AZERBAIJAN - Geology Conclusions.

The main oil reserves in Azerbaijan are in the Middle Pliocene. The theory is that they migrated from underlying deposits. But recent studies concluded that, by organic content mainly, rocks of the lower PS did not lead to rocks of greater age.

A local study says: "Oil-rock correlation by the isotopic content of oil carbon shows that the PS is best of all correlated with organic matter of the PS itself (lower division) and Diatomaceous suite (Middle-Upper Miocene)... Oil-oil correlation by isotopic-geochemical composition shows that oils of the PS are different from reservoir oils of greater age, except for oils from Sarmatian deposits (U. Miocene). Their carbon-isotopic composition is comparable with that of oils occurring in the PS". The same study concludes that, according to "basin modeling results, vitrinite reflectance measurements" and other indicators, "the main phase of oil formation in a central, deeply buried part of the South Caspian depression is at the depths of the PS, chiefly at the lower division".

The study suggests that "geochemical coincidence of oils and organic matter in the lower PS division and Diatomaceous series "permits the supposition of complex paleogeographical conditions of their sedimentation, and the possibilities to relate the lower division of the PS to Miocene". The supposition has "quite independently found its expression in a new geochronological scale of Azerbaijan". This is based on biostratigraphical research done jointly by BP and the Geology Institute of Azerbaijan.

The Reserves: The proven recoverable oil reserves of Azerbaijan have long been the subject of debate between foreign quarters and the state oil firm Socar. Even within Socar, some experts do not agree with others on the actual size of recoverable reserves.

The official estimate of proven oil reserves in 2002 was 4.2 bn barrels, consisting of about 3 bn barrels onshore and 1.2 bn barrels offshore. But these exclude the offshore areas awarded to foreign companies under PSAs signed since 1994, which are targeting more than 25 bn barrels to be found, proven and developed. BP, the leading foreign operator in Azerbaijan, has put the country's proven reserves by end-2003 at 7 bn barrels, as at end-2001, up from 1.3 bn barrels at end-1992.

Opening an oil and gas conference in Baku in June 2000, President Aliyev said: "Our (Socar) experts...think Azerbaijan's total gas reserves could be some 4 TCM". Experts said he was referring to the offshore Absheron area operated by Chevron, which could not find the estimated 3 TCM (105 TCF) reserve there, and the offshore Shah Deniz area operated by BP.

Hopes that foreign firms would find big oil reserves on the Azeri side of the Caspian were boosted in late June 2002 as Agip, on completion of year-long appraisal drilling into the Kashagan reservoir in the Kazakh zone of the Northern Caspian, estimated the field's "producible" oil reserves at 7-9 bn barrels. Later the then Kazakh Energy Minister, Vladimir Shkolnik, told a London conference Kashagan's reserves could reach 20 bn barrels. In May 2000, LUKoil announced the discovery of 2.2 bn barrels of recoverable oil at the Severny block off the Russian state of Astrakhan, until then believed to be the least promising part of the Caspian.