The "RAMCO Energy" companies group (Great Britain) together with the "Totalfina - Elf" alliance (France-Belgium) resumed negotiations with SOCAR on development of the "Guneshli" oilfield shallow part. The negotiations aim at conclusion of a contract on further development of the field, the "RAMCO Energy" Baku Office reported.

Pursuant to specialists' preliminary accountings, the total hydrocarbon resources of the "Guneshli" oilfield are equivalent to 700 million barrels. At present, daily oil extraction at the field being developed by SOCAR makes up 120 thousand barrels. Foreign companies schedule to enhance the oil extraction after signing of the contract.

The "RAMCO Energy" doesn't intend to appear as an operator of a new project.

The preliminary drilling results on Shah Daniz have confirmed the discovery of vast gas and condensate reserves in this world class field. The reality of this is the promotion of Azerbaijan from a gas transit route into a major gas supplier. With the introduction of more effective technology and easy to implement transport systems, Azerbaijan's gas price will be most competitive on foreign markets. 

SOCAR have now developed plans to create an international consortium to export and produce Azeri gas and several foreign companies have demonstrated an interest in participation. It could include Conoco, Chevron, Exxon, Shell, BP Amoco and Statoil. In August 1999, HE Heydar Aliyev signed a decree to create a working group to discuss the implementation of gas transportation from Shah Daniz to world markets. The party is made up of senior representatives from the consortium's companies. 

Gas studies have also been carried out jointly with international companies and a Gas Strategy has been developed by SOCAR which focuses upon domestic supply, power generation, gas export and transit and electricity exports. Azerbaijan's strategic objective is to meet domestic gas requirements and to export in the longer term up to 15-20 billion cubic metres of gas annually. An energy strategy is therefore emerging, further developing and enhancing the opportunities within the energy sector as a whole throughout the Caspian region. 

HE Suleyman Demirel, President of Turkey during discussions with HE Heydar Aliyev acknowledged that the Turkish demand for gas will reach 40 billion cubic metres by 2010 and confirmed that this demand could be met by gas supplies from Shah Daniz. 

In addition, the results from Shah Daniz have also generated renewed discussion on the issue of the conversion of oil run power stations to gas based, with a view to fully utilising available gas in order to meet domestic demand. 

Finally Azerbaijan proposes to upgrade the existing Baku-Batumi gas pipeline and extend it to the Turkish border in 2000, initially to export some of SOCAR's associated gas, received free of charge from AIOC and other onshore gas. 

BP-Amoco, the operator of the Azerbaijan International Operating Company (AIOC), said it expected to approve plans for the next stage of development at the Azeri-Chirag-Guneshli concession within a year.  Approval for the Phase I program, which is being called by the name "First Azeri Investment", should be forthcoming late in the fourth quarter of 2000 or early in the first quarter of 2001, BP-Amoco said.  The plans provide for some $ 2.8 bn to be invested in various production-related activities (some $ 800 mm has been allocated just for drilling) and the construction of a pre-drilling platform, a new 48-well production platform and six other production platforms. Pre-drilling operations would begin in 2002, and the construction of the 48-well platform would begin in 2004. 

The AIOC hopes that the program will help boost oil output from the current level of about 100,000 bpd to 1 mm bpd. The consortium had originally planned to approve its Phase I plans more than a year ago. However, concerns about cost and ongoing disputes over the routing of a main export pipeline (MEP) have delayed decisions. 
 

Partners in the BP Amoco-led Shakh Deniz oil and gas consortium announced a plan to spend up to $ 1.3 bn on first-stage development and export of gas from their Azeri field. The seven-member consortium plans to begin exporting 5 bn cm of gas per year to Turkey in the winter of 2002-2003 from the offshore Caspian Sea field, later increasing exports to 16 bn cm.  "The first stage of development will cost between $ 1.0 and $ 1.3 bn and includes platforms at the field, the construction of an underwater pipeline to carry the gas to shore and a gas compression station onshore," BP Amoco's president in Azerbaijan Andy Hopwood told a news conference. The consortium's partners made it clear the project was separate from a $ 2 bn Trans-Caspian gas pipeline (TCP) from Turkmenistan through Azerbaijan to Turkey, which is due to be ready in the next two years but has been delayed by Azeri demands for a larger share in the line. 

Azeri President Haydar Aliyev rejected Turkmenistan's earlier offer of an annual quota of 3-5 bn cm through the TCP, which will have an eventual design capacity of 16-30 bn cm. Aliyev said no less than 50 % of the gas going through the Turkmen line would be Azeri and his top negotiators have been adamant that that view will not change. "It's time for Azerbaijan to produce and export gas and we will do that whether or not Turkmenistan also intends to export gas to Turkey," said Valekh Aleskerov, head of the foreign investment department at Azeri state oil company SOCAR.  Some industry sources, who fear the TCP talks could reach stand-off over the quota issue and also doubt the 2,000 km (1,250-mile) TCP could be built for the projected $ 2 bn, are crucial. "Our Shakh Deniz export project is much better as we have 100 % control over it and the costs are minimal as it is closer to the market," said one of the consortium's partners who added that the other partners were ready to finance the project.  The plan to export gas from Shakh Deniz, where reserves are estimated at up to 700 bn cm, includes renovating 490 km of existing pipeline in Azerbaijan and laying 280 km of new pipe in Georgia to the Turkish border at a cost of between $ 600-700 mm. The consortium has about a year to arrange a gas supply contract with Turkey before sanctioning the project, Hopwood said. Engineering work, procurement and construction would begin in the second half of this year, coinciding with the completion of the third test well. 

Members of the Shakh Deniz consortium include operator BP Amoco (25.5 %), Statoil (25.5 %), SOCAR, Elf Petroleum, LUKAgip and Iran's OIEC (10.0 % each) and Turkish Petroleum (9.0 %). 

The reserves of gas and gas condensate at the Shah-Deniz deposit exceed 700 bn cm, said Natik Aliyev, president of the State Oil Company of Azerbaijan (SOCAR). Specialists drew that conclusion after assessing the results of drilling of the second exploration well. BP Amoco Exploration (Shah-Deniz) plans to drill four more exploration wells. Investment in the project equals $ 3.5-4.5 bn. 

 Results from the closely watched well at Muradkhanly,  which is one of the Caspian state's most productive onshore oil fields, are due  sometime in May. As the first onshore contract to be developed, it is seen as an  indicator of the potential of such deals, which have a shorter payback time than  the more complicated and costly offshore fields.
 Ramco, the first foreign firm to  come to the former Soviet republic in 1989, holds a 50 percent stake in  Muradkhanly with the other 50 percent belonging to Azeri state oil company  SOCAR. Under the agreement, Ramco is expected to double output from the  20-year-old field to 1,600 barrels of crude oil per day (bpd) from 800 bpd, but  hopes to be producing up to 110,000 bpd within the next four years. 

Some 80  percent of the contract area at Muradkhanly is to be rehabilitated.
The remaining  20 percent is unexplored. The company, which also has a 2.0825 percent share  in the BP Amoco - led Azerbaijan International Operating Company (AIOC), has  also re-started negotiations for further development of the shallow water  Gyuneshli field. Gyuneshli, which currently produces some 60 percent of  Azerbaijan's annual output and has recoverable reserves of around 750 million  barrels, is seen as the crown jewel of the country's oil industry. 

Ramco expects  to announce its new partner in the shallow-water Gyuneshli project in early April. 

All the work will be done in the lab of Azlab, the joint venture of SOCAR and Schlumberger. Given the testing, SDX-2 operations will be continued until January 2000. It is hoped in BPAmoco that the second well will confirm the declared find of 700 bn m3 of natural gas and 300 mn tons of condensate.

The prospect is situated in the South Caspian Sea, offshore Azerbaijan, approximately 70 kilometres south-east of Baku. It lies beneath water depths ranging from 50 metres in the north-west to 600 metres in the south-east. The contract area covers an area of approximately 860 square kilometres.

RESERVES
The Shah Deniz structure lies 35km southeast of the Bahar field and 70km southwest of the supergiant Gunashli-Chirag-Azeri oilfield complex. With a vertical relief of over 1.5km (1 mile), the mapped structure encloses an area in excess of 300 square km. The main reservoir rocks within the structure are expected to be at a total depth of 5 to 6.5 km and have been folded into a relatively simple dip-closed anticline structure.

Reserve estimates range from 1.5 to 3 billion barrels of oil (250 to 500 million tonnes) and 50 to 100 billion cubic metres of gas. Developent of these reserves in 600 metres water depths require technology developed for the Northern North Sea and Gulf of Mexico.

SEISMIC
In the summer of 1997, over 22,000km of modern 3D seismic data were acquired over the Shah Deniz PSA contract area by the Azerbaijan seismic company, Caspian Geophysical. After the data had been acquired by their ship, the MN Baki, Caspian Geophysical processed the data in their processing centre in Baku. 

AREA PICTURES

SUBSURFACE GEOLOGY
Immediately prior to the 3D data acquisition, additional data were acquired on the water depth and near-surface conditions over Shah Deniz. This detailed bathymetry provided information on faults associated with mud diapir collapse, shallow gas, debris floes 1000m below the seabed and modern day features such as mud volcanoes and seabed channels. In total, twelve separate mud volcanoes have been identified. The largest of these, North of the reservoir, produces a major debris flow over 5km wide.

EXPLORATION
The three year exploration programme for Shah Deniz is on schedule and all the significant milestones have been achieved.

Two exploration wells will be drilled to fulfil the drilling obligation of the PSA.
Starting the drilling programme , the well SDX-1 was spudded in July 1998 using the semisubmersible Dada Gorgud. Well SDX-1 is located 70 km south of Baku at location -E on the northeast flank of the structure in 135m water. Plans envisage drilling the top hole down to a depth of approximately 2500m before setting 13 3/8 in casing.

The newly re-built rig Shelf 5 will therefore continue the drilling to a depth of 6100m. Shelf 5 will then drill the second well by the third quarter of 1999 to a minimum depth of 5800m depending on the results of SDX-1.