POTENTIAL OF OIL AND GAS DEPOSITS IN THE CASPIAN SEA OFFSHORE AZERBAIJAN : OUTLOOK FOR THEIR TAPPING
The main outlook for oil and gas production in Azerbaijan is coupled with the South Caspian basin, within which the oil- and gas-bearing fields of the Absheron and Baku archipelagos as well as the deepwater portion of the Azerbaijan sector on South Caspian are situated (fig.1). The oil and gas bearing deposits of the Absheron and Baku archipelagos are characterized by the presence of large promising structures.
The oil and gas bearing range of the deepwater portion of South Caspian covers a vast territory. There are a considerable number of perspective structures stretching away in various directions. The horizons of the Middle Pliocene productive series are a main regional oil and gas pay zone of the South-Caspian-Kura-river province, including oil and gas bearing areas of Absheron and Baku archipelagos.
Due to peculiarities of the Paleocene relief of the sedimentation basin, the nature of changes in its boundaries, the drift sources of terrigenous materials and a number of other natural factors in the sedimentation process during Middle Pliocene, a section of sediments of the Pliocene age in various zones are very different with their thickness, litho-facial variability an nature of the oil and gas bearing property.
Within the northern part of the Azerbaijan sector of the Caspian Sea, the oil and gas bearing area of Middle Caspian's Azeri part with dome-like of oval form are most conspicuous. Here expectations of oil and gas bearing property are connected with sediments of the Mesozoic, mainly, Low and Middle Jurassic age. Depending on how well the regions were explored, oil and gas reserves and resources varied all over Azerbaijan.
Within Azeri sector of the Caspian Sea, Absheron archipelago and the northern part of Baku archipelago refer to the most studied areas, while the southern part of Baku archipelago, the deepwater portion of Azeri sector of South Caspian and Azeri part of Middle Caspian have been explored comparatively purely. Vast territories of oil ans gas bearing areas off the shores such as the deepwater portion of South Caspian's Azeri sector and Azeri part of Middle Caspian have not yet been explored by drilling in general. They can be referred to most purely explored areas. The areas were only studied by geophysical methods, largely, seismically. It should be noted that a basic technique that was used here was 2D seismic survey. In studying some areas, 3D seismic survey was carried out. The studies conducted allow with more or less credibility to characterize and assess all the kinds of hydrocarbon reserves and resources of Azerbaijan, including the Azerbaijan sector of the Caspian Sea.
To date, in Azerbaijan there have been discovered 70 oil and gas fields, including 27 ones off its Caspian coast. Out of the total number of fields, 53 are currently in production. The total amount of crude, including condensate, recovered from under the ground edged up to 1382.0 million tons, and about 456 billion cubic meters of gas were produced, including 450 million tons of oil with condensate and 326 billion cubic meters of gas from offshore fields. Of them 4.2 million tons of oil and 0.8 billion cubic meters were extracted from the Azeri - Chirag - Guneshli license area.
However, despite such an intensive oil and gas production from the bowels of the earth, Azerbaijan still has mammoth hydrocarbon reserves. Oil, condensate and gas reserves both explored and of economic value are basically concentrated in large and unique fields. Oil and condensate reserves are chiefly deployed within the Azerbaijan sector of the Caspian Sea. In the sector, 18 of the total number of fields are running, development of 4 has been completed, and five have not yet been tapped. The non-uniform distribution of the fields revealed and being developed in Azeri sector of the Caspian Sea caused some disparity in deploying the explored oil and condensate reserves. A maximum concentration of reserves is observed in the oil and gas bearing area of Absheron archipelago. Late in the 70s and 80s here large oil deposits such as Guneshli, Chirag and Azeri were discovered. The pay zone yields a basic portion of our domestic oil production. Evaluation of recoverable hydrocarbon reserves for prospects off Azerbaijan's coast in the Caspian Sea shows that they could be between 6 to 10 billion tons in oil equivalent. The reserves, as it was above said, are largely concentrated in the productive series of Middle Pliocene, which contains 81 percent of initial potential oil resources and some 90 percent of natural gas. The sediments of the Paleocene-Miocene and Mesozoic age contain 10 percent of initial potential resources of oil and 5 percent of those of gas. Despite the fact that the initial potential oil resources in the productive series were explored well, the productive series keeps on remaining a basic perspective source and contains some 70 percent and 85 percent of unexplored oil and gas resources, respectively. The deposits of the Miocene and Mesozoic age hold about 10 percent and 15 percent of unexplored oil resources, respectively.
As it was above noted, an important result of prospecting works late in the 70s and 80s in Azeri sector of the Caspian Sea was a discovery of a number of large hydrocarbon fields in water depths ranging from 60 to 350 meters and more, where recoverable oil reserves ran up to 800 million tons of oil and more than 20 billion cubic meters of gas. The tapping of the deepwater fields off Azerbaijan's shores, which were discovered late in the 70s and 80s was delayed because of the lack of appropriate technologies and usually very little equipment being available. Under the conditions, a decision was made on the necessity for attracting significant funds, advanced technologies in the Azerbaijan oil upstream industry by inviting foreign companies to cooperate with them in the evaluation and development of offshore fields. A bid tender was announced for the Azeri field and foreign companies were invited to begin talks.
However, despite the fact that these works were begun in 1991, the first contract was signed only after dear Azerbaijan President Heydar Aliyev has risen to power and taken the helm of the government of the nation. On September 20, 1994 the first contract was signed for developing the fields in the Caspian Sea offshore Azerbaijan (map 2).
The deal was the first move, which opened the way to Azerbaijan for foreign companies. The contract enabled them to invest in the republic's national economy with confidence.
In this respect, the signing of the contract had long-term strategic implications not only for tapping oil and gas reserves of Azerbaijan. It should be noted that the successful outcome of the contract is determined by not only the total amount of recoverable hydrocarbon reserves of the Azeri-Chirag-Guneshli license area (some 630 million tons) but further activity in attracting foreign investments in the republic. After the deal has been sealed, such companies as Chevron, Exxon, Mobil, Itochu and others intensified their activities in Azerbaijan.
It has been more than four years from the date of entering into the contract of the century. From the beginning of the contract coming into effect in 1995, in accordance with a work program and budget approved, AIOC in common with SOCAR, carry out the works to implement Early Oil Production Program. Under the program, geological engineering surveys were carried out throughout the contract area. The zone surrounding the deepwater stationary offshore platform #1 in the Chirag area as well as along the route of an underwater pipeline linking the platform to a terminal on the shore at Sangachaly were explored. 3D seismic surveys were conducted on the concession. The Dada Gorgud semi-submersible drilling rig was also upgraded and refurbished. Five appraisal wells were drilled from the rig.
The results from the wells drilled were encouraging. They confirmed the data earlier obtained from the fields. All this gave full confidence and created a good prerequisite for doing further activities.
From August 1997 to June 1999 12 wells have been spudded at the Chirag-1 platform. Among them were 11 production wells and one injection well. A daily oil production rate of the wells brought onstream averaged 1500 cubic meters of oil and about 200,000 cubic meters of gas. From the start of commissioning the wells, 4,200,000 tons of oil and 900 million cubic meters of gas have been produced.
Touching upon a question of oil export from the contract area, we must note that the first oil was produced on November 7, 1997. From the date the big oilfield offshore has started output, adding to Azerbaijans's capacity to export oil.
In accordance with Early Oil Project, to decide the task, the necessary works were done at the production Chirag-1 platform, at the terminal at Sangachaly as well as on the northern and western pipelines. Since 1998, early oil has flown to Novorossiysk through the northern pipeline. The transport of oil via the northern pipeline was begun on October 25, 1997 at a time when the first cargo of the SOCAR-produced oil from Azeri fields was bound for the port of Novorossiysk. The construction of the western pipeline was completed on December 10, 1998 and on April 17, 1999 a solemn opening of a terminal at Supsa was held. The pipeline capacity is 5 million tons per year. Oil is delivered to Georgia's Black Sea port of Supsa. 915,000 tons of oil have been transported through the pipeline, including 655,000 tons that were moved out of the port Supsa.
The choice of an oil export direction for a main export pipeline is under discussion. The Baku-Ceyhan line is seen as one of the main routes for MEP. Operating the Contract of the Century will not only boost the amount of oil produced in Azerbaijan but will exert a favorable sway on the entire economy of the republic. Positive results of signing the contract are of great significance to stimulating a further rise in investments in the Azerbaijan oil and gas upstream industry.
After signing the Contract of the Century there were consequently concluded the contracts to explore and develop the following blocks :
Garabag, Shakh-deniz, Dan Ulduzu - Asrafi, Lenkoran-deniz - Talysh-deniz, D-222, Absheron, Nakhichevan, Oguz, Kurdashi, Inam-D35, Araz - Alov - Sharg, Atashgyakh -Yanan Tava - Mugan-deniz, Lerik-deniz, Dalga, Janub, Savalan, Mashal-Zafar, and contracts for onshore fields : South-West Gobustan, Muradkhanly, Kursanga - Garagly and Padar, which opened Azerbaijan for many foreign investors.
Unlike the Contract of the Century, 33 companies from 15 countries have a concern in all 14 consequent offshore contracts concluded. They cover 32 promising structures in Azeri sector of the Caspian Sea. The areas are not oil and gas fields. They refer to promising structures. To discover a field, it is imperative to carry out prospecting operations on the structures, i.e., to drill deep exploratory wells. And it is connected with some risk and expenses.
All legal costs and expenses incurred in connection with exploring for oil and gas resources are for the account of foreign companies investing in the business, and in case of an unfavorable outcome, all losses sustained are the risk of the foreign companies.
The exploration works under contracts for Garabag and Ashrafi Dan Ulduzu have been completed. As a result, two gas and condensate fields - Garabag and Ashrafi - have been discovered.
A contract for exploration and development of the Shakh-deniz field, in which the Iranian oil company has a concern, was signed on June 4, 1996 and on Novenber 17, 1996 it was enacted into law by Milli Mejlis of the Azerbaijan Republic.
Members of the Shakh-deniz group with their interests in the project are :
BP (Great Britain) 25.5 percent Statoil (Norway) 25.5 SOCAR (Azerbaijan) 10.0 OIEC (Iran) 10.0 Elf Aquitaine (France) 10.0 LUKOIL (Russia) 10.0 TPAO (Turkey) 9.0
The promising Shakh-deniz structure is 55 kilometers south-east of Baku, off the coast. The acreage covers a square of about 859.8 km2 . The contract cost is put at US$4-5 billion. $150 million of the sum is contemplated to be spent for the exploration period. The contract has 30 years to run. The exploratory period runs for 3 years and is to be up in 1999. During the period two test wells are planned to be drilled. During the additional period one more appraisal well is expected to be spudded. Geological surveys and engineering works were carried out at the license area. 3D seismic exploration was conducted. The 3D seismic data were gathered, processed and interpreted. After that, the location for the prospective appraisal wells were specified in the area. Under the contract, the Istiglal semi-submercible drilling rig was upgraded and refurbished.
On June 7, 1998 the first well SDX-1 was begun to be drilled. The well has been drilled to a depth of 6,316 meters. According to well logging data, three perspective horizons were ripped open - the VIIIth and Xth horizons of the Balaknany Suite and Pereriv Suite. Pending its test, the well is considered not to be completed as yet. The test will be run using the Dada Gorgud submersible drilling rig. In the area the second well SDX-2 started to be drilled. Its target depth is 6,522 meters. At the well a depth of 1,917 meters was achieved, at June 1, 1999. The well has been drilling from the Istiglal semi-submersible rig.
Under two contracts for development of the Nakhichevan and Absheron areas, 3D seismic exploration was conducted, the seismic data were processed and interpreted. In the Nakhichevan area, the first exploratory well was positioned. And over the Absheron area selection of a well-site for drilling the first appraisal well comes to an end.
Under four contracts, on the blocks offshore - D-222, Oguz, Kurdashi and Inam, 3D seismic surveys were conducted and data processing and interpretation are in progress. By the terms and conditions of the deal, contracts for tapping the perspective Araz - Alov - Sharg structures and the Atash - Yanan Tava - Mugan-deniz acreages were ratified by Milli Mejlis of the Azerbaijan Republic comparatively recently. The groundwork is being done for issuing a 3D seismic survey tender. Under the latest contracts signed for the Zafar-Mashal and Lerik-deniz - Janub-Dalga-Savalan areas, the contracts are preparing for their to be enacted into law by Milli Mejlis of the Azerbaijan Republic. In addition, a whole number of the world's another oil companies are gaining a thorough insight into the opportunities of the Azerbaijan sector of the Caspian Sea.
No doubt, the SOCAR-signed contracts, as it has been mentioned, will step up much oil and gas production in Azerbaijan. If in 1997 9.0 million tons of oil and 6.0 billion cubic meters of gas were domestically produced, yet 1998 became the turning year : 11.3 million tons of oil and 6.0 billion cubic meters of gas were recovered and as from the year oil and gas production levels in the republic will steadily rise up and reportedly surge up to 16.0 million tons of oil and 7.0 billion cubic meters by 2000, in 2005 - 28.0 mil mt of oil and 10.0 bil cu m of gas, in 2010 49 mil mt of oil and 18.0 bil cu m of gas.
Thus, familiarizing yourselves with Azerbaijan's opportunities is indicative of the republic's raw material ground for its oil and gas upstream industry is enough to bring annual hydrocarbon output to 70 million tons in oil equivalent in the next few years. In turn, it will serve as a foundation for resolving economic and social problems of Azerbaijan.
KHOSHABKHT BAGHI OGLY YUSIFZADEH,
Vice President for SOCAR,
Academician, Doctor of Science.