|
Autumn 1999 (7.3)
Pages
99-106
AIOC
Celebrates
5 Year Anniversary
by Tamam
Bayatly
September 20,
1994 was a historic day for the newly independent Republic of
Azerbaijan. The State Oil Company of the Azerbaijan Republic
(SOCAR) signed a Production Sharing Agreement (PSA) with a consortium
of 11 foreign oil companies from six nations for the development
of three major oil fields in the Azerbaijan sector of the Caspian
Sea-the Azeri, Chirag and deepwater portion of Gunashli fields.
The PSA contract had a 30 year duration. It became effective
on December 12, 1994 after ratification by Azerbaijan's Parliament.
  This
PSA represented the first major investment by Western multinational
companies in any country of the former Soviet Union and was dubbed
"Contract of the Century" by Azerbaijanis.
Photo: AIOC's Signing
Ceremony which Azerbaijanis fondly call, "Contract of the
Century". Sept 1994.
Following ratification of the contract, a new operating company
was formed - Azerbaijan International Operating Company (AIOC)-to
implement the agreement on behalf of the shareholders and working
in partnership with SOCAR and the government of Azerbaijan.
 Originally
AIOC comprised 10 major foreign oil companies working together
with SOCAR. Today the partners include: BP Amoco, Unocal, LUKoil,
Statoil, Exxon, Turkish Petroleum (TPAO), Pennzoil, Itochu, Ramco,
Delta Oil / Amerada Hess representing seven countries: UK, USA,
Russia, Norway, Japan, Turkey and Saudi Arabia. BP Amoco assumed
operatorship for AIOC effective June 1999.
Photo: First AIOC Steering
Committee meet in the former residence of Oil Baron Taghiyev.
Jan 1995.
 The
Steering Committee, made up of representatives from SOCAR, the
government of Azerbaijan and the foreign oil companies, approves
the work program and specific project budgets for AIOC.
Photo: AIOC as the central
exhibition at Baku's annual Caspian Oil and Gas Show beginning
in 1995.
Contract Area
Estimated recoverable reserves of the fields: 4.6 billion barrels
(620 million tons) of oil and 3.5 trillion cubic feet (99 billion
cubic meters) of associated natural gas, which Azerbaijan gets
for free.Estimated investment required to fully develop the fields
is in excess of $10 billion. Expected peak in oil production
levels: from 800,000 to 1,000,000 barrels per day (40-50 mta).
AIOC Milestones 1994 - 1999
 September
20, 1994 - SOCAR and the consortium of foreign oil companies
sign the Agreement on the Joint Development and Production Sharing
Agreement (PSA) for the Azeri, Chirag and the deepwater portion
of the Gunashli fields in the Azerbaijan sector of the Caspian
Sea.
Photo:
Kaspmorneft
drilling rig being brought ashore to be transformed into the
Dada Gorgud rig. 1995.
December 12, 1994 - The Azerbaijan Parliament ratifies the PSA,
and the Azerbaijan Interna-tional Operating Company (AIOC) is
established to implement the 30-year contract.
January 24,
1995 -
The first Steering Committee takes place with Terry Adams as
AIOC President. President Heydar Aliyev addresses the Committee.
 October
9, 1995 - The third Steering Committee approves the Early
Oil Project (EOP) as well as the two Early Oil export options-the
Northern route through Russia; and the Western, through Georgia.
Photo: Official ceremony
of "First Oil from Chirag" celebrated at the Respublica
Serai (Republican Palace). The speeches which included those
from many foreign dignitaries continued for more than five hours.
President Heydar Aliyev opened the session. Nov 1997
January 18,
1996 -
Azerbaijan and Russia sign an intergovernmental agreement on
the transit of Azerbaijan oil via pipeline from Baku to Novorossiysk,
Russia.
March 8,
1996 -
Azerbaijan and Georgia sign an inter-governmental agreement on
the transit of Azerbaijan oil via pipeline from Baku to Supsa.
Left photo: President Heydar Aliyev (center) and SOCAR's President
Natig Aliyev (left) celebrating the "First oil from Chirag"
on November 12, 1997.
Right photo: Azerbaijan's heaviest
lift refubished by AIOC. 1996
August 24,
1996 -
President Aliyev inaugurates the upgraded Dada Gorgud semi-submersible
drilling rig. On the same day he also dedicates AIOC's newly
refurbished office building known as Villa Petrolea II which
was named after the residence of the Nobel Brothers from the
beginning of the century.
November 7, 1997 - First Oil is produced from the Chirag-1
Platform.
November
12, 1997 -
Official celebration of the production of First Oil from Chirag.
This date becomes an official public holiday upon decree by President
Aliyev. The Sangachal Terminal is inaugurated.
January 12,
1998 -
First barrels of Early AIOC oil are pumped into the Northern
Route pipeline system through Russia.
March 24,
1998 -
Shareholders lift first oil tanker from Novorossiysk, Russia.
Left photo: Pipes for Western
pipeline through Georgia to the Black Sea. Oil reached the Supsa
port in April 1999.
Right photo: The Russian port of
Novorossiysk on the Black Sea is the terminal port for Azerbaijan's
northern oil route. In March 1998, the first oil tanker was loaded.
December
10, 1998
- First barrels of Early AIOC oil are pumped into the Western
Route pipeline system.
April 8,
1999 -
Shareholders lift first oil tanker from Supsa, Georgia.
April 17,
1999 -
The Presidents of Azerbaijan, Georgia and Ukraine inaugurate
the Western Route Export Pipeline and the Supsa Terminal on the
Georgian coast of the Black Sea.
September
20, 1999 -
Celebration of the fifth anniversary of the Contract of the Century.
Benefits
to Azerbaijan
Commercial Benefits
Since the ratification of the PSA in 1994, approximately $2.4
billion has been invested in the implementation of the AIOC contract.
Direct benefits from the PSA include bonus payments to the Azerbaijan
Republic, a share of profit oil, taxes, free associated gas,
upgrade of existing SOCAR infrastructure (from boats to construction
yards), lease payments, payments to employment and social funds
and others, totaling approximately $900 million.
Every single dollar spent by AIOC is estimated to attract another
$2-3 of additional investment in the local economy and communities.
To date AIOC has spent $324 million on local goods and services
and continues to be a major purchaser of goods and services from
the local community.
Technology Transfer
Directional drilling technology, which enables well targets to
be located a considerable distance from the platform thereby
increasing recovery.
High-angle (near horizontal) drilling technology, which provides
the opportunity to complete wells with a large formation thickness,
thereby increasing the production rates.
Completion technology such as gravel packs, screens, high-density
perforating, large diameter tubulars and well equipment, which
allows higher production rates while controlling the amount of
sand being produced.
Care for the Environment
· Full baseline study
of the contract area.
· Studies of the pipeline routes in Azerbaijan and Georgia.
· Studies covering subsea and land for the pipeline and
terminal sites in Azerbaijan and Georgia.
· Seven Environmental Impact assessments
· Oil Spill Response plans prepared and implemented
Training and Development
· Since 1994, over $19 million has been spent on training
national staff both in Azerbaijan and overseas.
· Training and development of national staff has resulted
in a 43% reduction of expatriate staff.
· There are over 65% Azerbaijan staff in professional
positions throughout the organization.
There has been
significant focus in internationally recognized professional
certification and training to supplement the existing skills
of national staff.
Some of the most proactive and effective safety training programs
were delivered to operational staff across both Azerbaijan and
Georgia.
Community Programs
AIOC's sponsorship program supports the government's campaign
to assist vulnerable groups and educate young people. Major projects
have included:
· Young Scientist Award with the Ministry of Education
and the Academy of Sciences,
· Excellence in Teaching, with the Education Department
of the Mayor's office,
· Young Musician of the Year with Baku Music Academy,
· Education materials for refugee schools,
· The upgrading of the Baku State University library,
· Young Mugham Performers' Competition,
· New Year and Novruz parties for refugee children and
orphans.
International Recognition
The successful completion of the Minimum Obligatory Work Program
(MOWP) and Early Oil Project (EOP) demonstrates that the foreign
oil companies can work with the Government and SOCAR to realize
completion of an integrated project involving an offshore production
platform, subsea pipelines, onshore storage and export to international
markets.
This has increased investor confidence and gained international
recognition for Azerbaijan's oil policy and leadership that has
made these early achievements possible.
Accomplishments
to Date
· 14 wells drilled (11 production and 3 will be water
injection wells)
· 37.7 m bbls (5.1 mt) of oil produced
· 1998: 16.3 m bbls (2.2 mt)
· 1999: to date, 21.4 m bbls (2.9 mt)
Forecast for 1999
· 37 m bbls (5 mt)
· 23.6 m bbls (3.2 mt) exported through the Northern Route
Export Pipeline
· 14.1 m bbls (1.9 mt) exported through the Western Route
Export Pipeline
· 21 tanker liftings using the Supsa offshore loading
buoy
The Future
Reservoir Management
To improve
the Chirag field oil recovery, a water flood pressure maintenance
facility, currently under construction, will be retrofitted to
the platform in early 2000.
Full Field Development
(FFD)
Current
plans for the first stage of FFD aim at building one drilling
and quarters platform located in the central portion of the Azeri
field with a capacity in excess of 300,000 bpd. Evaluation of
export options is being finalized and the Project Team is ready
to begin preliminary engineering, procurement and contracting
process that could lead to construction commencing in the second
half of 2000.
Main Export Pipeline
(MEP)
The MEP is an important and integrated component of the FFD plans.
AIOC continues to participate, as a member of the Azerbaijan
Working Group under the leadership of the Azerbaijan Government
as decreed by President Aliyev on September 5, 1997, in negotiations
for a time dated option on a one million bpd export pipeline
from Baku to Jeyhan (Turkey).
Tamam Bayatly is Media and Government Affairs Specialist at AIOC.
From Azerbaijan International
(7.3)
Autumn 1999.
© Azerbaijan International 1998. All rights reserved.
Back to Index AI 7.3 (Autumn
99)
AI Home
| Magazine
Choice | Topics
| Store
| Contact
us
|
