieved agreements governing the Caspian legal status?

Oyrat Baygarin: The assessment is very simple, I can even say wide. Recently we celebrated 10-year anniversary from the date of establishing diplomatic relations between our two countries. On this occasion leaders of two countries and foreign affairs ministries took messages which precisely and concisely describe Kazakhstan's satisfaction with current state of bilateral relations. Surely, if we cooperate in a bigger way, we must further strive to expand and deeper that.

Surely, actual tasks that require solution exist now, but they are not in such importance and based on lack of legal base to be completed under realities of today's relations, or easily solvable on bilateral contracts.

As far as Caspian problem is concerned, now, the special envoys of presidents of Caspian littoral states examine this problem. Kazakhstan counterparty is represented by the first vice-minister of foreign affairs Kayrat Abuseitov. Our opinion is widely sounded - three north Caspian states quite far progressed with this problem, and we wish Turkmenistan and Iran would follow us.

In past two years meetings of working groups aimed at Caspian legal status took regular base. This gives hope on soon solving of the problem. You know, last meeting of working groups took place in Teheran in July, the next meeting is slated to convene for November in Baku.

Outcomes of April summit held in Ashgabad were apprised as positives. Despite the summit ended with signing no document, the very fact of meeting of five presidents is very positive and promising event. I think, talk in summit corridors will positively affect solving of Caspian status. Moreover, certain juridical base exists now, particularly, bilateral documents between Russia and Kazakhstan, Russia and Azerbaijan, Azerbaijan and Kazakhstan have already been signed. In order to come to consensus, all five littorals are to be disposed to. As it is known, Iran's little-room for compromise stand adheres to 20% partying of the seabed or condominium. At that, Iran unilaterally sends official documents to various international bodies, saying the least this is an incorrectness.

In the event with Turkmenistan, its officials, in corridor talks during the Caspian summit expressed intention to bring themselves to the conference table with Kazakhstan to coordinate coordinates of modified median line on bilateral base - sectoral border between two states. As to this matter Kazakhstan has already sent concerned proposals to Turkmenistan.

C.E: On the Ashgabad summit Turkmenbashi Saparmurat Niyazov determined 5-mile coastal zone plus 25-mile economic zone, does it mean that in Kazakhstan's case one can say that Turkmenistan will change again its position?

Oyrat Baygarin: You know, I recur, this offer has been proposed to Kazakhstan on bilateral base and does not concern pentalateral approach of convention on legal status of the Caspian basin.

C.E.: That means, one problem may have several solutions, while Turkmenistan's position can alter constantly.

Oyrat Baygarin: I think, in Turkmen case, within a single country voluntary approach can prevail over, but no leader of any country will confer principles of international legal-contract ethics. He first must became aware of realities of today's world, Turkmenistan has already showed its preparedness to bilateral talks. If Kazakhstan and Turkmenistan will agree on, then it would be easy to break throw little-room for compromise position of Iran. Now, I think again that finalizing outcomes of negotiations will mainly depend on good disposition of parties - the disposition to seek for compromise.

C.E: Does this mean that president of Kazakhstan Nursultan Nazarbayev signing the law on border, in conforms to which Astana has introduced new understanding "continental shelf" on the Caspian and defined 12-nautical mile for Kazakhstan, turns dawn the median line principle of parting the sea bed?

Oyrat Baygarin: Now I can unambiguously say no. The statement of foreign affairs ministry of Kazakhstan says that this law does not rule international agreements. The law specifies, "if an international law ratified by Kazakhstan Republic specifies rules other than those in the present law, then rules of the international law shall be applied".

C.E: What economic agreements are signed today between Azerbaijan and Kazakhstan and how are they realized?

Oyrat Baygarin: Presently Azerbaijan and Kazakhstan signed 70 agreements which cover all fields of contract-legal base, main of them is agreement on trade-economic cooperation, free trade zone, protocol on avoiding double taxation. Agreement on scientist-technical cooperation, cooperation in public relations and culture are being prepared. These documents are expected to be signed during the coming visit of the prime minister of Kazakhstan Imangali Tasmagambetov to Baku. In the future - signing of common transport agreement.

C.E: Mr. Bayragin, is Kazakhstan's entering to Baku-Tbilisi-Ceyhan project on the governmental level likelihood?

Oyrat Baygarin: In 1999 the president of Kazakhstan Nursultan Nazarbayav along with leaders of Turkey, Azerbaijan and Georgia signed up the politic declaration in Istanbul, hence Kazakhstan showed its intention to take part in the campaign of filling Baku-Tbilisi-Ceyhan pipeline. Today's realities do not allow Kazakhstan realizing its intentions, I mean participation in construction of subsea pipeline Aktau-Baku, since legal status of the Caspian has not been finalized yet. No sensible Caspian littoral state on the background of leading intensive negotiations of Caspian legitimizing will take responsibility to take such unilateral decisions.

C.E: But bilateral agreements do justify themselves now?

Oyrat Baygarin: You see, once mass media played up an information about "Aktau-Baku-Tbilisi-Ceyhan" project, and this very negatively drove the process of negotiations between Kazakhstan and Russia, this became reason of polysemantic assesses or comments, that somehow or other does not answer Kazakhstan's today's policy aimed at valid decision of Caspian legal problems in consideration of principles of international law and mutual respect of interests.

For example, Kazakhstan and Russia have already signed protocols on development of Kurmangazy field based on equal 50/50 interest of parties, which successfully operate. Today, Kazakhstan adheres multiversional export of its hydrocarbons. If CPC exists, this does not mean Kazakhstan will not move its oil through Baku-Tbilisi-Ceyhan once built, or export to South or East.

Today, "Kazmunaygaz" and SOCAR closely cooperate and keep in touch within existing investment programs of two countries. Therefore, I think, perspective of cooperation of two countries on the Caspian will expand in the future.

Thank you for interview

CPC - BAROMETER OF THE INVESTMENT CLIMATE

Ian MacDonald, the General Director of the Caspian Pipeline Consortium

At present, we gradually commission various elements of the pipeline system, terminal in Novorossiysk and each of five original oil refineries. Till the year-end latest refinery in Kalmykia will be in operation and CPC will gain its original throughput of 28 million tones of oil a year (nearly 600 thousand barrels a day).

At that, the CPC system is not completed yet. Its first turn is one of several projected and, at present our experts carry analytical research of its next part. This work is based on requests and forecasts of producing companies that are shareholders in CPC. Based on today's forecasts in the middle of the next year CPC will operate at its originally projected throughput to move Kazakh oil.

Expansion of the pipeline system requires construction of new refineries and storages on the Novorossiysk terminal. Finally, CPC will be able to move 67 million tones of oil a year (nearly 1,5 million barrels a day).

If efficiency and security of oil transportion from the field to terminal is taken as assess factor of our activity, then CPC activity can be apprised as successful. The fact that CPC considers versions of expanding its system is one more indicator of its success.

Realization of such project like CPC in Kazakhstan and Russia gave rise to number of problems that are not fully foreseen and brought out lines of further foreign investments to the region. There are several largest world-known oil majors among CPC shareholders that deem CPC a touchstone from the point of realizing their investment projects in Russia.

Looking back we can see that CPC blends together many features unique for the region, so there is no need to wonder as to some problems and reactions.

CPC constitutes the first investment project in Russia worth of several billions of USA dollars.

CPC pipeline grid belongs to consignors, the pipe is financed and constructed by group of shareholders that have or can have large oil volumes to be transported. This is its radical difference from the Russian pipeline system that moves oil recovered by third parties. Transneft's pipe grid is oil transporting system of general use, CPC - not. This is a simple but background difference which puts certain tasks before the system and since CPC does not keep within the scheme specific for the existing structures.

Since the CPC system is in ownership of consignors, its tariffs are determined by an agreement concluded by shareholders rather than in the order of regulating. Really, CPC's activity is in conforms to comprehensive agreement of shareholders signed by the Russian government and imposing on all partners contract obligations that are not easy to be fulfilled, but strict observance to contracts is the base of the international business and trade.

CPC is financed at the expense of private funds. Moreover, the main part of capital outlays for the first part has been funded with foreign oil companies.

The CPC system has Quality Bank - this is the unique experience for Russia that is adopted from experience of other countries and is the most complete mechanism to provide fair compensation to producing companies that have oil of different quality. This allows exactly reflect production cost and market price on oil and in my opinion, wide use of such mechanism in Russia - is the matter of time.

CPC is the fully automatized system. Pipe valves are latched and unlatched at one simple stroke of the knob on the controlling center at terminal. Controlling over working pressure, oil discharge to the system and loading system are centralized. This technology, new for the region, requires radical change of attitude of employees and controlling bodies on construction stage as well as during operation.

CPC's refinery is equipped with turbine drive mechanism - one more know-how in the region and the system of trunk grid and controlling, floating tank roofs that allow to remove pollution and introduce method of horizontal drilling when constructing river crossovers.

CPC uses out-of-coast loading buoy - experience that does not have analogue in Russia and creates the problem for regulating and controlling.

Since the very beginning CPC is developed in consideration of 2,5-fold increase of its original throughput. Even it resulted in some expenses on the beginning stage, projecting and realizing of expansion of the pipeline system would easier if there is quite attractive relation of expenses and results. Actually, feasibility of expanding is a necessary condition of full realization of economic potential of the project for the welfare of the state and companies.

The CPC funding scheme envisages that shareholders will gain profit in long lead time, but such benefits will be real and essential. At that, like at any other long-term investments, profit of shareholders will be formed over a time, rather than in one hour.

In consideration of the above distinctions CPC is induced to hardly keep information effort of very different interested parties in Government as well as in other circles explaining why construction and exploitation of the pipeline is carried by this way and why shareholders can express such impatience toward rights and obligations under the agreement.

At that, there are number reasons why further success of CPC, its development in conforms to project and its ability to provide benefit to partner governments and shareholders is in Russia's interests. I would like to talk of some of such reasons:

CPC is recognized by international investment circles as barometer of investment climate in Russia. Among international shareholders of CPC are ChevronTexaco, ExxonMobil, BP, Shell and Agip - five of six world oil majors which shares are quoted on stocks.

CPC is the main indicator of energy companies not only, but also for investments in general, and very this reason make the international group of investors led by Bransuic UBC Warburg to visit the CPC terminal in the recent future in order to see what can be achieved. The communique of the recent summit of the presidents Putin and Bush envisages two projects - CPC and Sakhalin-1.

Good news for CPC shareholders and government is the fact that Russia makes appearance in CPC.

I do not affirm that in coming months and years CPC will not face problems - inherent to any project of such scale and significant. Though such exploitation problems like receipt of entities and passing centers via the state boundary are already solved, other problems remain open, including illegal pipe-branches, registration of the port and illegal claims of tax bodies related to VAT settlements for export tariffs.

At that, with confidence I state that today CPC's success is worthy of endevour and CPC's experience shows foreign investors' possibility of confident realization of large, difficult and long-term investment projects in Russia.

AZERBAIJANI SECTOR OF THE CASPIAN SEA AND SECRET OF EXPLORATION SUCCESS

Vice-president of SOCAR for geology, geophysical and development of fields Khoshbakht Yusifzadeh

The Caspian Sea is the largest closed water basin 1280 km extended along meridian and has the largest width 370 thousands km.

The extend to which geology-geophysical character of the Caspian Sea has been studied, the sea is surely leader among closed and marginal seas. Wide range of various exploratory operations, a large share of which is accounted by offshore geophysical and drilling surveys, were first applied on the Caspian Sea basin, namely in Azerbaijani sector of the Caspian. Over 80 years Caspian basin is experiencing geology- geomorphological, geophysical, geochemical surveys, drilling and other oil and gas related operations.

Offshore operations are characterized by specific nature, at the same time, analyze evidences that exploration of offshore hydrocarbon fields on the whole sea basin and implies general circle of operations that are similar to general circle of onshore operations, but in comparison with similar onshore operations offshore operations are marked with expensiveness, this fully concerns offshore oil and gas related operations on South Caspian.

Oil and gas related exploratory operations on South Caspian have a history going back for many years. This allowed devising exploratory strategy that mainly coincides with exploratory strategy applied in other regions around the world on oil and gas related operations. But this strategy has its differences and features caused first by the fact that the Caspian region was a polygon for application of single designs of exploration, development, oil and gas production.

As of 1 January 2002 nearly 1420 million tones of oil and condense and 470 billion cu m of gas of which about 481 million tones of oil with condense and 339 billion cu m of offshore gas have been recovered from Azerbaijani subsoil. However, despite this, Azerbaijani subsoil still holds huge hydrocarbon resources.

Main oil&gas bearing complex of South Caspian, namely Azerbaijani sector, as it is known, is pay section of middle pliocene that holds 80% of initial potential oil reserves and nearly 90% of natural gas. Despite the high exploration rate of initial potential oil and gas resources of pay section and analyzes carried over 100 years, the pay section remains the main promising oil and gas bearing complex of Azerbaijan.

Main volumes of explored and non-explored oil and gas reserves of Azerbaijan are mainly accumulated on Absheron archipelago and south part of Absheron region where such large and world known oil and gas fields are situated: Neft Dashlari, Guneshli, Chirag, Azeri, Kapaz, Shah-Deniz, and some other prospects.

On the Baku archipelago oil and gas deposits and reserves are mainly concentrated on north and central parts of the archipelago where in line with discovered Sangachali-sea, Duvanny-sea, Khara-Zire, Bulla-Deniz, Alat-deniz another promising structures are discovered: Nakhchivan, Umid, Babek (D-1) and some others.

In south part of Baku archipelago certain volume of unexplored oil and gas resources is accounted by promising structures Atashgah, Yanan-Tava, Inam and some others.

In deepwater part of Azerbaijani sector of South Caspian main resources are anticipated to occur in zones of Araz, Alov, Sharg, D-8, D-10 and D-11 structures where sea depth ranges 750-850 meters, and occurrence of pay horizons is 6500-7100 meters.

39 oil and gas bearing fields are discovered from the beginning of exploratory operations on the Caspian, discovery of 35 of these fields are resulted through works carried by Azerbaijani oilmen, including 28 fields in Azerbaijani sector, 5 - in Turkmen sector, 1- in Kazakh, and 1 in Russian. 18 out of 28 offshore fields on Azerbaijani sector of the Caspian are under development.

It must be noted that efficiency of exploration operations achieved in Azerbaijani sector of the Caspian is very high. When world practice of exploration efficiency amounts to 25-30%, in South Caspian this figure is over 50%. By exploration producing availability of wells, efficiency of exploration operations in Azerbaijani sector of the Caspian in 80s - early 90s averaged nearly 65-70%. The same years saw peak of efficiency of growth of oil and gas reserves on 1 meter of sinking, in 1986-1990 1 meter of sinking averaged 745 tones of hydrocarbons. In this period at total sinking of 269 thousand km oil and condense grew 134,8 million tones and 65,7 billion cu m of gas or 200,5 million of hydrocarbon equivalent.

What did cause success of Azerbaijani oilmen in exploration operations and how was it achieved, what exploration methods were applied during surveying oil and gas deposits and how were they used in further oil and gas related operation?

As it is known, ways of efficient achieve of exploration tasks include necessity to solve many tasks and are generally defined by exploration strategy. Such issues imply identification of oil and gas generation zones, ways of feasible migration, formation of hydrocarbon deposits, allocation of natural reservoirs and some other classic tasks included into the general strategy scheme, which were studied in past and are studied now.

For South-Caspian cavity the most important thing is investigation of regional changeableness of phase condition of hydrocarbons. Within a single anticline lines, as far as they submerge along stretch, neat oil deposits are replaced with gas and gas condense deposits. This changeableness - is parallel to increase of thickness of Quaternary deposits and, respectively, is related with descending travels where gas and gas condense deposits prevail, but in zones of comparative uplifts in Quaternary period oil deposits prevail.

In the practice of exploratory operations one of most important tasks is chose of well in-spud place of first prospect wells. In the world practice, over a long time Azerbaijan gained substantial experience in spudding prospect wells in crest and in increst parts of anticline structures. The most important moment here is that during offshore operation sea depth and depth of occurrence of main basis oil bearing horizons in crest and increst parts of the structures are more preferable and efficient, mainly due to least sea and well depths in these parts of structures. On the other part, feasibility of discovering fields in creast and increst parts of structures are also higher. Many oil and gas fields were discovered in South Caspian by this method, that means through spudding first prospect wells in crest and increst structures. Among them are Neft Dashlari, Guneshli, Chirag, Azeri, Kapaz and some others.

However, this method not always justifies itself. Azerbaijani oilmen have experience in operations on South Caspian when wells drilled on some areas did not yield viable results. This was concerned with the fact that some structures, particularly those situated on Baku archipelago, are marked with heavily broken crests. And therefore, on crests like Sangachal-deniz, Bulla-deniz and some other structures where crest parts of flexures were waterworn and broken, wells drilled in crest parts of flexures did not give positive results. Later on, method of crest deviation was applied on such structures, this resulted in discovery of large oil and gas condense fields, namely Sangachal-deniz and Bulla-deniz.

Right chose of number of exploratory floors is the most efficient method of achieving success in the strategy of exploration operations on South-Caspian basin generally, especially on Azerbaijani sector of the sea.

Most promising structures of South Caspian are multilayer. Floor exploration plays an important role in offshore operations when intensification of exploration drilling and oil and gas identification are required. Floor exploration of fields is carried if depth of occurrence of deepest production horizon is bedded deeper 4000 meters and there are several productive horizons. Depending on thickness of productive stratum, number of productive horizons and occurrence depth the fields can be explored by two or three floors. Clear samples of fields where floor exploration method is applied are Bahar, Guneshli and some other fields. This method was first used on Bahar gas condense field, where exploration was carried in three floor. First store - from top to "Fasila" set of rocks, second store - to Podkirmakinski set of rocks and third store - to Gala set of rocks. Floor exploration helped fully delineate oil and gas deposits, increment and develop first store of exploration - from top to "Fasila" set of rocks, and then other productive entities.

Taking into account cash flow required for exploration of offshore fields, compared with onshore fields, exploration methods customarily applied on onshore fields to discover, delineate and then develop fields does not do for offshore oil and gas fields. Depending on character of the area we sometimes used local exploration and development methods.

Sample of such exploration and development is Guneshli field (sea depth - 80-350 m). This field experienced floor exploration method and local development. Guneshli field was discovered in 1979, in 1980 section from top to "Fasila" set of rocks was developed. In short time 13 fixed platforms were installed on the field from which 177 wells were drilled and produced 100 million tones of oil and condense. Presently, Guneshli field accounts 60% of SOCAR's annual oil output.

Since 1994 oil industry of Azerbaijan began seeing foreign investments to carry oil and gas related operations, first to develop offshore fields and prospects of Azerbaijani sector of the Caspian Sea.

Today, SOCAR signed 15 contracts with foreign based companies on development of 33 areas on Azerbaijani sector of the Caspian of which 1 contract is signed for three oil and gas bearing fields (Azeri, Chirag, Guneshli) and other 14 contracts on 30 prospects (see table 2).

Exploratory drilling operations in Azerbaijani sector of the Caspian in partnership with foreign companies first began in 1996. During the past period deep exploration drilling was carried under 11 contracts on 16 areas. 9 new structures were drilled (Khamdam, Ashrafi, Dan Ulduzu, Talish-deniz, Nakhchivan, Absheron, Oguz-nose, Kurdashi, Araz-deniz) and these operations were continued on four structures (Garabag, Inam, Shakh-deniz, Yanan-Tava) and three fields. 20 wells were completed through drilling and construction on 14 areas of which productive objects were tested on 11 wells, on 2 areas drilling operations of two wells have not been completed yet. Presently, drilling operations go on on Yanan-Tava structure and temporarily halted on Inam.

Carried tests were followed by discovery of three oil and gas fields - Shah-deniz large gas condense field, and two smaller fields - Ashrafi and Garabag and increment oil and gas reserves on Azeri-Chirag-Guneshli fields. Efficiency of increment on 1 meter of drilling in 1996-2000 averaged over 12 thousand tones. In this time frame 290 million tones of oil and condense and 430 billion cu m of gas or 720 million tones of hydrocarbon equivalent were incremented at 59 thousand meters of total drilling. Hence, efficiency of hydrocarbon increment on 1 meter of sinking in 1996-2000 grew over 16 times.

Though, efficiency of productivity of explored wells in 1996-2000 amounted to 73%, only 11 out of 15 wells completed through drilling and construction operations were viable. This is comparable with 1996-1999 (nearly 70%), but we get higher results on efficiency of hydrocarbon increment on 1 meter of sinking, i.e. less sinking of exploratory drilling incremented more hydrocarbon reserves. Hydrocarbon increment in 1996-2000 was provided through exploration operations on Azeri-Chirag-Guneshli, Shah-deniz, Ashrafi and Garabag fields. Reserves of Azeri-Chirag-Guneshli fields were also increased by over 190 million tones of oil, on the discovered large gas condense field Shah-deniz - 400 billion cu m and 70 million tones of condense (total reserves of Shah-deniz are estimated to be over 1 trillion cu m of gas and 150 million tones of condense), on Ashrafi and Garabag fields amounted to 60 million tones of hydrocarbons.

All this is achieved through our partnership with foreign companies.

Naturally, achieving of high indexes was brought by experience of Azerbaijani oilmen gained during exploratory works and found uses in joint works with foreign companies on contract areas of Azerbaijani sector of the Caspian Sea.

Certain role in achieving such high indexes is featured by introduction of new technologies in seismic operations. The most efficient type of geophysical operations on the Caspian basin, like around the world, is seismic survey. Most part of total 400 structures on the Caspian basin are revealed and prepared to exploratory drilling through seismic survey. Modern technology of offshore seismic provides precision shooting surveys at any depths of the Caspian Sea. Starting from 1995 Azerbaijani sector of the Caspian saw 3D seismic surveys, in past years Azeri-Chirag-Guneshli contract area also saw 4C and 4D seismic surveys. Quality and details of seismic surveys considerably improved.

In line with this, in partnership with foreign oil companies we continue theoretic researches earlier carried by Azerbaijani oilmen. Received results prove our conclusions and allow choosing right strategy of exploration operations.

Gained experience is used in this or another way. Hence, the method of spudding first exploratory wells in crest and increst parts of South Caspian structures was used during exploratory operations on Ashrafi and Shah-deniz structures, through this first wells on these areas revealed oil and gas bearing fields. Shah-deniz area should be specially noted, the first well was spudded here on the place earlier defined by geologists and geophysics.

Crest deviation method is also applied during exploratory drilling operations in Azerbaijani sector of the Caspian. This method of exploration operations is widely used by foreign operating companies. However, recommendations of Azerbaijani specialists are not fully used during such explorations. Selecting location of first exploratory wells on single areas, foreign companies often use so-called "commercial delineation" instead of method of deviation from crest flexures. Hence, first exploratory wells on Absheron and Nakhchivan structures were drilled on distance sinking of productive horizons ("Facila" set of rocks, X and VIII horizons of Balakhani set of rocks) and occur beyond the oil-drainage line. If the first exploratory SDX-1 well on Shah-deniz were drilled on increst part of the flexure, but not on the place of third SDX-3 well, we found ourselves beyond gas-pool outline (see table 4) and probably had not enough prospects on this area. Data received on Absheron and Nakhchivan structures, where "commercial" choose of place of first wells by our foreign partners brought by another view on exploration operations, resulted in delay of discovery oil and gas fields on these fields. However, we are sure that in coming years, owing to drilling of second exploratory wells on these prospects structures, envisaged by contract obligations, our experience will be fully taken into consideration, and oil and gas fields will be discovered on these areas.

Method of floor exploration and local development of fields used on Bahar and Guneshli was also applied during operations on contract areas. Presently, this method is used by foreign partners on contract areas Azeri-Chirag-Guneshli and Shah-deniz. Chirag is successfully developed by the method of local development, production here is carried from Chirag-1 platform.

Discovery of large gas condense Shah-deniz field in Azerbaijani sector of the Caspian in 1999 allowed not only to preliminarily estimate hydrocarbon reserves of this field, but in a new way to look at prospects of the whole region. Gas prospects of South Caspian are related with such structures like Absheron, Nakhchivan, Zafar-Mashal, Araz-Alov-Sharg where discovery of large gas condense deposits with probable oil fringe are anticipated.

Moreover, there are number of other promising structures within Absheron and Baku archipelagoes and deepwater part of the sea on Azerbaijani sector of the Caspian Sea, which are of great interest - these are D-1, D-8, D-10, D-11 and some others.

Taking into account data compiled till today, we forecasted oil and gas production in the country for next 20 years. Calculations show that Azerbaijan is able to considerably increase oil and gas output in coming several years leveling it to 80-100 million tones of hydrocarbon equivalent. As to our calculations, till 2010-2011 will not only achieve but also surpass peak gas output of 1982.

By 2010 Azerbaijani sector of the Caspian anticipates commissioning of new large gas condense fields. Works on commissioning of Shah-deniz have already begun (slated for 2005).

In line with capital reconstruction of domestic market of Azerbaijan, gas market is first, increase of oil and gas output requires resolving of tasks concerned with oil and gas export. According to forecasts, in next several years Azerbaijan will export both oil and gas. Oil export from Azerbaijan along with existing routs is planned to be carried by projected Baku-Tbilisi-Ceyhan oil pipeline, gas export - through Baku-Tbilisi-Erzerum pipeline.

As we see, successful exploration operations in Azerbaijan and particularly in Azerbaijani sector of the Caspian allows highly appreciating potential possibilities of the region and generally shows propriety and efficiency of chosen methods and exploration methods.

GAS REFINERY OF AZERBAIJAN - TIME OF SURVIVAL IS OVER THE WORST

AzGR BUILDS NEW ECONOMIC RELATIONS

The director of Azerbaijan Gas Refinery - Miralamov Huseinbala Fazil oglu.

Miralamov Huseinbala Fazil oglu was born in 1947. He started his working experience from the position of foreman. Then he worked as a chief engineer, headed regional gas constructing-and-mounting department and construction trust. He also occupied the position of general director of "Liquefied Gas" Production Association, the first deputy chairman of the state fuel committee, taught in an institute of higher education.

In 1979 he was awarded Order of Labor Red Banner. In April 1998 he was appointed a director of Azerbaijan Gas Refinery. He is the chairman of plant committee of "Yeni Azerbaijan" party.

Laureate of the premium "CIS - Director of the Year" 1999, 2000, 2001 annually awarded to 100 industrial and science leaders under support of Federal Assembly of the Russian Federation, CIS Interparlamentary Assembly, coordinating unit of local commodity producers and the public-political paper "Tribuna".

In 2001 was awarded the premium of Association of assistance to French industrial.

Married with three sons and one daughter.

SHORT ON HISTORY

The first turn of the Azerbaijan Gas Refinery was put into operation in 1961. In four years refinery's capacities were enhanced through introduction of new gar refinery units, in 1964 refining in Azerbaijan reached the target volume of 4,5 billion cu m of gas a year. In addition to six gas refinery devices there were built gas condense treating (capacity 675 thousand tones a year) and unstable gasoline fractionating devices (600 thousand tones a year). Technology envisaged in the project allows getting liquefied gas, kerosene fraction (reagent for gas refining devices), heavy condenses (crude stuff oil refining plants) and gas benzene (crude stuff for oil-chemical complex in Sumgayit). Originally, gas and condense from Garadag field were utilized as crude stuff for this gas refinery. Then the crude stuff was added by associated and natural gas recovered by offshore oilmen of Azerbaijan. Growth of gas production required expansion of refinery's capacity. After some technical and technological changes, capacity of the plant grew to 6,5 billion cu m of gas a year. Such growth has been observed till 1986. After 1986 output of the refinery began falling to 2-2,5 billion cu m a year.

Since 1998 the situation changes to better.

EVERYDAY LIFE ON THE PLANT

I headed AzGR in April 1998 and immediately run into mass of various problems waiting for complex decision. Speaking vividly, eight years ago the refinery was "invalid". State of rusted communications and colons alone plunged into despondency. But I constantly felt support of managerial head of the State Oil Company of Azerbaijan Natig Aliyev and Vice-president Ilham Aliyev and general director of "Offshore Oil and Gas Production" PA Rahman Gurbanov. There was need of new conception of scaled development of old plant. High professional level of our engineer-technical personnel is very satisfactory too. All chief specialists of our refinery took part in devising three years in duration strategy plan. Later on, foreign experts noted that specialists of AzGR manage to get maximal effect under minimal finance expenses. In two years AzGR was reconstructed, that helped achieving impressing results. Four of five main units were revamped, fifth unit of capacity of 3 million cu m of gas a day was commissioned in early 2001.

In the second half 1998, in consideration of demand on liquefied gas in Azerbaijan and limited actual crude base of the refinery, there was proposal to refine it from imported crude stuff.

By SOCAR's content we had negotiations and contracted with "Tengiz-ChevrOil" on supply of wide spread of light hydrocarbons from Kazakhstan. In 1998-99 crude stuff bought from "TengizChevrOil" amounted to 6343 tones of which there were produced 5352 tones of commercial butane (liquefied gas) and 991 tones of natural gasoline.

Recently in partnership with SOCAR we opened tender and contracted on purchase of electronic balance to weight imported and produced production.

In 2000 we fully updated the energy supply system, built an electric shop for engine revamp, bought mobile diagnostic laboratory.

Power engineering is the basis of production, this sphere was got under control too. A freight park was fully repaired and painted, 48 silvery-colored cigar-shaped tanks were lifted on new platforms.

Obsolete concrete pales played out their lifetime, but security for us is above all. Lorry fleet of 45 motor units was also reconstructed: its territory was paved with asphalt, life conditions of drivers were improved.

Wide computer net of the plant was added with 40 latest up-to-date units, this much lightened management of technology processes, weighting of gas volumes, accountant works, preparing of statistic reports. Production of the plant must be in conforms to European standards, therefore we got modern physico-chemical equipment to identify content of produced products.

Productive capacity of the #5 unit is 3 million cu m a day. Over 10 years this unit was standing idle, there was no need due to lack of crude. After capital revamp, ceremony of commissioning of this unit was on 20 September of past year.

All personnel of the refinery understand that we work for the perspective. Having productive capacity of 5,5 billion cu m of gas a year, presently Azerbaijan Gas Refinery handles 2,5 billion. And this is not caused by lack of natural gas on our offshore fields.

Existing technology of our refinery can handle only high-pressure gas (18-25 atmosphere). Most of all offshore fields are on late stage of development, and gas from there comes with low pressure. As a result, more than half of commercial gas runs to consumers with important components which are being burned instead of yielding profit.

Increase of pressure on the "inlet" of the refinery - is the most important task. In one of decrees of the president of Azerbaijan Heydar Aliyev SOCAR was ordered to obtain full utilization of gas produced on "Guneshli" field and associated gas coming from "Chirag-1" platform. This is a serious problem for which managerial head of SOCAR puts out considerable effort.

Reconstruction of booster station on "Neft Dashlari" was completed. Three additional units allowed expanding station's capacity from 5,8 million cu m to 7,4 million cu m a day. This means that country's population got additional 1,6 million cu m of "blue fuel".

The recent future will see end of construction of offshore platform #19 on "Guneshli" field. Associated gas produced on the platform must run to the plant. Hence, very soon, the refinery will have no problems related with raw supply. Therefore, all capacities are brought to availability to the service #1. Fully re-equipped central refinery of the laboratory certifies the whole gas received and controls over its quality.

Azerbaijan Gas Refinery has Achilles' heel, this is a cooling system. It is known that heavier cooling of the crude, lesser loss of valuable components. Our refinery is able to lower temperature of absorbent to 28 degrees only. Most of modern gas refineries, including Russians, conveyed to use of propane cooling unit. In the future we are planning to buy a unit that can increase outlet of liquefied gas by 30%. The unit will repay its cost at the expense of production of extra products.

AzGR encourages close contacts with foreign companies operated in Azerbaijan. These are Statoil (Norway), ConocoFillips (USA), Nichimen Corp. (Japan). In late 1998 our experts were invited to Norway and took part in engineering of the project proposed by Statoil on modernization of existing and construction of new refinery for handling gas from Shah-deniz field. As analyze showed, gas from Shah-deniz contents high-heavy hydrocarbons, this makes refinery economically highly efficient. The plant is situated in the center of well-developed industrial infrastructure: there are railway, motorway, own reservoir farm, trestles, pipelines. And just new gas pipeline extended from Shah-deniz will add this infrastructure.

SOCIAL LIFE

Care of the personnel was always in focus of our attention. The refinery is situated remote of the city and suburbs, therefore our buses deliver engineer-technical personnel and workers from Lokbatan, Buta and Baku to the station. Every day over 200 workers have a free dinner in the dinning room of the refinery. Every year at favorable prices or free of charge our workers leave for pensions and health centers. Conditions of work improve year by year, air conditioners of latest generation are installed in offices. Hairdressing saloons are free of charge. We also have fashion house and own daintiest. For annual prophylactic control physicians themselves come to the refinery. In one word, there are all conditions for creative labor. Compared with average salary in the country salary of our personnel is quite high. Average salary of personnel in comparison with 1999 grew 76,5%. And this is despite the significant part of the profit was driven to reconstruction and development of the production process. Disciple on the refinery is on the highest level, people prize the work. Plant's personnel is solidary for better or worse. We conduct active youth policy. We pay close attention to people who many years worked for oil industry. We never forget of people who worked for the refinery and damaged health. They get allowance. Everybody knows that during undeclared war of Armenia, Azerbaijan lost 20% of its territories, over 1 million people became refugees, tens thousands turned in invalids. The war did not bypass personnel of our refinery. We have war invalids and martyrs in Garabakh. Past year, the president Heydar Aliyev participated on the ceremony of dwelling house built up in Lokbatan for families of martyrs and invalids. Annually, at the Novruz Bayrami and Kurban Bayrami national holidays every worker is granted premium. At the same time, we do not forget hospitals, orphanages and old people's home that receive gifts from us.

In 2001 AzGR celebrated its 40th anniversary. Time of survival is over of worst, now is the time to live, seek for new economic cooperation. All these are fruits of successful strategy of the Azerbaijan President Heydar Aliyev. Successful realization of this strategy is the path that would lead the people to a great future.

OUTCOMES OF EXPLORATION OPERATIONS IN AZERBAIJANI SECTOR OF THE CASPIAN

Akif Narimanov, senior geologist for Offshore Oil&Gas Production Association to SOCAR

Azerbaijan is one of countries where people first in the world began oil extraction and use in household (heating and lighting of houses) and healing. As back as in 17-16th centuries B. C. "firing oil" was curried away to East countries.

Since 10th century inhabitants of Absheron peninsula began dugging not deep pits - nearly 10-12 meters - to extract oil. By the beginning of 17th century number of pits were dug around Balakhani, Sabunchi, Ramani and other villages accounted to 500.

1926 saw well #71 first in the world drilled from wooden platform in Bibi Eybat bay. This marked beginning of offshore oil production in the world.

From 1934 curvature logging electrical devices were applied to drilled wells. This is the period when began started offshore geophysical exploration and drilling from ships (near Pirallahi island). In 1934 began installation of metallic feet on drilled-in piles to carry offshore drilling operations.

In 1934 there was first in the USSR structure drilling from large wooden ponton on the Caspian to map geology of the area between Pirallahi island and landfall.

In 1937as a trial there was drilled well of 220 meters from "Geologist" launch nearby Nargen island and then mapped up to 180 meters depth.

In 1941-1945 near "Neft Dashlari" purpose-built ships shot geology-mapping drilling and on outcomes of these operations they drew geology map of the sea-bed, on the base of this map there appeared well #1, in 1949 large oil field "Heft Dashlari" (well #1 was put into operation on 07.11.1949, daily gusher output - 100 tones from Gala set of rocks) was discovered, (see table 1).

Discovery and commissioning of legendary "Neft Dashlari" field became the strong push to development of offshore oil production in Azerbaijan.

During development of "Neft Dashlari" and other fields there was applied construction of updated metallic trestles for 15-20 meters of sea-depth, and base unit "Gipromorneft-1" that allows drilling at 25 meters depth.

"Neft Dashlari" first in USSR saw drilling of deviated wells by clustered method, later on widely used on other Caspian and onshore fields and outside of Azerbaijan, even in Western Siberia.

From 1950 through wide use of geophysical methods of operation several promising structures were defined and prepared for deep drilling, drilling out of these structures in short time allowed discovering number of fields, even very large oil&gas condense fields that allowed long term covering republic's gas need: Sangachal-Duvanny-Khara-Zira (1963), Bahar (1968) and Bulla-Deniz (1073).

First self-lifting drilling rig to carry offshore exploration operations was used in 1968.

Importance of exploration operations of 70-80ths resulted in discovery of number large deposits at 80-350 meters and deeper in Azerbaijani sector of the Caspian that countribute 800 million tones of recoverable oil and 200 billion cu m of gas reserves. Prospect of development of country's fuel-energy complex in next 20-30 years is ruled by commissioning of these fields. Today, as we stated above, large stake of oil output is accounted by one of them, namely by "Guneshli" field.

Second deep offshore field (well #1) - Chirag is discovered in 1985.

Two years after discovery of Chirag, another oil&gas field "Azeri" (1987) was discovered south-eastern from Chirag on the extension of Absheron-Balakhani zone of uplift. In 1988 there was discovered "Kapaz" field, in 1994 - "Novkhani-deniz".

Exploration drilling carried by foreign oil majors in 1998 was followed by discovery of Garabakh and Ashrafi fields, in 1999 - giant gas-condense field "Shah-Deniz".

It should be noted that exploration-geophysical operations started in mid-20th century brought discovering of 145 anticline prospects in Azerbaijani sector of the Caspian. Of which 59 structures are bedded at 60 meters depth, 16 structures - at 60-200 meters depth, 70 - at 200 meters. It should be noted, in addition to anticline traps on the shallow water portion of Azerbaijani sector of the Caspian there are also promising non-anticline traps for oil and gas accumulations. These traps have not been studied in details yet, but have large potential.

Exploration operations in Azerbaijani sector of the Caspian opened 28 oil and gas fields of which 18 are under development, 4 - completed development, 6 have not started yet.

From the date of beginning of exploration operations to 01.07.2002 over 806,0 million tones of hydrocarbons were recovered from oil and gas fields of Azerbaijani sector of the Caspian. However, as it is seen from the table 2, Caspian potential is not exhausted yet. Oil and gas fields that are under development alone can yield 205 million tones of liquids.

Adding to them forecasted reserves related with unstudied drilling of 56% of water basin and non-accounted resources of deep-bedded horizons and traps of non-anticline type we can firmly say on good prosperity of future generations with hydrocarbon reserves.

PHASES OF DEVELOPMENT AND DRILLING PROSPECTS OF OFFSHORE OIL&GAS PRODUCTION PA TO SOCAR

Hasan Mejidov (Deputy Director General of Offshore Oil&Gas Production Association to SOCAR on drilling and marine transport)

Future of development of Caspian oil fields was defined in the beginning of the current century when the project of talented engineer P. N. Pototsky to cover up Bibi-Eybat bay with earth, later on named Ilyich bay, was brought to life. First high-profile wells drilled here marked birth of large oil&gas producing region.

30ths saw directed drilling on the Pirallahi island from the seacoast and installed island offshore feet. This resulted in discovery of subsoil deposits. In 1942 drilling operations in Azerbaijan were fully rolled up. By the decision of the State Defense Committee all drilling offices in Baku with all their bases, equipment, instruments and staff and many field specialists, masters and qualified personnel were relocated to eastern regions of former Soviet Union. In unusual conditions of Tataria, Bashkiria, Ural, Volga region, Turkmenistan and Uzbekistan Baku driller-explorers launched truly titanic work aimed at exploration (now wide known) of oil and gas fields of "Second Baku".

After Great Patriotic War, the main target focussed on recreation of drilling operations in the republic and beginning of exploring new oil fields to meet fuel need of national economy of Trans- Caucasus nations and south regions of the country. At that years explorers discovered offshore fields "Gurgangy-sea" and "b. Darvina" which proved high perspectives of subsea structures of Absheron archipelago.

In 1947 for concentration of exploration operations of promising offshore and onshore areas here was established PA "Aznefterazvedka". The organization must direct main forces on exploration of new fields, define oil bearing capacity of the structure known under the name "Neft Dashlari" (Oil Rocks) and on this base carry the program of development of other offshore prospects adjoining to Absheron peninsula. In those years there were not sufficient technical base, but operating personnel of PA with great enthusiasm began solving of this important national economic task in the country.

So that for study of the situation peculiar exploratory decant made up of S. A. Orugev, A. K. Aliyev, Y. I. Safarov and others first landed on the ridge of rocks in the open sea. On 14 November 1948 smaller launch "Pobeda" arrived to "Neft Dashlari". In those years, there was nothing but paired kirgim and launch tugs to be used in offshore construction. But despite all this the first oil-rig was installed in record short terms.

Location of the first exploratory well, most likelihood, was chosen by geographic reasons rather than geological. Exploratory well #1 spudded in February 1949 is the pioneer of "Heft Dashlari" field. And at last, on 7 November 1949 high profile oil with daily output nearly 100 tones gushed forth. Data compiled from first exploratory wells 1, 13,17, 32, 34 and others were such efficacious that after defining oil-bearing capacity of this field they set a task to launch exploration and development operations of offshore oil fields of the republic. In short terms PA devised necessary organization-technical actions.

On 1 December 1949 here was established PA "Azmorneft" for exploration of offshore oil fields, oil production and construction of offshore oil fields in Azerbaijan. The association was made up of "Artemneft" and "Gurganneft" trusts, field "Bukhta Ilyicha", enlarged exploratory office on the sea. There was created specialized administration for construction of offshore bases, trestles and fields of "Azmorneftestroy" with relevant construction-and-assembling organizations, administration of floating units ("Caspmornefteflot"), machine-building plant and some other important organizations. Discovery of new oil fields and necessity to organize field operations in terms of open sea brought number of large research-technical problems without decision of which arranging of exploration and development of offshore oil&gas fields with high technical-economic indexes and scientifically based methods is not possible.

Solving of problems and creating of scientifically based methods of development of offshore oil&gas bearing fields in late 1949 was organized by "Gipromorneft" institute that in our days grew into the large scientific and design institute of our country, personnel of the institute considerably helped development of oil production on the Caspian sea, went side by side with offshore oilmen on their difficult and precious way. At that, institute's personnel literally began from naught having no sufficient scientific and material-technical base to solve large complex of scientific and design problems in association with engineer-technical personnel of drilling organizations. Many researches were carried to prevent accidents and difficulties.

Pile metallic bases built by the project of engineers N.S. Timofeyev and B. A. Raginski played an important role in development of fields of Absheron peninsula. In 1949 L. A. Mejlumov, S. A. Orujev and Y. A. Safarov designed large block base "MOK". Thanks to commissioning of stationary offshore bases "MOK" there were discovered and explored oil fields "Gurgan-sea", "Jiloy", "b. Darvina", "Neft Dashlari", "Palchig Tepesi", "Sangachali-sea", Garadag-sea", "Bahar", "Bulla-sea", "Bulla", "Alat-sea", "Duvanny", "Duvanny-sea" and others.

Overcoming difficulties brought by hydrometeorology terms, deepening of sea depth and remote of main material-technical bases and sharp deepening of well depths and under difficult geology-technology terms of well drilling, offshore drillers continuously expand drilling operations in order to soon commission high flow rate oil&gas fields under lowest labor and fund expenses.

In past years considerable work was done in modernizing and development of technique and technology of clustered directed deepwater drilling under geology-technologically difficult terms. Modernizing of technique and technology of directed drilling allowed achieving considerable hole vertical deviation, this opens large possibilities in development of rich oil deposits in deep waters and with high technical-economic efficiency.

Azerbaijan gained substantial experience in deep and ultradeep hole making including those that are drilled by clustered and directed methods and in efficient run of progressive rock cutting tools (for instance, SMIT, ISM and diamond bit), that provide high sinking.

Sea depth is one of those factors that restrict exploratory and development operations on fields. Each individual case during projecting of offshore fields for exploration and construction of fields requires new approach in consideration of sea depth, distance from landfall, relief of sea floor and others.

In 1974 in immediate vicinity from "Neft Dashlary" the deepwater fixed platform was projected and installed on "Guneshli" structure to spud bush of ten wells under 84 meters of sea depth.

On 28 August 1979 oil gusher blew from X-horizon of Balakhany set of rocks during testing of the well #4, this opened large perspectives before oilmen. Now there are 13 deep-water platforms under 140 meters of sea depth. 169 high flow oil and gas wells were drilled from these platforms. In the future another 27 wells are expected to be drilled here. There is additionally built platform #13 and expanded 12 wells of platform #14 to expand drilling operations on this field.

Ultra-depths work requires new approach to decision of complex of technical tasks. It is necessary to create and modernize floating semi-submersible drilling rigs which will allow drilling exploratory wells on 400 meters sea-depth and even deeper.

Actions to prevent sea pollution during drilling and testing of offshore wells are developed and brought to life, this decreased sea pollution during drilling and production operations.

Complex program of full prevention of pollution of Caspian Sea is devised and realized. More efficient means of anticorrosion protect of offshore oil&gas-field hydrotechnic installations are widely applied.

"NEFT DASHLARI" - VIVID PERSONIFICATION OF TECHNICAL INTELLIGENCE AND TITANIC WORK FROM "BLACK ROCKS" TO "OIL ROCKS" - HISTORY OF WORLD OFFSHORE OIL PRODUCTION 170 MILLION TONES OF OIL ARE PRODUCED OVER 53-YEAR LIFE OF "NEFT DASHLARI"

"Neft Dashlari - bridge from 20th century to 21st century" (G. A. Aliyev)

Alchin Shirin-zade The head of "Neft Dashlari" Offshore Oil&Gas Production Department to SOCAR, doctor of technical sciences

"Neft Dashlary" ("Oil Rocks") - is unique phenomenon of 20th century and fruit of great scientific sense and work heroism, demonstration of high technical intellect of our nation. And this is not accidentally.

Ancient history of Azerbaijani oil played and plays historic role in development of our country. Oil industry - the leading sector of world economy found its rapid development in Azerbaijan. For a long time, especially on the eve of 19th and 20th centuries Azerbaijan was as a sample of oil industry and science for the whole world. Many technologies widely applied to oil industry of leading world states are originated from Azerbaijani oil industry. And it is naturally that in mid-20th Azerbaijan became cradle of world's offshore oil. Geology surveys of special expedition of Sciences Academy of USSR that began in 1945 under leadership of one of prominent representative of Azerbaijan oil science A. K. Aliyev were completed in 1948. By this time tectonics and stratigraphy of "Black Rocks" were exactly defined and surveys completed. Continuous, difficult researches brought the scientist to the idea of possible oil production from sea floor. A. K. Aliyev devised wide geology map of "Black Rock" area and the plan of industrial exploration of the region. Despite many difficulties and pessimist forecasts of many skeptics, especially in Moscow, this opinionated and persistent scientist sought after carrying offshore exploration surveys. Hence, first working decant was threw out on turbulent waves of the Caspian.

On 14 November 1948 there was defined the exact place to spud the first exploratory well.

And at last, on 7 November 1949 the first well drilled on the sea-bed blew strong oil gusher. This gusher marked beginning of new century in world history of oil industry - century of offshore oil. Region of "Black Rocks" turns into legendary offshore oil fields "Neft Dashlari". Heroism and firmness of offshore drillers enraptured the whole world - with courage and selflessness they make Azerbaijan famous. Since this time there began construction of tremendous oil&gas producing complex on the Caspian.

For this aim offshore oilmen passed through difficult but renowned path of 53 years and even today continue course of development of unsubdued Caspian layers.

Next day after the first oil gusher blew republic officials, Ministry of Oil Industry, many famous oil specialists arrived to "Neft Dashlari". The government carried organizational-technical activities aimed at purposeful arrange of drilling and oil production operations, meeting needs of industry and producers. On 1 December 1949 there was established "Azmorneft" PA.

In December 1950 wells drilled by teams led by alive legends - Gurban Abbasov and Mikhail Kaverochkin gave first oil. In February 1951 the first tanker loaded with oil was dispatched from "Rocks".

In 1951 A. K. Aliyev, M. Kaverochkin, N. Babayev, A. Kamladze, S. Grobshtein, V. Nogayev, S. Orujev, Y. Safarov, A. Yagubov were awarded the State Premium for achievements in exploration, drilling, production, exploitation, construction of offshore oil wells. In March 1959 G. Abbasov, M. Geokchayev, Y. Kerimov, M. Kaverochkin (posthumously), B. Mamedov were awarded Hero of Socialistic Labor. For high achievements in offshore oil production in 1961 A. Alikhanov, A. Bilandarli, B. Hajiyev, M. Gasimzade, I. Guliyev, B. Negreyev, F. Samedov, N. Baybakov were conferred on Lenin Premium. Later on, H. Bayramov, I. Huseynov, A. Jafarov were also awarded Hero of Socialistic Work. Tremendous work of Caspian conquerors lies behind these names, premiums and titles. The path passed from the first gusher ages centuries.

Starting from "Island of seven ships" on large lengths of Caspian sea, during more than half of the century time, experienced stepwise construction and built giant oil&gas producing and housing complex.

In 1952-1955 there were built 16 two-store buildings, dining -hall, library, club, 2 oil gathering points, water distilling device, diesel electric station, bath-house, store, administrative building, fire-pump station and etc.

In 1955-56 - cinema club for 300 spectators, water reservoirs, dining hall for 100 people, PTR #3, water distilling device #2, NSP-6, transformer substation were commissioned, in 1957 - built PTES. Every year ends with commissioning of tens of new entities and it is not possible to name all of them.

In 1985 one more offshore "wander" was commissioned to oilmen: 9-store house. Thermoelectric power station commissioned in June 1986 that continuously supplies the whole oil&gas producing and housing complex of OGPD "Neft Dashlari" and several platforms of OGPD "28 May" have been operating till the time.

By joint endeavors of our geologists, oilmen, drillers, constructors, forwarders 170 million tones of oil and 13 billion cu m of gas were produced over 53 years, over 2000 wells are drilled, installed more than 180 km of trestles, built 170 intrestle areas and hundreds of kilometers of oil&gas pipelines. 1967 saw peak of oil output - 7,6 million tones.

For information, personnel of our OGPD exploit 2 fields "Neft Dashlari" (since 1949) and "Palchig Tepesi" (since 1951).

Starting from 70ths, natural fall of strata pressure and decrease of stock of operating wells also shifted dawn rate of oil output. On other part, trunk of trestles and communication lines were projected to serve for 10-15 years and therefore under impact of often storm winds and corrosion they gradually became unserviceable or out-of-the-way for production process. Many hydroengineering installations required reconstruction or renovation. However, earlier 90ths brought hard economic and politic climate, lack of finance, drop of output, disruptions in technology and equipment supplies brought by breech of economic ties after USSR collapse affected activity of our department.

Problems were added by hurricane in November 1992 on the territory of "Neft Dashlari", as a result oil production was endangered by threat of halt, some parts of trestles were wrecked and went dawn, hence the integral technology system of oil&gas&water pipelines broke, intrestle areas became isolated artificial bases. Resume of production, recreation of areas required huge technical, technological, construction and finance means. Certain activities were devised and being realized till today. In one word, many problems accumulated and realization of that require prompt solving and they must be solved. On other part, after signing "Contract of the century" in 1994 oilmen were before important task to rouse oil economy.

By recommendation of the director general of Offshore OGPA Rahman Gurbanov in August 1996 I was assigned to head "Neft Dashlari" OGPD. We stood before very difficult and large tasks. First - to stop drop of oil output, this process is concerned with many factors that need time, strength and complex approach. Resting upon experience of leading specialists of OGPD, together with managerial head of Offshore OGPA and science organizations we analyzed the situation and assessed real state of production, devised complex of current and future activities to realize tasks of government and national significance.

As the main direction of our activity we emphasize on improve of gaslifting system. In consideration of the fact that over 70% of our oil are produced by gas-lifting method we must develop this system.

In order to improve this system first of all new gas pipelines of high and low pressures are installed to increase gas pressure. On single bases, remaining on "Palchig tepesi" after hurricane of 1992, we lay subsea gas pipelines of high and low pressure. Following these activities we have created closed gas lifting system that is one of our most significant achievements.

On the next phase we began radical transformations in gas compressor machines.

During 1995-1996 there were 11 machines working without replacement. This brought heavy loses due to breach of work regime of gas lifting wells during the time when machines are out of order due to drop of pressure in the system. For liquidation of this gap in 1998 there was reconstructed KC-4 to serve 8 machines, in 2000 4 machines KC-3 were reconstructed, this work goes on even today. At present, OGPD holds 18 working gas-engine compressor aggregates of which 9-10 are under operation, other - in reserve. After building reliable gas-pipeline and creating of closed system, pressure in 10" gas pipeline increased from 22,5 atmosphere to 30 atmosphere, in 8" - from 28 to 3 2,5. This resulted in increase of output of gas lifting wells. Another sore problem that was bothering our oilmen over 30 years found for its decision, nearly half of gas lifting gas - 400-450 thousand cu m - discharged to atmosphere due to low pressure in wells.

From 2000 we have began discharging this gas back to the system. As a result, volume of gas received from OGPD "28 May" shifted dawn two-fold and now we get just 450 cu m a day. Thanks to this we fully meet gas need of OGPD and also first in the history of "Net Dashlari" we drive 250 thousand cu m of gas a day to landfall to use it as fuel.

Our achievements in gas gathering are clearly demonstrated by following figures: if in 1991 982 thousand cu m of gas a day were utilized out of 738 wells, now the same volume of gas we gather from 412 wells. Despite the late phase of development of operated field, exhaustion of hydroengineer installations and forming of artificial single bases that complicated geology surveys, in 2001 there were 84 geology activities while 1994 accounted just some 36.

We are pleased to say of achievements in oil production. Carried actions are evidently seen in achievements of our department. In quite short term 1996-1998 we could stop drop of oil output and in 1999 saw growth of output compared with previous year, first in past 32 years. 4960 tones of oil are yielded to the government. In 2000 instead of 770 300 tones projected by the government here were produced 783 625 tones (100,6%) or 4325 tones over the plan. Figures of 2001 are also pleasing, output totaled 802518 tones of which 7018 tones over the plan. Growth in comparison to previous year is 18 893 tones.

The first half-year of 2002 was also successful for our oilmen. State plan is met at 102,2%. Output amounted to 401471 tones of oil against projected 392 800 tones of which 8671 tones are over the plan. Daily output increased from 2000 tones to 2200.

Number of wells commissioned after drilling also grew, this figure increased from 5 in 1994 to 11 in 2001. In this time frame output from transitory wells grew from 724 681 tones to 745 646 tones. Progress in observed in output from new oil wells, if in 1996 this figure amounted to some 647 tones, in 2000 - 16 524 tones, in 2001 - 41 206.

In six months of the current year 7 instead of 3 projected wells are put into operation after drilling, these wells gave 12 234 tones of oil against projected 9630 tones.

In the first half year 23 wells instead of 13 are resumed, output of these wells amounted to 8274 tones against scheduled 4253.

Our achievements are also reflected in finance indexes; cost of one tone of oil dropped to 197285 manats in 2001 from 290 527 manats in 1997, in five months of 2002 profit of our OGPD was more 6,5 billion manats against scheduled amount.

In order to decrease time of development, joint two strata exploitation (and even three - 1 well) in one well is applied to "Neft Dashlari". Starting from mid-1999 this method is applied to 32 wells and as a result yields another 50 thousand tones of oil. Treatment of bottomhole zone with demulsifying agent "ALKAN" DE-202 is applied for three years, output grew by 10-15%, apply of this demulsifying agent resulted in increase of inter-revamp period of 70 wells.

Great attention is paid to construction of large entities to increase lifetime and reliability of "Heft Dashlari". After reconstruction economically and ecologically very efficient PTR-5 is put into operation. Improve and modernization of oil and gas gathering systems was achieved through construction of USU-3a and USU-4a. Huge work is done in construction and revamp of 10 intrestle production areas and construction of three areas of inlet trestle, installation of oil and gas pipelines. These are our working days.

Solving of social problems is part of our day-to-day activity. Despite the finance difficulties, a great deal is done to solve housing problem of oilmen for which 9-store building of 117 apartments is built in Bakikhanov district, 5-store house of 80 apartments in Garachukhur district, 8 apartments are reconstructed in the building #9 on Darvin str. Solving of housing problems goes on even today. Serious progress is done in medicine, culture, public service of offshore oilmen. Industrial safety, improve of work terms are in the center of constant attention of company's managerial head. New administrative buildings are built for CDNG-2, CDNG-4, motor and tractor shop, shop of capital and underground revamp of wells, revamp-construction and montage shops.

Park in Chvanovo district is equipped and became a lovely rest place for workers, sport center "UMID" ("HOPE") - is also unique sport place on the Caspian that became stimulus of growth of interest to sport among young oilmen.

Our whole practical activity is coordinated with scientific institutes and experts. Scientific conferences, seminars, business meetings of A. H. Mirzajanzadeh with specialists of "Neft Dashlari" also became good traditions, attracting of young specialists to scientific work. At present, one doctor of technical sciences, 5 candidates of technical sciences are working in OGPD, and recently one young specialist Iskender Aliyev defended Ph.D. thesis.

"Heft Dashlari" - is a huge polygon of practical realization of many ideas of oil science and therefore ties with science and scientists in the future will also develop and strengthen in all direction. This is dictated by the time.

OGPD "Neft Dashlari" has a great future of exploited fields "Neft Dashlari" and "Palchig Tepesi" which still hold nearly 30 million tones of recoverable oil reserves. With current rates of oil withdrawal we will work on "steel piles" for a long time. On other part - "Neft Dashlari" - is the capital of offshore fields of the Caspian and serves the base, beachhead for development of other fields envisaged in the "Contract of the century". We will develop and strengthen "Eight wanders of the world" to successfully realize Big Oil Strategy, initiated and designed by the prominent politic and statesman of world significance - our dear President Heydar Aliyev.

We have a great potential of personnel educated in the manner of School of "Neft Dashlari" by right named "Academy". Such giants like S. A. Orujev, S. Bezirov, N. Babayev, B. Mamedov, B. Hajiyev, F. Samedov, H. Abbasov, A. Jafarov, H. Bayramov, H. Yusifzade, A. Zeynalov, E. Mamedov, M. Seid-Rza and hundreds and hundreds of others who stood at source of Domestic offshore oil graduated from this "Academy".

Today, these plans are realized by talented youth led by theirs leaders of genius - large organizer of state youth policy Ilham Aliyev. On the background of rebirth of sovereign Azerbaijan "Neft Dashlari" will further develop and prosper (tribune of name of Azerbaijani offshore oil). This is our civil and professional duty.

Oilmen - are creative power, they always were and will be on positions of State system, prevent of our historic achievement - independence. They are good aware of value of Freedom and Independence, so difficulty achieved by nation. We encourage and support course of genial leader of Azerbaijan nation Heydar Aliyev. All our achievements became possible thanks to general stability achieved through wise and far-sighted policy of Heydar Aliyev.

HISTORY OF DEVELOPMENT OF "GUNESHLI"

The head of "28 May" Offshore Oil&Gas Production Department to SOCAR

Telman Jafarov

In 40-50ths of 20th century geologists, oilmen and scientists of Azerbaijan began exploration operations on the Caspian. These surveys turned to be efficient.

Outcomes of surveys proved both shallow and deepwater Caspian bosom held huge hydrocarbon reserves.

Laureate of the State Premium, professor A. Suleymanov splits development of Azerbaijani offshore oil industry on four phases:

I phase - 1904-1922;

II phase - 1923-1948;

III phase - 1949-1962;

IV phase since - 1963 - till the time.

Many of latest 14 deposits discovered in 1966-1998 are under exploitation. Discovery of oil fields coincided the period when the country was led by the present president of Azerbaijan Heydar Aliyev who repeatedly noted services of Azerbaijani scientist-oilmen in discovery of Caspian oil deposits.

Azerbaijan is known in the world as the motherland of Caspian oil, bosom of our country hold huge hydrocarbon reserves. Through far-seeing policy of our dear president H. A. Aliyev, Azerbaijan became sovereign state with high international authority.

Exploration and exploitation of oil and gas holding "Guneshli" field inseparably linked with consistent and purposeful policy of Heydar Aliyev that helped Azerbaijani oilmen to create terms to conquer deep end of the Caspian sea - 100 meters and discover mega-field in Azerbaijani sector of the Caspian - "Guneshli". This discovery allowed solving important political, economical and social problems of government importance and exporting end petroleum-products.

In 1978 Garadag plant of deep-water bases that opened many of new job vacancies was commissioned. Discovery and development of "Guneshli" field is closely tied with the name of Sabit Orujev, minister of gas industry Gurban Abbasov - Hero of Socialistic Worlk, general director of NPO "Caspmorneftegazprom", vice-president of SOCAR Khoshbakht Yusifzade, vice-president of SOCAR Ahmed Zeynalov, laureate of state premium Alekper Suleymanov, chief engineer of VPO "Caspmorneftegazprom" Namik Efendiyev, talented geologists Enver Mamedov, Idris Rzabekov, Akif Narimanov, offshore constructor Khanoglan Bayramov, Iskender Tairov, known drillmaster Israfil Huseynov, head of trial works Mirzadadash Badirkhanov, and also achievements of chief specialists of OGPD "28 May".

Some facts and history on exploration, exploitation and development of "Guneshli" field.

The field was discovered by Azerbaijani geophysics during seismic operations in 1958-64. The first well on the field was drilled under direction of the hero of Socialistic work Israfil Huseynov.

The first offshore fixed platform on "Guneshli" field was assembled by the team of honored constructor Iskender Tairov. Block of 420 tones has been assembled with help of "Keroglu" catamaran. Lack of experience in construction operations in deep waters (84 meters) told on, the block turned over.

But despite that, construction of OFP #1 was completed in 1978.

Short after, economically high profile and quality oil was produced from this platform. Construction of the field progressed with high speed. Operations were controlled by Heydar Aliyev. Huge work that was every week discussed by operating staff teamed by legendary oilman Gurban was done.

In short term, thanks to his insistency and exactingness, Oil Ministry of USSR sent to the region pipe-layer "Suleyman Vezirov" to install subsea pipeline and other large tonnage ships and necessary oil equipment.

Originally there was just one area operated on the platform on which huge business was organized later on. After a number of years output of the field grew.

In late 1989 number of wells drilled on 10 OFPs accounted 100. Annual oil output was close to 6 million tones. Here began construction of terminal for oil gathering, treatment and transporting.

Since 1 January 1990 new OGPD "28 April", later renamed in "28 May", was established on "Zhiloy" island.

The head of OGPD "28 May" was assigned Nadir Asadov, chief engineer Telman Jafarov.

In January 1990 on Zhiloy island was meeting led by chief engineer of Offshore OGPA Namik Efendiyev and deputy on construction operations Akhmed Zeynalov centered on problems of "Guneshli" field, ways of finding solutions and detailed program of operations was drawn on outcomes of the meeting.

Particularly, the program envisages:

1. End of construction of "Neft Dashlari" terminal and minimizing of water discharge to Dubendi.

2. Creating of terms for revamp and commissioning of standing wells.

3. Liquidation of variations in oil&gas pipelines through introduction of separate gas and oil transportation.

4. Creating of gas-lifting system on platforms for exploitation of wells.

5. Supplying platforms with electric energy.

6. Decreasing drop of strata pressure through increase of water discharge to strata.

The above stated problems found decisions in 12 years.

After collapse of the USSR all Caspian littoral states led by Russia have their own claims on Caspian resources. Everybody aware of huge fuel reserves bedded in bosom.

After this 10-15 km to south-eastern from "Neft Dashlari" offshore fixed platform was assembled, this one more time approved independence of Azerbaijani government. With his wise policy Heydar Aliyev proved groundlessness of claims of Caspian littoral states.

It is known that in 1990-93 politic stability shattered oil industry as well and brought here chaos. In this time of stress, by claim and insistence of nation Heydar Aliyev who returned to political government devoted most part of his time to decision of problems in oil industry. In 1994 he strengthened leadership of Offshore OGPA.

In turn, general director of Offshore OGPA Rahman Gurbanov in line with providing PA with substantially experienced personnel assigned young and promising specialists to fill top occupations. Control and executive disciple were toughened. This, in turn, slowed dawn fall of oil output on offshore fields that in 1995 stopped at all. On "Guneshli" daily oil output dropped from 20 to 15 thousands. This decline in oil output was continuing. Undertaken deep activities helped stopping fall of output and increase to 16 thousand tones a day. Surely this was resulted through large organization activities and selflessness.

Stabilization of oil output in Offshore OGPA became possible thanks to "Guneshli" field.

Despite the number of wells introduced in 1993-1998 after drilling were two times less against projected, operating staff of the company succeeded to stabilize output in this region. There was created non-compressor oil production that have been quickly operating till today. In the time frame 1996-1999 this method of oil production allowed recovering 179 161 tones of oil from "Guneshli". Introduction of new complex technology method of oil and gas transporting resulted in rise of output of wells on OFP.

221 wells were drilled on "Guneshli" since the beginning of exploitation on 13 April 1980 with well #4 till today. During this time output peaked 6 million 701 tones in 1991.

100 millionth tones of oil recovered from "Guneshli" coincided 14 January 2002. Personnel of OGPD "28 May" that is responsible for over 6556 oil and 48,5% of country's gas uses its all internal resources and labor and intelligence potential to stabilize oil and gas production. Favorable terms are created on "Guneshli" to apply know-how, and as a result, there are arranged contacts with specialists of research centers of the country, this helped introduction of new inventions and efficient proposals. It is enough to say that two laboratories of "Gipromorneft" carry its activity on OFP #11.

Second return to power of our dear president Heydar Aliyev, climate of political stability brought by him, allowed foreign oil companies paying closer attention to offshore oil and gas fields of Azerbaijan. This is also concerned with "Guneshli".

Soon, in conforms to "Azeri-Chirag" and "Guneshli" agreements, is expected realization of the program of further exploitation and development of deepwater part of the field. At the time being, OFP #14 is being expanded.

In the recent future OFP #11 is also expected to be expanded. Exploitation well, drilled on these platforms, are of great importance from a view of stabilizing oil output.

Managerial head of SOCAR and general director of Offshore OGPA Rahman Gurbanov regularly show interest to problems of "Guneshli", render actual assistance in solving important social problems of offshore oilmen. Undoubtedly, this attention favorably results in production. Development and exploitation of "Guneshli" field by hard working personnel of OGPD "28 May" is the substantial school of life and industrial experience, forge of training specialists.

As a result, on 20 September 2001 on "Day of oilmen" by the Decree of the President of Azerbaijan 6 specialists of OGPD "28 May" were awarded by orders "Honors" and medals "Progress". High government awards are recognition of serves of the personnel that gives work even more responsibility.

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