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A Resurgence of Oil and Gas Exploration Activity in Azerbaijan

A number of high value prospects in the Azeri sector of the Caspian Sea have piqued the interest of major operators, fostering a resurgence of oil and gas exploration activity in Azerbaijan.
This article appeared in Vol. 16, No. 2 - 2019

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A Resurgence of Oil and Gas Exploration Activity in Azerbaijan

A number of high value prospects in the Azeri sector of the Caspian Sea have piqued the interest of major operators – BP in particular – fostering a resurgence of exploration activity that could reverse the decline of Azerbaijan’s large resource base. Several operators are also pushing forward plans to develop numerous existing discoveries in Azerbaijan over the next ten years, potentially tapping into more than 4 Bboe.

  • Azerbaijan blocks with planned exploration and appraisal activity. Source: Rystad Energy GIS Services.

BP will drill four exploration wells in Azerbaijani waters this year and another two in 2020. Highest hopes are pinned on the deep exploration well scheduled for the second quarter this year in the Shafag-Asiman gas play, classified by Rystad Energy as a ‘high impact well’ given its close proximity to the giant Shah Deniz field. BP holds a 50% working interest in Shafag-Asiman and hopes to replicate the success of Shah Deniz. The company will continue exploration in the area by testing an ultra-deep target beneath the Shah Deniz field in 2020. BP plans to soon conduct 3D seismic studies on its recently-awarded relatively unexplored Block D230, north-west of the company’s giant ACG project, in waters ranging from 100 to 800m. The first well is expected to spud in the first half of 2021. Moving closer to shore, BP plans to drill three wells in the Shallow Water Absheron Peninsula (SWAP), and will drill an onshore well in the second half of this year on the Gobustan South West block, having acquired a 61% working stake in 2018. The block contains the Duvanni and Dasgil mature oil and gas fields, and exploration activities are likely to target deeper Cretaceous and Jurassic carbonate reservoirs.

Equinor, the Norwegian company, will drill an appraisal well on the Karabakh prospect later in 2019. Equinor has also signed a production sharing agreement for the Ashrafi, Dan Ulduzu and Aypara area, not far from the ACG field, and will commence a seismic survey imminently. It aims to drill an exploration well in 2020 or 2021.

In addition to the uptick in exploration efforts in Azerbaijan, operators have lined up development plans on existing oil and gas-condensate discoveries in the region. Rystad Energy forecasts that six of these projects will come online during the course of the next decade, holding collective recoverable resources of about 4.4 Bboe.

National oil company Socar is increasing its presence in the upstream sector and is working with international E&Ps, such as Total and Equinor, in an effort to develop more resources and thus arrest the decline in Azeri production. Precluding any new oil discoveries, Azerbaijan is likely to see an equal production contribution from gas and liquids during the course of the next decade.

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