SOCAR, RWE agree to explore Caspian gas field
Azerbaijan’s state energy firm SOCAR and Germany's energy company
RWE signed a memorandum on Wednesday to jointly develop the
Nakhchivan gas field in the Azerbaijani sector of the Caspian
Sea.
RWE will be given 12 months to work on the promising structure. The two companies will sign a PSA contract within this period, to be followed by exploration work, said SOCAR President Rovnag Abdullayev, who co-signed the memorandum of understanding on exploration, operation and production sharing with the RWE head.
Khoshbakht Yusifzada, SOCAR’s First Vice-President, has told reporters that the Nakhchivan field holds considerable reserves. According to preliminary government estimates, Nakhchivan may contain up to 300 billion cubic meters of gas and 40 million tons of condensate.
The deposit is located 90 km (55 miles) south of the Azerbaijani capital, Baku, at a depth of 400-600 meters below the surface of the Caspian Sea. It was first discovered by Azerbaijani oil explorers in 1960 and prepared for drilling in 1994.
RWE’s Chief Executive Juergen Grossmann said the Nakhchivan project was an element of his company’s cooperation with Azerbaijan and it could turn in the future into a part of the ambitious Nabucco pipeline project.
"This is an independent project. It will be developed independently, but I hope that this project will contribute to the Nabucco project," Grossmann said.
RWE is one of the shareholders in the planned Nabucco pipeline, which seeks to transport Caspian and Central Asian gas via Turkey and the Balkans to Europe. The German company is in talks with SOCAR on the possibility of using gas to be produced during Phase 2 of developing Azerbaijan’s offshore Shahdaniz gas field, which is due to begin in 2012-2013, as a source for Nabucco.
RWE is not the first foreign company that has sought to tap the Nakhchivan field. US giant ExxonMobil expressed interest in the deposit in 1997 and signed a contract with SOCAR. However, having drilled the first well in 2001-2002, which cost ExxonMobil $150 million, the company declined to continue exploration, citing the absence of commercially viable reserves at the field.
Ilgar Taghiyev, deputy head of SOCAR’s investment department, said that though a foreign company, referring to Exxon, withdrew from the project in the past, the German company has again voiced interest in Nakhchivan and SOCAR agreed to jointly develop the field following lengthy negotiations.
The terms of cooperation are not elaborated, but Taghiyev says SOCAR remains adherent to a firm stance that it will not assume any risks until an exploration well has been drilled. Moreover, the Azerbaijani company will not incur any expenses involved.
"Foreign investors always assume expenses on exploration operations. If any reserves are discovered, the state oil company joins in, covers its share of the expenses during exploration and holds talks on production sharing," Taghiyev said, adding that, therefore, SOCAR will not be responsible for any expenses incurred if RWE fails to discover significant gas reserves at the Nakhchivan deposit.*
RWE will be given 12 months to work on the promising structure. The two companies will sign a PSA contract within this period, to be followed by exploration work, said SOCAR President Rovnag Abdullayev, who co-signed the memorandum of understanding on exploration, operation and production sharing with the RWE head.
Khoshbakht Yusifzada, SOCAR’s First Vice-President, has told reporters that the Nakhchivan field holds considerable reserves. According to preliminary government estimates, Nakhchivan may contain up to 300 billion cubic meters of gas and 40 million tons of condensate.
The deposit is located 90 km (55 miles) south of the Azerbaijani capital, Baku, at a depth of 400-600 meters below the surface of the Caspian Sea. It was first discovered by Azerbaijani oil explorers in 1960 and prepared for drilling in 1994.
RWE’s Chief Executive Juergen Grossmann said the Nakhchivan project was an element of his company’s cooperation with Azerbaijan and it could turn in the future into a part of the ambitious Nabucco pipeline project.
"This is an independent project. It will be developed independently, but I hope that this project will contribute to the Nabucco project," Grossmann said.
RWE is one of the shareholders in the planned Nabucco pipeline, which seeks to transport Caspian and Central Asian gas via Turkey and the Balkans to Europe. The German company is in talks with SOCAR on the possibility of using gas to be produced during Phase 2 of developing Azerbaijan’s offshore Shahdaniz gas field, which is due to begin in 2012-2013, as a source for Nabucco.
RWE is not the first foreign company that has sought to tap the Nakhchivan field. US giant ExxonMobil expressed interest in the deposit in 1997 and signed a contract with SOCAR. However, having drilled the first well in 2001-2002, which cost ExxonMobil $150 million, the company declined to continue exploration, citing the absence of commercially viable reserves at the field.
Ilgar Taghiyev, deputy head of SOCAR’s investment department, said that though a foreign company, referring to Exxon, withdrew from the project in the past, the German company has again voiced interest in Nakhchivan and SOCAR agreed to jointly develop the field following lengthy negotiations.
The terms of cooperation are not elaborated, but Taghiyev says SOCAR remains adherent to a firm stance that it will not assume any risks until an exploration well has been drilled. Moreover, the Azerbaijani company will not incur any expenses involved.
"Foreign investors always assume expenses on exploration operations. If any reserves are discovered, the state oil company joins in, covers its share of the expenses during exploration and holds talks on production sharing," Taghiyev said, adding that, therefore, SOCAR will not be responsible for any expenses incurred if RWE fails to discover significant gas reserves at the Nakhchivan deposit.*