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Azerbaijan awards new oil-gas contract â€“ UPDATED

Azerbaijan awards new oil-gas contract â€“ <font color=red>UPDATED </font>

22 December 2009 12:58 (UTC +04:00)

The agreement was signed by SOCAR President Rovnag Abdullayev and Bahar Energy Ltdâ€™s CEO Richard MacDougal.

Rovnag Abdullayev described the agreement as Azerbaijanâ€™s 28th PSA with foreign companies.

In his words, SOCAR plans to expand its exploration activities to increase the countryâ€™s proven gas reserves by one trillion cubic meters.

He added that Bahar field produced 55 million tosn of oil and 105 million tons of gas in 2008. The field is estimated to hold 25 billion cubic meters of gas in reserve, he noted.

Richard MacDougal said one exploratory well will be drilled within three years and if necessary, another well will be drilled.

In total 50 wells will be drilled in the first phase as part of the 25 year agreement with an option of 5 year extension, he said. Also, the existing wells will be restored. SOCAR will earn $2.5 billion in the first phase.

During three years, 170 000 tons of oil and 630 000 tons of gas will be delivered to SOCAR free. All investments will be made by Bahar Energy Ltd.

Rovnag Abdullayev also added that the foreign company will pay bonuses to SOCAR at milestones.

â€œSOCAR will be paid $2 million when the agreement takes effect, $1 million upon approval of development program, and $1 million for production of per 100 million barrels of hydrocarbon. Besides, $5 million bonus will be paid at the date of commercial launch of hydrocarbon production and $2 million after the output increased by 1.5 times. Acreage payments is $2 000 per acre. The participating interest of the government will increase from 40% at the commencement to 90% at the phase-out,â€ he added.

He noted that the production will be carried out by a joint venture of SOCAR (20%) and Bahar Energy Ltd. (80%).

The Bahar Field lying 40km south of Baku was discovered in 1968 and contains oil and gas-condensate in sandstones and sandy siltstones belonging to the middle Pliocene Productive Series.
The main oil-bearing horizons, the Pereriv Suite and Balakhany X, are developed with reservoir pressure maintenance by longitudinal and marginal (up-dip) flooding of surfactant-added sea water.

The field has to date produced 16 833 600 tons of oil and 128 688 million cubic meters of gas. The number of production wells has decreased to 16 from 93.

Gum-Deniz is located 21km south-east of Baku. The field has to date produced 28 897 100 tons of oil and 26 995.2 million cubic meters of gas.

Bahar Energy Ltd. is registered in Jebel Ali, part of the city of Dubai in the United Arab Emirates.