British oil giant BP plc is likely to ink a production sharing agreement (PSA) with SOCAR. The Azeri state energy company is contemplating to team up with BP to jointly explore prospects in a new block in the North Absheron basin off the Caspian Sea before year-end 2017.
Zacks.com reports in its article Are BP & SOCAR Looking to Tie Up for Caspian Sea Exploration? that in May 2016, the companies inked a memorandum of understanding (MoU) to jointly explore Block D-230. These efforts marked the companies’ attempt to discover more oil resources in the Absheron basin. In Azerbaijan, BP is the prime operator for energy resources. The company also operates two of the most important oil and gas developments in Azerbaijan — the Azeri-Chirag-Deepwater Gunashli (ACG) oilfields and the Shah Deniz offshore gas field. The ACG oilfields generate most of the country’s oil production. The Shah Deniz offshore gas field is anticipated to hold 1.2 ton-1.5 ton centimeter of gas.
Recently, BP along with its co-venturers inked a modified and restated ACG field PSA, which extended the production sharing deal for the country’s massive ACG oilfields until 2049. The current deal was slated to end in 2024. The co-ventures included Chevron Corp, Statoil ASA and ExxonMobil Corp, among others.
These agreements are a result of BP’s appraisal of its exploration portfolio. The company reiterated plans to refocus on expansion in natural gas and advantaged oil in regions where it presently functions. BP is also seeking for prospects to develop new production regions while abandoning less competitive exploration prospects. These initiatives will likely support the company with growing and sustainable free cash flows, which it can distribute among shareholders.
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Shah Deniz gas field is located about 70 kilometers southeast of Baku. The gas field is the largest natural gas field in Azerbaijan. It lies in the South Caspian Sea, off the coast of Azerbaijan at a depth of 600 meters. It is being developed in two stages. The partners of the project include SOCAR, BP and Statoil.
A giant project, Shah Deniz Stage 2 or Full Field Development (FFD) is expected to add an incremental capacity of 16 billion cubic meters per year (bcma) of gas production to about 9 bcma yielded by Shah Deniz Stage 1.
One of the largest gas developments in the world, Shah Deniz, will boost European energy security by transporting Caspian gas resources to markets in Europe for the very first time. The company’s shares have gained 12% as compared with the industry’s increase of 9.8% in the last three months.
