Oil prospects for Azerbaijan suffer further blow

Jul 09, 2001 02:00 AM

Azerbaijan's position as the centre of the Caspian oil and gas industry suffered a further blow, after ExxonMobil reported a dry exploration well, and speculation rose of other failed offshore drilling. An ExxonMobil official announced that the first exploration well in the Oguz offshore concession, once believed to contain some 95 mm tons of crude, would be abandoned because "no commercial accumulation of hydrocarbons were encountered".
"At the moment there are no plans for future drilling," the official added. ExxonMobil, under its contract with Azerbaijan's state oil company SOCAR, is committed to drilling two wells in the structure or pay compensation. The US multinational's announcement is the third piece of bad news this year for the ex-Soviet state of Azerbaijan, which only a few years ago was being touted as the next Kuwait.

It comes as industry analysts have raised expectations that Chevron is soon to announce similar bad results at offshore drilling sites. A consortium run by Italy's Agip failed to find sufficient amounts of hydrocarbons January in its first well in its Kurdashi concession in the south Caspian. TotalFinaElf, the French group, recently announced failure in the Lenkoran Talysh-Deniz structure near by.
Chevron is widely expected to reveal less-than-positive results in its Absheron offshore field. The site was earlier believed to hold up to 1,000 bn cm of gas, making it one of the largest natural gas fields in the world. Industry analysts said that the US company found only a "very thin gas layer". Azerbaijan in fact has yet to strike oil since exploration in its offshore sector began three years ago.
Azeri officials are quick to point out that the worldwide petroleum industry registers only a one in 10 success rate and claim that the country may still become one of the main oil and gas producers this century. Azerbaijan at the same time already boasts two world-class offshore projects in the Azeri-Chirag-Guneshli oilfields and the Shah Deniz gas structure, both operated by BP, while more than a dozen fields are still to be explored.

Many observers, however, are not convinced. "The jury is still out on whether Azerbaijan will be a major oil and gas provider," says Gavin Graham, a Shell official, whose company has interests in all five Caspian countries.
Others see the balance of gravity already shifting north, thanks to a gargantuan oil discovery in Kazakhstan's Kashagan offshore structure and two smaller finds in Russia's Caspian sector. Thane Gustafson of the Cambridge Energy Research Associates sees the northward shift as creating a possible change in the choice of oil export routes, as Russia becomes more of a player.

Source: The Financial Times
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