Azerbaijan confirms that first test well at Kyurdashi holds no oil

Jul 14, 2000 02:00 AM

Artur Rasizade, the prime minister of Azerbaijan, has confirmed that the first test well drilled by the group set up to develop the Kyurdashi block had been dry.
AKD Petroleum Operating Company found only traces of hydrocarbons in its exploratory shaft, which was sunk offshore at the Arazdeniz field, Rasizade said.
He declared, however, that it was too early to assume that the contract area -- or any other part of Azerbaijan's sector of the Caspian Sea -- held no oil at all. Other parts of AKD's concession may prove more fruitful, he said.
For their part, representatives of the consortium said last week that the block might still contain up to 90 mm tons of crude oil. It is possible that the reserves have "migrated" to other sections of the contract area, they said.

AKD had said earlier this month that the first test well did not even hold enough to justify testing. The Italian-led group has asked SOCAR for permission to liquidate the well. However, it has said it will not make any final decisions about the fate of the project until another test shaft is sunk. Only when another well has been drilled can the size of the Kyurdashi block's oil reserves be estimated accurately, AKD representatives said on July 4.
It was noted that the Arazdeniz-1X well had been drilled near the centre of AKD's concession. It therefore seems unlikely, the Azerbaijani sources said, that further drilling will uncover substantial reserves. Nevertheless, some local geologists believe that wells drilled in the deep-water sections of the block may show more positive results.
AKD had said in April of this year that it hoped to find 70-110 mm tons of crude oil at the Kyurdashi concession. Experts said at the time that the group's chances of finding oil were good since the block is located relatively close to shore; deposits located far from shore in the mid-Caspian are more likely to contain gas.
The consortium has said it will spend $ 38 mm on its exploration program in 2000, with outlays to rise to $ 50-60 mm in 2001. The total cost of developing the three offshore fields -- Arazdeniz, Kerkendeniz and Kyurdashi -- was initially estimated at $ 2.5 bn.
Interest in the Kyurdashi project is split 50% to SOCAR, 25% to Agip of Italy, 15% to Mitsui, 5% to Repsol of Spain and 5% to Turkish Petroleum (TPAO). Agip, which was also a participant in the ill-fated Karabakh project, is serving as the operator of the consortium.

The group's 25-year contract was signed on June 2, 1998, and ratified by Azerbaijan's parliament, the Milli Majlis, on July 8, 1998. AKD's production-sharing contract states that the group must drill three exploratory wells by June 2, 2001. Under the agreement, all costs incurred by SOCAR during the initial stages of the project are to be covered by the other consortium partners.
The deal also states that SOCAR will receive a signing bonus of about $ 36 mm. The Azerbaijani company did not have to repay this bonus, as it did under other contracts with foreign partners. SOCAR is also dueto receive another non-repayable bonus of about $ 10 mm if AKD is ever able to extract 12,000 barrels of oil per day from the Kyurdashi block for 60 days in a row. It would also receive this bonus payment if AKD was able to produce consistently from two development wells for a period of 60 days.

Source: NewsBase
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