Upstream - from Arctic to the Caspian

Caspian Energy (CE): Dear Minister, Azerbaijan has gained a unique experience and a reputation of a reliable partner and, considering these advantages, does it plan to further expand its upstream component by means of foreign investments?

Natig Aliyev, Minister of Energy of Azerbaijan: Two policy lines are to be distinguished here. The first is to go on working with foreign companies in the upstream sphere. As examples of such policy we can cite PSA contracts on Absheron, Nakhichevan, and Araz-Alov-Sharq structures.  Also, North-Absheron archipelago projects are being considered in joint venture with Statoil Company.  We are in the process of drafting an agreement with BP on deepgas – ACG oil field prolongation, which, as you know, is to be completed in 2024, in line with the Contract of the Century. SOCAR portfolio contains many new proposals which are being considered. My opinion on the matter is unchanged from the start – all projects covering geo-exploration and discovery of new oil fields, et cetera, must be carried out via attracting foreign investment due to the highest risks linked to the oil field discovery. In case of discovery, negotiations may be launched on oil field exploration.  We have had such instances in the past, and the experience has been quite rewarding. 

Presently, exploration has become a much too costly process. Absheron and Nakhichevan oil rigs cost us 140 mln $ each.  For this reason, as we speak of PSA, one must strictly delineate the periods of geo-exploration and other stages of oil reserve probing after stating its commercial estimates. We are currently working on this, as the Azerbaijani oil sector contains a sufficient number of geological structures, approximately 144 which need studying.  Earlier it boasted  more promising ones, that is, geological, geo-physical proved reserves of oil and gas.  Many of these have been repeatedly under geological and geo-physical exploration, but methods undergo changes, continuously improving. Therefore, we must initially infuse entirely new, modern types of geo-physical filming of all these structures, before drilling is launched.

Thus, our prospects are bright, and work is to go on.  However, we shall not impose it, but rather determine our course based on the market forces, reserves, study the demands for increased oil extraction, all of which in turn depend on marketing, geo-conditions and oil prices, availability of transportation infrastructure.  This is a mutually co-related process.  Therefore, each company is guided by its own policy in the expansion of geo-exploration works. As you know, when oil prices are rather low, this instantly brings about the dwindling of geo-exploration, companies curtail exploration, research, security costs, et cetera. The situation becomes quite different in case the prices rise. Drilling, geo-physical filming, research, reserve accumulation, et cetera, are under ongoing development.