From an offshore perspective, the Caspian is also without question the most exciting region of the former Soviet Union, since exploration, development, and production are ongoing, international participation is acknowledged and desired, and development should be relatively simple, compared to Russian waters. Over the past year, many of the region's problems have either been solved or reduced appreciably. Politically, the regimes of the area have settled into their roles and have begun making reasoned decisions based on the best interest of their countries. Russia has withdrawn from Chechnya, and a tentative truce is prevailing between Azerbaijan and Armenia. Even the Kurds appear to have put their rebellion against Turkey on hold. And it seems an export pipeline has been settled upon - a temporary line preceding the Tengiz to Novorossiysk line.
Russia, however, is contesting the independent action of the Caspian littoral nations, maintaining that the Caspian is, in effect, a Russian lake, and that Russia must agree to and probably participate in all petroleum development projects. During Tzarist and Soviet days, considerable offshore development occurred in the waters along the Aspheron Sill between Baku, Azerbaijan and Aladzha, Turkmenistan for more than a hundred years, but that development has been very basic, inefficient, and unproductive until recently, when international operators, services, equipment, and technology began arriving.
AZERBAIJAN- The long-negotiated international contracts and grants of development and production contracts and PS concessions have settled out. The 4 billion bbl Azeri-Chiraq Fields and a portion of the Gunesh* Field, after years of seemingly interminable hassling, was given over to the consortium Azerbaijan International Operating Co. (AIOC) and is expected to go on production this year with 24 wells producing 120,000 b/d oil. First well on Chiraq was spudded by the Dada Gorgud, formerly the Kaspmorneft semisubmersible.
At full production, the $8 billion complex will be producing some 700,000 b/d. To begin exporting this bounty, AIOC, Socar, and Transneft, Russia's pipeline operator, have signed an early oil export agreement by which the AIOC will begin exporting Caspian oil this year. Some 80,000 b/d will transit the Russian pipeline to market. Upon full production, however, at least 700,000 b/d will require another, greater capacity system.
The 1.5 billion bbl Gunesh* Field, in need of extensive redevelopment to increase its production, was turned over to a group composed of Ramco, Pennzoil, and Lukoil. Ramco is also working on a redevelopment of Azerbaijan's oldest offshore field, the Neftianye Kamni, where production has dropped from 140,000 b/d in 1970 to just 16,000 b/d today.
Socar and BP (operator with 25.5%) are jointly developing the giant Shaikh Deniz Field with a consortium that includes Lukoil, Statoil, TPAO, Elf, and OIEC, the Iranian Engineering & Construction Co.
Azerbaijan's Socar state oil company has signed an E&P PSC with Elf for the Lenkoran-Talysh Deniz permit. Elf is operator, with 65%, with Socar holding 25% and Total 10%. The 420 sq km permit area lies 300 km south of Bakunear the Iranian frontier in waters 20-100 meters deep. 3D seismic and two wells must be carried out within the next three years.
Another international consortium is developing the Dan Ulduzu and Ashrafi Fields It includes Amoco, Delta (Saudi Arabia), Itochu, Socar, and Unocal, as well as a likely Russian partner, either Lukoil or Tyumen.
Lukoil has also been granted a PSA with Pennzoil and Agip for development of the Karabakh Field. Other nearby structures are going to Amoco and Unocal, the Umid-Babakah structure to Occidental, and others to Exxon, Chevron, and Elf.
KAZAKHSTAN - Across the Caspian from Azerbaijan and occupying most of the eastern shores is Kazakhstan, with its giant Tenghiz Field barely onshore and an estimated 27 billion bbl oil and vast, untold gas reserves offshore. It is one of the few former Soviet states that seem to have gotten its petroleum sector organized sufficiently well to attract major interest, but is taking development of its offshore province more slowly to protect the fragile environment of the northern Caspian.
A 103,000 sq km seismic study by PetroAlliance, a Western Geophysical, DG Seis JV, has been completed and state oil company Kazakhstancaspishelf and partners Agip, British Gas, British Petroleum/Statoil, Mobil, and Shell are undertaking a methodical exploration program. Thereafter, production-sharing contracts are expected with first exports in 2003.
Early interpretation of the seismic reveals that there is another giant oilfield, 8-10 billion bbl, just offshore the Tenghiz area, and that the region is peppered with other highly prospective structures.
TURKMENISTAN- Although it desperately needs petroleum production, Turkmenistan can't seem to attract investors other than Iran. It has put on several roadshows to attract interest in its aquatory, and is offering concessions to international operators in both joint venture contracts and production sharing arrangements, but few have taken the opportunity of getting involved in the Turkmen exploration and production program. Seven fields in various states of operability lie in its Blocks I and II, held by Larmag Energy of the Netherlands. The other three blocks have seen little or no development.
Additionally, Turkmenistan is offering the remainder of its aquatory north of the Apsheron Sill. Seismic acquisition is preceding a bidding round, with bidders limited to participants in the seismic acquisition group. Due to the proximity of the Karaliogaz massif on the eastern shore, the area is promoted as highly prospective.
The two major bodies of water that contain almost all the Middle East's offshore petroleum production are the Caspian Sea and the Persian (Arabian) Gulf. The former is just now beginning to reveal the extent of its vast reserves, but the latter has already established itself as second only to the North Sea in offshore production. Offshore production in Saudi waters reached 2.1 million b/d in 1995, in the Emirates' aquatory 1.33 million b/d, Iran, Qatar, and the Kuwaiti-Saudi Neutral Zone each 200,000-400,000 b/d.
SAUDI ARABIA - Saudi Arabia's primary reserves are onshore, but to reach its goal of achieving a production capacity of 10 million b/d, it had to place renewed emphasis on its offshore fields in the Gulf, particularly those of the Safaniya area, including Marjan and Zuluf. The goal has been achieved, but the process was difficult not only for the Kingdom but for the world market, having caused economic dislocation in the country and a period of depressed oil prices in the world's markets. Both appear to be recovering, however.
The largest offshore oilfield in the world, Safaniya has multiple producing zones and currently has an output of approximately 1.5 million b/d. Saudi Aramco's upgrading program for the field has included 160 unmanned well platforms and five large six-well platforms. The company is continuing to expand its exploration and development efforts by using 3D seismic acquisition both to explore and delineate prospects.
UNITED ARAB EMIRATES - The Emirates are a disparate amalgam of dissimilar shaikhdoms with huge on and offshore petroleum reserves. Each oil-rich Emirate goes about its exploration and development without a care to what the other Emirates are doing, thus considerable duplication of effort occurs.
Abu Dhabi, now in an ongoing expanded exploration and development program aimed at outstripping Kuwait, its primary competitor, intends to jack up its output by a million b/d. A 100-well program is underway on Upper Zakum Field alone, and at the showplace Das Island LNG complex, a $1 billion expansion program is at full throttle with the intention of doubling production to 5 million tons a year.
Zakum Field is seeing a rapid increase in its production, following $6 billion in development costs for the giant. Its production is now well over 500,000 b/d, but plans were for production to have reached 600,000 b/d by the first of this year.
Dubai is also in the midst of improving its production with its own expanded drilling program on the giant Fateh and SW Fateh Fields, which have been producing at a rate of 400,000 b/d. Some 24 wells were planned for this year. Sharjah, otherwise, is developing its giant Umm Al Aqiwain gas field and the Abu Musa oil and gas fields.
IRAN - Iran is ambivalent these days; it wants to be accepted in the world community, and it wants to foster islamic fundamentalism wherever it may take root. Furthermore, the country wants to participate in the exploration and development of petroleum prospects in the Caspian and has offered to assist its neighbors via services and supply for the development of their fields and transit of Iranian territory as an export route for their hydrocarbons. Overtures have been made, as well, for participation in the various consortia formed to develop several of Azerbaijan's giant structures, but Iran was accepted only in the huge Shakh Deniz project. Until now, Iran hasn't had the expertise to tackle its own Caspian waters, because much of the aquatory is at considerable depth, but a program has now begun, with seismic already shot and a new jackup in place able to drill to a TD of 20,000 ft.
More important to its production ambitions, however, is Iran's now completed rebuilding of the majority of its oil and gas installations in the Persian Gulf that were destroyed during the war with Iraq. It is now extending its exploration and development to include virtually its entire Gulf aquatory, and a major drilling program is underway there that has attracted some foreign participation, namely Japex and Total. The intention is to build and maintain production capacity at 5 million b/d (from 3.5 million b/d).
Considerable priority is being given to development of previously discovered offshore oil and gas fields, especially five fields in the Strait of Hormuz with recoverable reserves of 300-500 million bbl and a production level of approximately 80,000 b/d. These, in addition to the 20 tcf G Field and further development of the massive South Pars gas field, will soon be offered to foreign companies.
Most significant of Iran's Gulf activities is the extensive development of its South Pars Field, an extension of Qatar's gas supergiant North Field, which is being carried out by Saipem and the French company Technip. The development includes three appraisal wells, platforms, subsea pipelines, and a gas treatment plant at a cost of US$1 billion. Iran's share of the recoverable reserves are put at approximately 800 billion cu meters of gas. A joint development proposal has been made to Qatar which would including a pipeline, but nothing has been decided to date.
Elsewhere in the Irani aquatory, the giant Kharg Island offshore refinery, destroyed by Iraqi bombing, has been completely rebuilt by ETPM and is now producing at capacity - 170,000 b/d. It receives crude from most of the offshore wells on Fereidun, Esfandiar, and Cyrus Fields, and is currently being tied-in to others.
Iran has numerous other fields and redevelopment projects that are scheduled for work either by NIOC or contractors from both the Middle East and elsewhere. Holding the most promise is the development of the giant Sirri A and E Fields by Total (again over US protest), a $600 million project. Three appraisal wells have already been drilled in the first stage of the contract.
QATAR- The only surprise encountered lately in Qatar's almost exclusive activity to develop its enormous North Field, the gas jewel of the Arabian/Persian Gulf that's almost as large as Qatar itself, was the discovery of oil by Gulfstream Resources Canada in a non-producing gas concession. The well tested 9,655 b/d oil and shows estimated reserves of some 1.3 billion bbl. Arco is the operator on the concession.
The massive North Field, with more than 343 tcf gas, is currently producing more than 50,000 b/d natural gas liquids and 700 million cf/d gas. Japan's electric utilities receive almost all the LNG it produces. Approximately 800 million cf/d are processed at the associated production and gas treatment plant.
The Emirate's other showplace is Elf Aquitaine's Alkhalij Field, about 100 km off the Qatari coast on Block 6. It is proving to be a major oil field in its own right, and is in full development now, with delineation wells continuing to be drilled and infrastructure being put in place.
The Saudi-Kuwaiti Neutral Zone lies at the northern end of the Gulf. Considerable development is occurring there, primarily of the Khafji and Hout Fields, which produce most of the Zone's 300,000 b/d.
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