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Azerbaijan Production - An Update For The Natural Gas Reserves.

Socar's First Vice-President Khoshbakht Yusifzadeh on June 12, 2102, told a Caspian petroleum conference in Baku that Azerbaijan had proven natural gas reserves of roughly 2.55 TCM. He put Azerbaijan's proven oil reserves at 2bn tons.

Industry and Energy Minister Natig Aliyev has repeatedly said Baku intends to raise natural gas production to 40 BCM/year. Arerbeigan's January-May 2014 gas output rose to 12.951 BCM from 11.996 BCM in the same 2013 period, according to Socar in June, due to increased production of associated gas at AIOC's ACG oil complex and the state firm's own production in other oilfields. Socar's Jan-May gas output was 3.26 BCM, up 7.7% from the first five months of 2013's 3.028 BCM.

Azerbaijan International Operating Consortium: AIOC, in which BP is operator and JV leader offshore, is planning to produce 756,000 b/d of crude oil in 2014 and to stabilise its plateau at 750,000 b/d at least until its 1994 EPSA expires in September 2024, down from a peak of 850,000 b/d in 2009 - though executives are not certain the 2014 target can be reached. This compares to 390,000 b/d in mid-2006 and 50,000 b/d in mid-1998. AIOC has the Azeri-Chirag-Deep-water Guneshli (ACG) complex of offshore oilfields, being developed further.

The nine AIOC partners are as follows: BP (35.8%), Socar (11.6%), Chevron (11.3%), Inpex (11%), Statoil (8.6%), ExxonMobil (8%), TPAO (6.8%), Itochu (4.3%), and ONGC Videsh (2.7%).

The Baku-Tbilisi-Ceyhan (BTC) crude oil pipeline on stream since 2007 takes most of AIOC's output for export from its Mediterranean terminal. PTC has a 1m b/d capacity.

The shallow section of Guneshli, 120 km east of Baku and 12 km south-east of Oily Rocks, is part of a structure first explored in 1958-63 by the Soviets. The first offshore platform was installed there by 1976, consisting of four steel jackets for drilling of 10 wells. By 1980, the platform produced 320 t/d of crude oil and was then believed to have over 100m tons of oil. The portion of Gunashli operated by Socar and excluded from the AIOC system (see omt2AzerProdJuly14-14), is in 120 metres of water.

AIOC's deep-water section (DWG) developed by BP is part of ACG's Phase-III. First oil from DWG was produced on April 20, 2008 from one of 10 pre-drilled wells. DWG now produces nearly 320,000 b/d from the field's eastern side and includes two bridge-linked platforms: a 48-slot drilling, utilities and quarters (DUQ) unit; and a process, gas compression, water injection and utilities (PCWU) unit. DWG oil is pumped through a pipeline tie-ins system into pre-installed junctions from Azeri field leading to the Sangachal terminal. The DWG has nine operating wells.

Azeri, the Chiraq structures and West Chirag together are planned to produce about 436,000 b/d in 2014. But BP executives are worried the total average for AIOC's output this year might be lower. Completion of the $6bn West Chirag platform, which started up in early February 2014 at 6,000 b/d and having the capacity of 183,000 b/d to be reached in 2015, with a 100,000 b/d average planned for this year, marked another phase in the consortium's development plan. West Chirag crude oil is being pumped through the platform's newly installed processing facilities for export through the Sangachal terminal.

BP's Regional President for Azerbaijan, Georgia and Turkey, Gordon Birrell, in early February 2014 said of West Chirag: "The start-up of the Chirag Oil Project (COP) marks a major milestone in the development of the super-giant ACG... West Chirag is the eighth world-class offshore platform that we have built and operated in a safe and efficient manner in the Caspian". By then, the ACG system had yielded over 2.3 billion barrels of crude oil. With future "major investments in new technologies and facilities, it will continue to produce as a world-class reservoir for many decades". He noted that the ACG production system ranked among the largest sets of oilfields in the world. At the end of the EPSA in 2024, BP estimates that only 5.4bn barrels of oil will have been recovered, still leaving a long life to the ACG fields. BP in early 2014 said: "As the ACG...development provides the Azeri Government with the most significant revenues, it intends to prepare the next phase carefully to prevent any slowdown in production. In that respect, the last years' experience is rich of learning... Fortunately the last platform of the ACG Full Field Development programme started operations at Western Chirag in early February 2014".

The UK major added: "From the modelisations tested by BP through digital oil fields techniques, it appears that solutions to prevent the early depletion of the ACG oil field[s] should be to add two offshore production platforms to increase the pumping operations and gas injection capacities. In order to maintain the ACG production at the level required by the production sharing agreement, the second platform should be in operation by 2021 at the very last limit".

In 2013, President Ilham Aliyev and the BP executives had a stormy meeting as the Azeri ruler complained about the decline in AIOC's production since 2010. BP assured President Aliyev that the UK major was doubling its efforts to restore production and establish a long-term output plateau of 750,000 b/d.

For years, AIOC has been in talks with Baku for an EPSA to develop deeper layers of the ACG complex which is rich in non-associated gas. But Baku is only offering a risk-service contract (RSC), while the BP-led consortium is insisting on an EPSA. A final Baku decision on this matter is not expected before 2015.

In 2005, Socar raised its estimate of the AIOC fields' recoverable reserves from 5.4bn barrels to 6.9bn barrels. But AIOC in August 2009 put recoverable ACG reserves at 5.4bn barrels. During the annual Caspian oil and gas conference in Baku on June 2-3, 2010, Socar Deputy VP for Investment & Marketing Vitali Beglyarbekov said continued development of the ACG complex had raised the group's recoverable oil reserves by 250m tons, with the consortium's proven reserves having risen to 1.2bn tons. He said the reserves had previously been estimated at 950m tons.

Beglyarbekov noted that the Chirag Oil Project (COP) had enabled the increase in recoverable reserves and the extension of peak ACG oil production from 2015 to 2020. The start of COP's construction was allowed on March 9, 2010, when Socar President Rovnag Abdullayev and BP-Azerbaijan President Rashid Javanshir signed an agreement on that. The COP involved construction of a new offshore oil and gas platform - West Chirag Production, Drilling and Quarters platform (WC-PDQ) - between the Chirag-1 and the Deep-Water Guneshli platforms. The COP will help produce 360m barrels (about 50m tons) from ACG.

COP's final output level will include 6.485 MCM/day of gas. The wells eventually will be pumped with about 2.3 MCM/day of gas and 189,000 b/d of water to maintain pressure.

BP began production from the deep-water Guneshli (DWG) field in April 2008, with output ramped up through 2008 as more wells were brought on stream. Total ACG production reached over 1m b/d at one time in late 2010. But since then, BP has been more cautious about its oil production and export targets.

Since the beginning of 2008, supply of associated gas from the CA, WA and EA platforms has continued via a 28-inch gas sub-sea pipeline into the Sangachal terminal and into Azerigas's national grid system for domestic use. Some of the associated gas produced from the Chirag platform flows to the Socar compression station at Oily Rocks via a 16" sub-sea pipeline. The rest of the associated gas from the ACG platforms flows via in-field sub-sea gas pipelines to the compression and water injection platform (C&WP) for re-injection into the fields in order to maintain pressure in the reservoirs.
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Comment:Azerbaijan Production - An Update For The Natural Gas Reserves.
Publication:APS Review Gas Market Trends
Geographic Code:9AZER
Date:Jul 14, 2014
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