Azerbaijan approves Rafi Oil's PSA for Surakhany field

Sep 29, 2005 02:00 AM

Azerbaijani President Ilham Aliyev on September 27 approved a production-sharing agreement (PSA) for the Surakhany field signed by the State Oil Company of the Azerbaijani Republic (SOCAR) and Rafi Oil of the United Arab Emirates.
The directive, published in the official press on September 27, enters into force immediately. It grants all necessary licenses, customs permits, visas and other requisites to the PSA's participants.

SOCAR will have a 25 %-interest in the project and Rafi Oil will have 75 % in the PSA, signed on August 16. The property has an area of 13 sq km.
The contract, which is the 25th contract for developing oil fields in Azerbaijan to date, states that oil production at the field should rise 50 % in two years. Rafi Oil will finance SOCAR’s stake in the project until it doubles the current rate of extraction. Rafi Oil must also pay a bonus of $ 1 mm and present SOCAR with a working program on the field's development within 90 days.

SOCAR will have the right to sever the contract if Rafi Oil does not start exploration within two years. This is initially a 25-year PSA with the possibility of a five-year extension.
The field, which first went into production in 1904, has 6.8 mm tons of oil left in it. A total of 2,300 wells have been drilled at Surakhany, which produced 115.6 mm tons of oil between 1904 and the start of 2005. At present, 230 wells operate at the field. A flat profit tax rate of 24 % will apply for the duration of the PSA.

Rafi Oil plans to invest $ 400 mm in the field. This includes $ 100 mm during the initial stage to renovate existing infrastructure and the remainder on increasing production, implementing new technologies and other areas.
Rafi Oil estimates that Azerbaijan will earn $ 921 mm from the contract if oil prices average at $ 49 a barrel. Rafi Oil intends to increase oil production at the field from 95,100 tons in 2004 to 257,000 tons in 2014.
The field produced 58,400 tons of oil and 10.5 mm cm of gas in the first half of 2005.

Source: Interfax Information Services, B.V.
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