Thursday, 13 January 2022 11:53

Gas upstream sector gets its second wind

 

COP26 resonates

across the Caspian

With the uncertainty of the energy security situation, persistent shortage of natural gas in all segments of the world market against the background of the expected drive out of oil, coal and “peaceful” atom from European energy balances, the deve­lopment of new large fields in the Caspian region is becoming increasingly topical.

There were more than 160 structures revealed in the Caspian Sea as early as in the 20th century, which may potentially contain up to 10 trillion cubic meters of natural gas hidden in hard-to-reach high-pressure formations, mainly in the deep waters of the Caspian Sea. Their development requires not only expensive and most-advanced environmentally friendly technologies, but also the well coordinated work of all the Caspian states in creating a favorable investment climate, which is more than possible after the signing of the Convention on the Caspian Sea status on August 12, 2018. The restoration of the territorial integrity of Azerbaijan, which is the central transport link of the so-called “Greater Caspian Region” stretching from India to the Black and Mediterranean Seas with the Caspian Sea in the center, has increased its role as a key platform for stability and security at the junction of Europe and Asia. All this attracts the attention of investors. The Caspian Sea has large proven reserves of natural gas, as well as a developed export infrastructure capable of increasing the maximum carrying capacity to 40-50 bcm per year from today’s 10 bcm.

Newly commissioned fields, as well as additional exploration and exploitation of previously identified promising areas, can support exports until 2050 when the EU will abandon fossil fuels.

Considering environmental requirements and the European Commission’s re­cognition of natural gas as an official transitional energy resource, most of the focus is on gas production projects with reserves concentrated nowadays in the Azeri sector of the Caspian Sea. Despite its unpopula­rity, oil production is ongoing in the Caspian Sea, new fields are discovered and exploration is underway. The COP26 echoes are already heard in the Caspian, but are not yet visible, much less tangible. The highest percentage of equity participation belongs to LUKOIL, which has 100 percent in four Caspian projects. SOCAR and its traditional partner British bp are the undoubted leaders in terms of investment parameters, and Burren Energy is the most active in the Turkmen sector. In total, there are 17 active projects at various stages of development in the Caspian Sea, one of which was temporarily suspended in 2001. Commercial production is running on 9 fields. The most active work on exploration and delineation of new fields is underway in the middle part of the Caspian Sea - in the south-western part of the water body. In the northern part of the Caspian Sea, the most produced commodity is oil. KazMu­naiGas and LUKOIL are the most active there.

The Azerbaijani National Company SOCAR, British bp and the American giant Exxonmobil are the leaders in terms of the volume of explored and under-development gas reserves. Then comes the Norwegian company Equinor followed by Turkish TPAO, Kazakhstani holding KazMunaiGas, American Chevron and French Total.  Exxonmobil, Kazmunaigas, Shell and Agip (Kashagan shareholders), CNPC and Total possess the biggest volumes of oil assets in the Caspian Sea. Assets information is given below in the table.

Ongoing projects in the Caspian

Tengiz field

Recoverable reserves – 750 mln – 1.125 bln tones of oil;

Projected volume of geological reserves – 3.133 bln tones of oil;

Associated petroleum gas reserves (APG)- 1.8 trn. m³.

In 1993, the Government of Kazakhstan established JV Tengizchevroil LLP jointly with Chevron to develop Tengiz oil field.

There are four partner companies involved in the project: JSC NC KazMunayGas (20%), Chevron Overseas (50%), ExxonMobil(25%) and LUKOIL (5%).

In 2020, TCO extracted 26.5 million tons of crude oil, which makes approximately 35% of the total volume of oil produced in Kazakhstan.

Kashagan field 

The license area of 5.6 thousand km2 within the framework of the NCPSA includes giant Kashagan field, as well as Aktoty and Kairan fields on the shelf of the Caspian Sea.

NCOC shareholders are KMG Kashagan B.V. (16.877%), Shell Kazakhstan Development B.V. (16.807%), Total EP Kazakhstan (16.807%), AgipCaspian Sea B.V. (16.807%), ExxonMobil Kazakhstan Inc. (16.807%), CNPC Kazakhstan B.V. (8.333%) and Inpex NorthCaspian Sea Ltd. (7.563%).

Kashagan is the largest oil and gas field in Kazakhstan and the country’s 1st offshore project.

Geological reserves of the field are estimated at 4.8 billion tons of oil, and the total oil reserves reach 38 billion barrels (6 billion tons), of which about 10 billion barrels are recoverable.

Kashagan’s natural gas reserves make 1 trillion m3.

The company plans to complete the dredging works in November 2022.

The project has caused sharp criticism of environmentalists, so NCOC has very carefully addressed the issue of choosing technologies and minimizing the consequences of performed operations. The work has to be carried out to continue safe oil production at Kashagan, since without normal approaches to the field, it will be impossible to carry out a PPM in 2022, and production at Kashagan can even be stopped in 2027.  By the end of 2021, the Ministry of Energy of Kazakhstan and NCOC planned to increase oil production to 10 million ton per year.

Azeri, Chirag and deepwater Gunashli fields

Bp – 30.37%, SOCAR – 25%, MOL – 9.57, Inpex – 9.31, Equinor – 7.27%, ExxonMobil – 6.79%, TPAO – 5.73%, Itochu – 3.65%, ONGC – 2.31%.

The sanction is the first major investment decision by the ACG partnership since the extension of the ACG production sharing agreement (PSA) to 2049 was agreed in 2017. More than $36 billion has been invested into the development of the ACG area since the original PSA was signed. The project is expected to achieve first production in 2023 and produce up to 300 million barrels over its lifetime.

Oil production at Azerbaijan’s largest Azeri-Chirag-Guneshli (ACG) oil fields managed by BP decreased in 2020 to 23.6 million tons from 26 million tons fixed in 2019, BP says.

“Oil production at the largest Azeri-Chirag-Guneshli fields last year made 23.6 million tons or 477,000 barrels per day”, says the BP statement. Reserves – 1.3 trillion cubic meters of gas.

Shah Deniz field 

The Shah Deniz Production Sharing Agreement (PSA) was signed in Baku bet­ween SOCAR and a consortium of foreign companies on 4 June 1996.

Bp – 28.8%, SOCAR – 10%, TPAO – 19%, Petronas – 15.5%, Lukoil – 10%, NICO – 10%, SCC – 6.7%.

Under the PSA BP is an operator with a 50% stake, and the rest 50% of shares belong to SOCAR.

According to BP, natural gas and condensate production on Shah Deniz field last year totaled 18.1 bcm and 3.6 mln tones respectively. The production capacity of existing Shah Deniz facilities currently amounts to more than 58 million standard cubic meters of gas per day or more than 21 billion cubic meters per year.

Absheron field 

Absheron is a gas-condensate field of Azerbaijan. It is located to the north-west of the other Azerbaijani field Azeri-Chirag-Gunashli. The area of the field is 260 km2.

Absheron project shareholders are Total  (operator, 50 %) and SOCAR (50 %). JOCAP (Joined Operating Company Absheron Petroleum) is an operator of the field. The contract area makes 747 km².

Annual gas production: 5 bcm.

An agreement for exploration, development and production sharing at offshore Absheron block was signed on February 27, 2009.

Initial gas reserves total 350-360 bcm, and condensate reserves - 45 mln tones of barrels. These reserves make it possible to produce about 5bcm per year.

On September 19, 2020, the ceremony of laying the foundation of offshore ope­rations at Absheron field was held at the Heydar Aliyev Baku Deep-Water Jackets Factory.

 

According to initial information, gas production is scheduled to begin in mid-2021. 

Shafag-Asiman Structure

bp and State Oil Company of the Republic of Azerbaijan (SOCAR) signed a new production sharing agreement (PSA) on joint exploration and development of the Sha­fag-Asiman structure in the Azerbaijan sector of the Caspian Sea on October 7, 2010.

Bp-50%. SOCAR – 50%. The first exploration well was spudded on 13 January 2020. The drilling was completed in March 2021 to the base of the Fasila reservoir to a depth of 7,189 metres. The well encountered gas condensate resource in the penetrated re­servoirs. However, the resource will need further evaluation and therefore it was decided to suspend the well to allow the evaluation of its results and the planning of the next steps for appraisal, potentially inclu­ding a sidetrack appraisal well.

Shallow Water Absheron

peninsula   

bp signed a new production sharing agreement (PSA) with SOCAR in December 2014 to jointly explore for and develop potential prospects in the shallow water area around the Absheron peninsula in the Azerbaijan sector of the Caspian sea.

Under the PSA BP is the operator with 50 per cent interest while SOCAR holds the remaining 50 per cent equity.

Plans are to spud the first exploration well in the third quarter of 2021.

D230

bp and SOCAR signed a new production sharing agreement (PSA) on 26 April 2018 for the joint exploration and development of Block D230 in the North Absheron basin in the Azerbaijan sector of the Caspian Sea.

Under the PSA, which is for 25 years, BP will be the operator during the exploration phase holding a 50% interest while SOCAR will hold the remaining 50% interest.

The 3D seismic acquisition programme on Block D230, which commenced in December 2019, was safely completed on 14 March 2020. The processing of the acquired data was completed. The interpretation of the seismic data is currently ongoing. If the results from the interpretation of the seismic survey are positive, bp may start planning for an exploration well.

Dostluq field

 The Milli Majlis (parliament) of Azerbaijan at a plenary session approved the Memorandum of Understanding on «Dostluq» field between Azerbaijan and Turkmenistan.

As reported, Azerbaijan and Turkmenistan signed an intergovernmental memorandum of intent on joint exploration and development of ‘Dostluq’ hydrocarbon field in the Caspian Sea on January 21, 2021.

The ‘Dostluq’ field was discovered in 1986 by Azerbaijani specialists. According to the Azerbaijani side, oil reserves of the field are estimated at around 50 million tones. 

Karabakh field

SOCAR and Equinor signed a Risk Service Contract for the development of Karabakh field on May 31, 2018 in Baku. To get the project implemented, SOCAR and Equinor created an operating company on parity basis (50% to 50%).

Karabakh field is located 120 km east of Baku. The sea depth in the field area is 180 meters.

The production of first crude hydrocarbons at Karabakh field in the Azerbaijani sector of the Caspian Sea will begin late in 2022, Azerbaijan President Ilham Aliyev said.

“If all goes according to the plan, I believe that in two years – at the end of 2022– production of first gas and oil volumes will begin (at Karabakh field - IF).

Karabakh field oil potential is estimated at 60 million tons. In the future, at least 1.5 million tons of oil and 1.5-1.8 billion cubic meters of gas per year will be produced from this field.

RUSSIA

Discovered by LUKOIL in 2005, the V. Filanovsky field is the largest oil field in the Russian sector of the Caspian Sea.

The Filanovsky field is the largest oil field in the Russian sector of the Caspian Sea with initial recoverable reserves of 129 million tons of oil and 30 billion cubic meters of gas. The field was commissioned in the fall of 2016. The launch of the third phase of the facilities construction on the Filavovsky field raised LUKOIL oil production in the Caspian by 5.2% and made it 6.4 mln tones at year-end 2019.

Discovered in 2000, the Yury Korchagin field has become the first field launched by LUKOIL in the Caspian. Production on the field started in 2010. Reserves in 3P categories amount to 500 million barrels of oil equivalent, which in physical terms amounts to 86 billion cubic meters of gas and 53 million tons of oil.

LUKOIL has discovered ten fields in the Caspian Sea with total recoverable hydrocarbon reserves of 7 billion barrels of oil equivalent. Oil and gas production for now is running at two fields - Korchagin and Filanovsky fields. The company’s 2020 oil production in the Caspian made over 7 mln tones.

Discovered in 2001, Grayfer offshore field (former Rakushechnoye) is the third pro­ject implemented by the Company in the Caspian. The field is located in the immediate vicinity of the V. Filanovsky field, which makes it possible to use the already built infrastructure. This will reduce the time and costs for the development of the field. The start of commercial production is expected in 2022. The expected production plateau is 1.2 mln tones per annum.

The third field in the Caspian Sea - Grayfer offshore fiield - with initial recoverable reserves of 39 million tons of oil and about 33 billion cubic meters of gas is planned to be launched in 2022. The planned production level will make 1.2 mln tones.

Kuvykin field with recoverable reserves of 6.3 million tons (C1+C2), 231 billion cubic meters of gas and 21 million tons of condensate is expected to be launched in 2029.

Turkmenistan

Cheleken (Livanov, Lam, Zhdanov)

Dragon Oil is developing the Cheleken contract area in the Turkmen sector of the Caspian Sea. The operations are performed under the terms of the production sharing agreement signed with the Government of Turkmenistan in 1999. The Cheleken Contract Area consists of two large fields, namely Dzheitune (Lam) and Dzhygalybeg (Zhdanov).

Dubai oil and gas company Dragon Oil Plc plans to invest more than $14 billion to increase oil and natural gas production three times, the company’s Managing Director Ali Al-Jarwan said in the interview to Bloomberg agency.

By the end of 2030 Dragon Oil will also invest $13 billion to increase oil production in Turkmenistan. Besides, it is planned to purchase assets in the Middle East and Africa.

By 2025, the company expects to produce 300 thousand barrels of oil equivalent per day (b/d) compared to almost 100 thousand b/d at the moment, A. Al-Jarwan noted.

Nebit Dag

(Burun, Nebit Dag, Kum Dag, Kara Tepe and Kyzl Kum)

Nebit Dag Contract Area (1050km) is located onshore in the western part of Turkmenistan and includes 5 developed oil-gas fields. As an operator of 100% working interest, Burren has the rights to develop Burun field in the west of the contract area. The other four fields within the territory of the PSA (Kyzl Kum, Kum Dag, Kara Tepe and Nebit Dag) were operated by the State Oil Company ‘Turkmenneft’. Burren owns the rights to conduct prospecting and exploration work in the rest part of the contract area under the license for exploration activities, which expires in February 2007. The PSA terms are limited to 2022, and the agreement can be extended for up to 10 years by mutual agreement with the Government of Turkmenistan. According to the PSA, Burren has been an operator since 2000.

As of the end of 2005, Burun field produced approximately 19,000 barrels of oil per day, extracted from 135 wells. The development, up to now, has been carried out primarily on the northern flank of the field, while an assessment should be carried out on the southern flank. Prior to 2004, the capital workover of wells had been carried out in order to restore their production capacity. Production drilling began in 2004. The average percentage of production participation during 2005 increased by 35%, producing 15410 barrels of oil per day (in 2004 it was 11430 barrels per day).

 

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