Shell wants to buy 25% stake in Inam field

Feb 21, 2000 01:00 AM

27-11- 99 A representative of Royal Dutch/Shell said that his company was seeking to acquire stakes in Inam, an offshore field in the Azerbaijan sector of the Caspian Sea, from two separate sources.
Shell wants to buy a 12.5% interest in Inam from Lasmo, the biggest oil exploration and production company in Great Britain, and another 12.5% from the Central Fuel Company (CFC), based in Moscow.
The Shell rep did not provide details on talks with CFC and Lasmo or provide any details on the possible terms of the deal. He did state, however, that his company's discussions with Lasmo were relatively far along. Lasmo's Chief Executive Joe Darby said recently that his company wanted to sell its stake in Inam to Shell.
If the purchases go through, the 25% stake in Inam would provide Shell with an entrée to the oil development business in Azerbaijan. The Anglo-Dutch company is currently involved in the Azerbaijani gas sector but is not a player on the local oil scene.
Western press sources said last week that oil industry experts had assessed Inam as a relatively easy concession to develop, due to its closeness to shore and proximity to existing pipelines. However, Lasmo managers said earlier this year that the Inam project was too risky because it entailed too much high-cost -- and therefore high-risk -- deep-water drilling. Darby said his company wanted to unload its stake because Inam was better suited for development by a larger company such as Shell.
Lasmo inherited its stake in Inam when it took over Monument Oil & Gas of Great Britain. BP-Amoco is serving as operator of the Inam project, with a 25% stake in the field. The remaining equity was originally split between Monument (12.5%), CFC (12.5%) and the State Oil Company of Azerbaijan, or SOCAR (50%).
The partners were to develop the field on a production-sharing basis. SOCAR experts believe that Inam may contain 100 million metric tons of crude oil and 100 billion cubic meters of natural gas. Development of the concession may require $ 2 billion in investments. The Azerbaijani government was paid a $ 32 million bonus upon the signing of the contract and will receive another bonus of $ 10 million when production begin. It will also be paid $ 2.5 million by the foreign partners for every 100 million barrels (13.5 million metric tons) of oil extracted from the field.
Amoco, Monument and CFC had agreed to finance SOCAR's share of expenses during the initial three-year exploration phase of the project. The group is obligated to conduct a 3D survey and drill two test wells during this initial phase. It may later extend exploration for another two years and drill up to two more wells. If exploration work turns up oil in commercially exploitable quantities, Inam will be developed over a 25-year period; the partners will have an option to extend the deal for another five years.
SOCAR had originally considered granting rights to Inam to LUKoil. The Russian oil company began negotiations on the Inam project in 1996, but SOCAR eventually refused its offer during a period of wrangling between the Russian and Azerbaijani governments over the status of the Caspian Sea.

Source: NewsBase
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