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Analysis: Azeri-Kazakh energy cooperation
Washington (UPI) Nov 16, 2007 In a small but significant move, the Azeri government is reaching out to its Caspian neighbors Kazakhstan and Russia as the ongoing development there produces a financial windfall for all. The State Oil Co. of Azerbaijan is beginning to export its services to Kazakhstan's oil and gas sector by conducting onshore surveys, while Baku is also gingerly allowing Russian investment in some offshore projects. "Work will be carried out by the SOCAR Department of Geophysics and Geology," said Khoshbakht Yusifzadeh, SOCAR's first vice president. "The order concerns both field and exploration works. I think we'll be able to do it well. The work can begin in late 2007 or early 2008." Earlier only the SOCAR and Schlumberger Caspian Geophysical joint venture exported surveying and exploration services. The move is highly significant because it sees the two non-Russian post-Soviet oil giants cooperating in a way that further undercuts Russian efforts to secure hegemony over Caspian energy exports. Azerbaijan is also moving to acquire a portion of shipping Kazakhstan's oil output across the Caspian. According to SOCAR President Rovnag Abdullayev, an agreement is being drawn up between Tengizchevroil and the Azerbaijan State Caspian Shipping Co., whose 86 vessels include 41 tankers. According to the contract, beginning next January CASPAR tankers will transport 5 million tons of Kazakh Tengiz oil to Azerbaijan for export, some through the Baku-Tbilisi-Ceyhan pipeline and some by rail through Georgia-based eastern Black Sea coastal terminals in Kulevi or Batumi. Further transit growth is possible in the medium term when oil production at Kazakhstan's Tengiz field will grow from 13 million tons up to 22 million to 25 million tons a year. According to CASPAR Chief Aydin Bashirov, the current volume could be higher but is at its projected level "because Tengizchevroil has concluded a contract with Kazakh ship owners who will transport a definite volume of this oil, too." Even as Azerbaijan seeks bilateral projects with Kazakhstan, Baku is being careful not to alienate its massive neighbor to the north, allowing Russian investment in its 25 square-mile joint Zikh-Govsani Caspian field block, which is being jointly developed by SOCAR and RussNeft under a production-sharing agreement. Yusifzadeh said the current agreement "analyzes the existing situation and surveys, but does not conduct any drilling works presently. All wells are drilled by SOCAR and then we probably will transfer these wells to the Apsheron Operating Co." RussNeft Apsheron Investment Co. founded the Apsheron Operating Co. for fulfilling the PSA contract, and AOC subsidiary RussNeft Apsheron Investment Co. has already paid its first bonus of $2 million to the State Oil Fund of Azerbaijan. The PSA was signed for a 25-year period with a possible five-year extension. SOCAR owns 25 percent of the PSA and RussNeft the other 75 percent. RussNeft estimates investments in the Zikh-Govsani project, which currently produces 285 tons per day, at $100 million to $150 million, and hopes to increase production 150 percent. The Zikh-Govsani field is estimated to contain 12 million tons of extractable reserves of oil. The two sites are communist legacies, having produced oil and gas for 60 years. The Zikh field is one of the Caspian's oldest offshore fields and was discovered and put into operation in 1935. Since then 234 wells have been drilled there, including 169 that are still operating. Following the 1991 collapse of communism, the field went into decline, but in 1997 new exploratory drilling was resumed on the site. Zikh produces 25 tons of oil and 20,000 cubic meters of gas daily from 10 wells. The Govsani field was discovered and commissioned in 1948, and 68 wells were subsequently drilled. Govsani produces 260 tons of oil and 90,000 tons of gas daily from 19 wells. The Zikh-Govsani project represents a rethinking by both Moscow and Baku about Caspian cooperation after many years of coolness. The first joint-venture agreement on rehabilitating and upgrading the Zikh-Govsani field block was signed in January 2001 between SOCAR and LUKoil. Each partner owned 50 percent of the project, but Baku in December 2004 subsequently canceled the concession citing ecological concerns. LUKoil was unhappy, as its geologists estimated the field's reserves at 20 million tons of oil for which the company was willing to invest $250 million. The reworked concession represents a new maturity on Baku's part in its relations with Russia, while its outreach effort to Kazakhstan represents an effort to share expertise and resources. For the present at least, the Azeri government has apparently decided that the Caspian energy pie is big enough for all. (e-mail: [email protected]) Community Email This Article Comment On This Article Related Links Powering The World in the 21st Century at Energy-Daily.com
Hydrogen: the wave of the future, but how far down the road
Washington (AFP) Nov 17, 2007The United States hopes to fill American roads with hydrogen-powered cars in two decades, but the clean fuel must be cheap and practical to make before it can replace oil, US experts say. |
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