On 26 October 2017, the newly-appointed Azerbaijani Energy Minister, Parviz Shahbazov, met in Baku with the Vice President of Europe and Caspian region at Total SA, Bernard Clement. Talks focused on the prospective launch of the second phase of the development of Absheron gas and condensate field in the Caspian Sea, expected to unfold between 2020 and 2023. The French energy giant’s potential participation in the development of the geologically challenging, albeit promising, offshore Umid-Babek block was also discussed. Both projects will serve to create the so-called ‘’next wave’’ of Azeri gas, intended to satisfy both domestic demand as well as strategic export goals, following the upcoming completion of the BP-operated Shah Deniz Stage 2 project.
Mr. Shahbazov estimated that the use of a ‘’modern drilling rig’’, in combination with the application of ‘’Total’s experience in exploration and drilling’’, will help initiate production ‘’on schedule’’ (i.e. by late 2020). In his turn, Mr. Clement said that Absheron’s annual gas volumes are set to triple up to 5BCM during the second stage of the field’s development. Gas output at Absheron’s first phase, the final investment decision (FID) on which is awaited in December 2017, will not surpass 1.5BCM/a. SOCAR geologists calculate Absheron reserves at 350BCM of gas and 45MMT of condensate. Total and SOCAR hold a 50% interest each in the Joint Operating Company Absheron Petroleum, since the French Engie decided to sell its 20% stake, earlier this year. In November 2016, the two companies inked a framework agreement establishing contractual and commercial terms for the first phase of production for the field, while drilling process is planned to begin in January 2018.
According to the announcement issued by Azerbaijan’s Energy Ministry, Total might also be invited to participate in the development of an offshore block consisting of Umid gas field and Babek structure. Discovered back in 2010 by SOCAR, Umid field, situated 40km offshore and 75km from Baku, has been referred to as the second largest natural gas field in the country after Shah Deniz. Since inauguration in 2012, daily output from Umid was kept at 1.4BCM/a, an amount close to its plateau output level of 1.5BCM/a, and 220TMT/a of condensate, but was gradually reduced as perspective foreign investors, like Statoil and Total, with whom SOCAR was conducting discussions at the time, were discouraged from signing production sharing agreements because of the dramatic decline in oil prices of 2014. SOCAR has now resumed production from this Caspian Sea field close to the 2012 levels.
The Babek prospective structure is located to the east of Umid and is believed to contain up to twice as much natural gas and condensate. It is considered a geologically complex continuation of Umid field. In April, the first Vice President of SOCAR, Khoshbakht Yusifzadeh, revealed the company’s intention to significantly increase gas output in the years to come through the development of several new gas fields, including Absheron, Umid, Babek and Bulla Deniz.
In 2007, SOCAR had disclosed plans to independently explore the Umid-Babek block. Nevertheless, complicated geological conditions made Azerbaijan’s state-owned oil and gas firm turn to international partners in search of technical expertise and financial assistance. Having reported on Friday the highest profits from pumping oil and gas in more than two years of oil rout, as a result of lately increased crude prices and deep cost cuts, Total finds itself in a favorable position to drive the new Azeri gas boom.
Available online at: http://www.caspianpolicy.org/energy/caspian-energy-insight-november-1-2017/#4
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