Business

SHIRVAN OIL - WHITEHALL - SCHLUMBERGER ALLIANCE IN OPERATION

By Mammad Mirzoyev Head of the Press-Center of SOCAR

Since starting work in Azerbaijan on September 01, 1997, Azeri-British joint venture, "Shirvan Oil", which was established on the basis of the Kurovdag oil field, has reached considerable successes in the area of oil production. To bring oil extraction into conformity with international standards, the JV has pursued a series of activities on rehabilitation of the depleted layers. The founders of the JV, British Whitehall International Traders (Whitehall), Schlumberger Oilfield Services (Schlumberger) oil and gas concern, and the joint venture set up an alliance to manage the development of Kurovdag. The alliance is based on "The Main Project Contract" (MPC), which stipulates full adherence to the legal and commercial grounds of the Constitutive Contract dated December 25, 1995 between the State Oil Company of the Azerbaijan Republic (SOCAR) and Whitehall. Under the contract, the joint venture acts as operator, while Whitehall undertakes full-scale funding of the MPC. The project is estimated at about 600 million USD. So, the agreement on the alliance with Schlumberger, the contractor of the project, elevates it to a new quality level, utilizing advanced know-how and the latest achievements.

General director of the JV Tofiq Hasanov had the following to say about the activities of the alliance:

Radical changes in the infrastructure of Shirvan Oil have been made with financial support of Whitehall. The whole operational infrastructure of crude production in the oilfield was repaired and renovated, an oil tanking platform with multisided infrastructure, 9 deep wells, fields for prospecting and restoration of all technological parameters of well pumps, an area for pressing pumps and compressor pipes, the automated system of gauging devices in field #3 were commissioned.

The average daily oil production was increased to 660 tons a day and over 100,000 tons of oil was extracted in excess. The cost of a ton of oil has been decreased from 116 in 1997 to 54,6 USD.

To push oil extraction into conformity with international standards, the joint venture has continued close cooperation with Schlumberger with full financial support from Whitehall over the past years.

Owning to this cooperation, up-to-date pre-prospecting and development management systems have been devised and a Schlumberger licensing system- "Oil-field Manager" - the latest achievement of the world science and practice, has been obtained. On the basis of the license, a computer information analytic center was set up in under the joint venture. Also developed are state-of-the-art systems and methods of well diagnosis based using US equipment. A working program and documents concerning the implementation of three-dimensional seismic prospecting offshore in the contract area have been for the first time prepared this year in close cooperation with Schlumberger.

The joint venture is bracing its self for drilling new wells in 2002, increasing existing well stock and restoring part of liquidated wells.

Shirvan Oil and Whitehall always participate in undertakings aimed at improving social sphere, such as charitable actions, and render material assistance to refugees, disabled persons, invalids of the Garabagh war, the families of Garabagh was victims and to those suffering from the landslide in Bayil district of Baku.

First deputy general director, Doctor of Technical Sciences, Proessor A.Mammedtagizade said:

The improvements in the joint venture have led to the necessity of creating a rehabilitation and development project for highly profitable Kurovdagh that has conditioned the establishment of the alliance. Schlumberger is part of Schlumberger Limited NVSE: SLB - the worldwide leader for providing services and know how in international oil industry and on project management and other areas related to increasing oil production. The Main Project Contract (MPC), signed on October 24, 2001 for a period of 10 years, aims to optimize the development and increase of oil production in all oil bearing deposits of the Kurovdagh field.

The Program of works on the MPC envisages a considerable volume of work on rehabilitation of the infrastructure of the fields, its development and creating the resource base.

The draft agreement determines main and subservient principles of oil production. The additional estimated capacities of oil production are 95,000 tons in 2002, 344,000 tons in 2003, 689,000 tons in 2004, and 1,087,000 tons in 2005. The draft stipulates that the total capacity of oil production within the period of four years in the field's productive horizons will be increased three million tons.

The question is not only the service contract, under which the contractor, Schlumberger, could carry out the work and joint complex management of Kurovdagh.

While creating the alliance of Shirvan Oil- Whitehall - Schlumberger, the main purpose was participation of specialists of the contractor in optimum decision-making process together with specialists of the joint venture. All parties to the alliance aim to obtain a final result, maximum efficiency and profitability on the field. The joint venture intends to pass to the other form of agreement - production sharing, as part of the program.

We plan to extract more than 10 million tons of oil in the framework of the contract, or as much as Kurovdagh used to yield in 1973. I believe that at the beginning of 2005 the JV will manage to provide the Baku-Tbilisi-Jeyhan MEP with one million tons of crude.

The implementation of the MPC will prefer national staff, except for some 5-8 foreign specialists having rich experience in similar projects. It will resolve the employment problem of the population and forward the economy, Professor A.Mamedtagizade said.

PIONEERING INTENSIVE OIL OUTPUT

Valeriy Kushnirov, Professor, Doctor of Geological and Mineralogical Sciences, Technical director of Shirvan Oil and special representative of Whitehall International Traders said:

The development of the Kurovdagh field was initiated in 1956 and nowadays includes 13 productive horizons from 600 meters to 35000 meters deep. All other prospects lie in the depths varying from 3200 to 5100 meters.

Over the past 45 years of development, 1150 deep wells of various assignments have been bored on Kurovdagh. The outcomes of the drilling prove the extremely complicated geological composition of the field. It contains up to 30 separate tectonic blocks, each being an independent drilling site. Notwithstanding the great number of the wells drilled, the construction of the field still remains unclear, as some 6% of the wells are situated below 3500 meters. Moreover, the exploration wells are unevenly distributed on the field.

The establishment of Shirvan Oil joint venture in 1995 coincided with the period of the lowest ever production level on the field. In 1997, when the Constituent Agreement came into force, it was possible to halt and stabilize the downturn in production.

It was clear then that the rehabilitation and development of the field, as well as the drafting of highly profitable projects were preconditioned with the involvement of large service companies with extensive experience and up-to-date equipment and technologies. It is noted that most of the latest achievements in oil sector and sophisticated computer systems and software give oil companies an advantage of increasing the production of hydrocarbons. Schlumberger, a company that actively develops its innovative methods, has already estimated the prospects of this work. This and the extensive working experience of the company in Azerbaijan combined to ordain the choice of Shirvan Oil that successfully overlapped with the interest by Schlumberger in the Kurovdagh field.

This mutual interest conditioned the setting up of the unrivalled alliance of Shirvan Oil and Schlumberger. The principal feature of the alliance is the implementation of the project in the format of the joint venture, and is that one of its co-founders, Whitehall, shall observe all the legal and commercial grounds of the Constituent Agreement dated 1995. On its part, Shirvan Oil as an operator of the project shall manage it.

A group of field management is being set up as part of the joint venture to coordinate decisions concerning the project. It is the combination of state-of-the-art technology and up-to-date technical equipment with extensive experience of workers and engineers that crate favorable conditions for prompt rehabilitation of the field and increase in its oil yielding.

In addition, the reserves of the field will be increased. It is also planned to carry out seismic prospecting to work out new technological models of the field and to evaluate hydrocarbon reserves in the developed horizons, as well as the deposits dating to Miocene age and lying 5000 deep.

In conclusion, we would like to say that this project, like any other project in the area of human activity, is noted not just for its higher productivity, but also for the purpose, that is being kind towards the land it is implemented on, people living and working on this land and the entrails of the earth it aims to extract fuel from. All these objectives will be adhered to in the activities of the alliance.

AZERI COGNAC, WINE WIN MEDALS

The fifth international contest of drinks was held at the Russian Scientific and Research Institute of Beverages in Moscow from November 19 till 27, as 97 countries were taking part. Representing Azerbaijan were four enterprises producing alcoholic beverages and Moscow-based Azer-Moscow plant. The contest was aimed at determining the best champagne, cognac and wine. Ivanovka wine by Ganja Sharab-2 plant won a gold medal, Azer-Moscow cognacs were awarded three gold and three silver medals and wines by Shamkir Sharab two bronze medals. Yeni Asr wine making plant in Shamkir won a bronze medal and a diploma, while wines by Alov joint stock company in Baku were awarded a bronze medal, a source from the Ministry of Agriculture said Thursday.

WB TO FUND PRESERVE RESTORATION

A WB mission led by environmental expert Conrad Von Riter is currently in Baku and expected to negotiate with the Azerbaijan government over the draft program of agriculture and ecology of Shahdag preserve. The WB intends to allot $15 million for the implementation of the program, which envisions restoration of the national park - Shahdag preserve spanning Khachmaz, Guba, Gusar, Shamakhi and Ismayilli, natural gas supplies to the region and improvement of the ecological situation.

The Japanese government has allocated $498,500 in grants for the preparation of the program.

The mission is expected to complete on December 15.