Azerbaijan prepares to sign contracts for two fields

Azerbaijan is preparing to sign major contracts with multinational oil companies seeking to develop the Umid and Babek gas fields. The news was confirmed by Vagif Aliyev, head of Socar’s investments department.

Aliyev, speaking to Natural Gas Europe, highlighted that for the first time Azerbaijan would not be awarding contracts in the form of PSAs (production sharing agreements), but instead contracts would resemble Iran’s “payback” contractual model. No information was provided as to the exact value of the contracts.

The Umid gas-condensate field was discovered in 2010 on the back of Socar’s deepwater exploratory drilling in the Caspian Sea in 2009. The results of the first exploration discovered that Umid’s reserves were over 200bn cubic meters of gas and some 40 million metric tons of condensate.

Socar was able to begin gas production from Umid in September 2012, at 1.5 million cubic meters a day, but this quickly decreased by more than 50% in 2014 due to what Socar described as complex geological structures. Babes has yet to enter production, however initial reports suggest that the field may contain some 400 billion cubic meters of gas and 80 million metric tons of condensate.

Socar’s vice-president Khoshbakht Yusifzaheh stated in 2015 that the company would be announcing a tender for the fields’ development and that the cost of drilling operations and other aspects of the operations would be taken into the contract.

Imid’s gas production is intended for Azerbaijan’s market, while Babek’s production is expected to be exported to western markets.