History of the Baku Oil Industry. Part 79

After the discovery of oil fields, Baku became a special place, where various economic and political interests of international coalitions, industrial clans and leaders were concentrated and clashed. VK begins publishing chapters from the book by Ismail Agakishiyev "History of the Baku Oil Industry and the Second Oil Boom (second half of the 19th century - beginning of the 20thcentury)" The book presents a historical analysis of the emergence and current state of the Azerbaijani oil industry.

By February 1998 the ratio of contract stares had changed and LUKOIL had 7.5%, SOCAR 7.5%, LUKAgip 50%, Pennzoil 30% and Agip - 5%. Coordinates of the second appraisal well at the Karabakh field were approved at a meeting of CIOC contracting managers on January 29th 1998. It was planned to drill a well 6 km to the south-west of the first appraisal well. By February 1998, the location for drilling the second well was finally determined. As a result of its drilling or sampling of beds on the prospective Karabakh field, a natural gas influx was discovered. According to experts, the daily production at this reservoir, revealed at a depth of about 3500 m (the total depth of drilling works was 3702 m), was estimated at 700 thousand cubic meters.

During August 1998 SOCAR and CIOC experts had to hold a series of consultations on a range of technical and commercial issues related to the project. According to SOCAR experts, the CIOC had chosen the wrong site for drilling the two wells. Experts of the companies that were part of the CIOC, in addition, had no consensus on how to calculate the volume of hydrocarbons in the Karabakh field, which was proved by various calculations made by different participants in the project that participants demonstrated at a meeting on the issue of natural gas reserves at the Karabakh field.

CIOC experts were of the opinion that, in order to eliminate all disputed questions, it was necessary to drill a third well. Under the contract, companies had the right to withdraw from the contract only after drilling three exploratory wells, provided that the contractor and SOCAR didn 't come to an agreement on the basis of technical results from one or more wells. On July 29th 1998, at a regular meeting of the Management Committee of CIOC contractors, it was decided to send a letter to the President of SOCAR, N. Aliyeva.

Two participants in the project, Pennzoil and Agip, proclaimed at the CIOC meeting that they were against drilling the third well. Only LUKOIL supported the idea, and was ready, if necessary, even to drill a fourth well. Pennzoil, that appeared to be playing a supporting role in the Karabakh contract, began to take a tough stand in relation to its partners. SOCAR, LUKOIL and Agip made a joint decision to continue the exploration and drilling of a third well in the prospective structure of Karabakh. The drilling works that started on September 21st 1998 reached a depth of 2 thousand meters by mid-October of the same year. The project depth was estimated at 3.8 thousand meters.

Drilling operations were expected to be completed in early November and acquired results were to be checked after that. The location for drilling the third well was found in the northern part of the structure, about 6.5 km to the north-west from the second well and 128 km east of Baku. The reason for the delay in drilling the second and third wells was the employment of drilling rigs. The CIOC had contractual obligations for a completion of the exploration period by February 23rd 1999.

The CIOC planned to finish drilling of the three exploratory wells in 1998, but managed to finish it only by February 23rd 1999.The drilling of the third well was a decisive stage in the activities of the CIOC. Contracting companies were not very optimistic. Confidence in success was based on the geographical location of the third well, located near the prospective structure of the Ashrafi field, where NAOS had previously discovered oil and natural gas deposits. According to Azerbaijani specialists, the layers with hydrocarbon reserves had faults which increased chances of success in case of a well chosen location for drilling. At the end of October 1998, the first traces of oil were discovered for the first time in the work of the CIOC. This became clear after a small sample extracted from the productive Nadkirmakinskaya sandy suite discovered in the course of drilling of the third appraisal well. However, the oil reserves themselves had not been evaluated.

Analysis of all samples produced an estimate of only 10 million tons of oil, out of which the extractable amount did not to exceed 3 million tons. At the discovery of the next layer, gas and gas condensate was discovered. Preliminary results, according to CIOC experts, allowed to talk about the opening of an oil deposit at the Karabakh field with a gas "cap." On November 13th 1998 the CIOC leadership decided to lay aside the decision on the further implementation of the Karabakh project until December 1998 at a meeting of the Management Committee of contractors of the consortium shareholders. Let me remind you that the exploratory period of the CIOC was to expire on February 23rd 1999. However, the CIOC did not wait until this time. At a meeting of the consortium in January 1999 it was decided to terminate the existence of the consortium.

Since the conclusion of the contract on November 10th 1995, the consortium had conducted seismic surveys, had accomplished the drilling of three exploration wells and eventually had discovered a natural gas deposit. However, the CIOC was willing to develop only oil fields, and due to economic ineffectiveness it decided to cease its existence. The consortium was officially disbanded on February 23rd 1999. During the exploratory period in the Karabakh area the CIOC co-financed the reconstruction and modernization of the  SSDR "Dede Gorgud" ($120 million); provided temporary work for a certain number of Azerbaijani workers during the drilling of three exploratory wells; discovered a new hydrocarbon deposit.