AZERBAIJAN - Azerbaijan International Operating Co

AIOC is now producing around 50,000 b/d. It has spent about $1 bn for development of the Chirag-1 platform with a capacity of 115,000 b/d and related facilities. The initial wells on this platform began to flow crude oil on Nov. 7, 1997. An official inauguration ceremony on Nov. 12 was attended by foreign dignitaries including Russian 1st Deputy Premier Boris Nemtsov and US Energy Secretary Federico Pena. The fourth production well went into operation on May 25. By then, Chirag had produced some 305,000 tons of crude oil. Production from Chirag, Azeri and Guneshli fields - all offshore - should rise to 700,000 b/d by 2005.

AIOC signed what was termed "the contract of the century" with the Baku government in September 1994 to develop 650 million tons of recoverable oil in the three fields under an $8 bn programme. At first work concentrated on subsea inspection of an existing jacket on Chirag and a feasibility study on early production from the field. This was followed by an upgrade of an existing rig. A 3D seismic work and site survey were done together with an environmental study and preparations for a logistics and supply base. By Oct. 1995, the old Chirag-1 platform was dismantled into nine modular units and transported to the Shelfprojektroi yards (SPS - run by McShelf, a McDermott- Socar JV) for refurbishment 20 days ahead of schedule. The upgraded platform was put in place by the autumn of 1996. Drilling of three appraisal wells began in Sept. 1996. In Oct. Saipem was contracted to build a 182 km crude oil pipeline from Chirag-1 to the onshore Sangachal terminal near Baku and a 47 km gas line to link the three fields. Work was completed in 1997. Start up of production was delayed, however, mainly because of problems with the section of the northern export pipeline passing through Chechnya. Production will exceed 100,000 b/d before end-March 1999 with the expected coming on stream of the export pipeline to the Georgian terminal of Supsa.

In Aug. 1997, AIOC awarded Brown & Root (B&R) a letter of intent for a $180m EPC for Phase 1 of developing the three fields to a capacity of 300,000 b/d. Phase 1 is based on a single processing platform with two drilling and wellhead platforms for up to 80 wells. The EPC of B&R, which had done work on various infrastructure and housing facilities for AIOC, was also to cover infield pipelines, the main oil and gas pipelines, the oil and gas links to the Sangachal terminal, expansion of this terminal and the upgrading of the export pipelines to Novorossiysk (Russia) and Supsa.

Shares in AIOC are held as follows: BP (17.13%), Amoco (17.01%), LUKoil (10.10%), Socar (10.00%), Pennzoil (9.82%), Unocal (9.52%), Statoil of Norway (8.56%), TPAO (6.75%), Exxon (5%), Itochu (2.45%), Ramco Energy of Britain (2.08%) and Delta/Nimir (1.68%).

Socar President Natig Aliyev told Baku's parliament on July 7, 1998 that by 2005 AIOC's annual profits from the three fields would grow from $100m in 1999

to $2 bn in 2001 and $5 bn 2002-2005. He said AIOC's PSA has resulted in $1 bn of investment in the local economy. AIOC sub-contracted work to some 90 local firms.