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History, present and future prospects of drilling in Azerbaijan's oil and gas industry




(MENAFN - Trend News Agency) Baku, Azerbaijan, Sept. 9

By Sara Israfilbayova – Trend:

A brief overview of the Azerbaijani oil history

In April this year, the deepest well in the Caspian Sea with the depth of 7.411 meters has been drilled on the Absheron field of Azerbaijan, which has gained worldwide fame as the ancient land of oil.

The record was achieved by a brand-new semisubmersible Heydar Aliyev – the sixth generation rig that was built in Baku shipyards and set up a beginning of a new page in more than a century history of oil industry in Azerbaijan.

Azerbaijan's oil industry, the history of which goes back to antiquity, has reached great heights.

Similar to the any other oil province in the world, it is divided into several stages, each of which is notable for its unique achievements.

Almost everybody in the industry has heard about Edwin Drake, the American who often is named 'Father of the Petroleum Industry", because the technology he devised to drill the first commercial oil well in the United States revolutionized the way how crude oil was produced and launched the large-scale petroleum industry. But Azerbaijan has its claim for that kind of achievement too.

The oil era has longer history with ancient historic records of people using a black liquid for illuminating purpose.

The first stage begins with the extraction of oil from wells drilled in 1847 mechanically, and continues until 1920. For the first time, industrial oil was obtained in 1847-1848 from wells drilled mechanically in the Bibi Heybat, and later in the Balakhani fields, and this year the development of the oil industry in Azerbaijan begins.

In 1846 in Baku, on Bibi Heybat, at the suggestion of a member of the council of the Transcaucasian Regional Directorate Vasiliy Semenov, for the purpose of oil exploration, the world's first oil well was drilled 21 meters deep, and for the first time in the world, drilling has yielded a positive result.

In July 1847, Governor of the Caucasus Mikhail Vorontsov officially confirmed in his documents the fact of drilling the world's first oil well on the coast of the Caspian Sea (Bibi Heybat) and its positive result.

Furthermore, July 14, 1848 is the date of the world's first oil well drilling by using wooden rods. Edwin Drake drilling well dated in 1859.

In 1899-1901 years, in terms of oil production, the Baku oil industry issuing 11.5 million tons of oil per year, ranked first in the world. During this period, the United States produced 9.1 million tons of oil per year.

The second stage begins in 1920 after the nationalization of the oil industry in Azerbaijan, which became a part of the Soviet Union, and covers the period until the discovery of the Oil Rocks field in the open sea in 1949.

In 1921, oil production was reduced to 2.4 million tons. In connection with the expansion of exploration and prospecting in Azerbaijan, a number of new fields were discovered and put into operation (in particular, the Gala, Buzovna-Mashtaga and others) and already in 1941 the volume of oil production was brought up to 23,6 million tons, which accounted for 76 percent of oil production in the former USSR.

In 1941, for the first time in the world, a slanted well with a depth of 2.000 metres was drilled with turbo drill method on Bayil settlement.

In 1948 in Europe and the USSR, a very deep well with a depth of 3.800 metres was drilled in Surakhani and vigorous oil fountain gushed forth.

The third stage began with the commissioning the Oil Rocks field in 1950, which became the basis for the development of the offshore oil industry in Azerbaijan, and continued until 1969. At this stage, offshore exploration is expanding, a number of new oil and gas fields are being opened and put into operation - Gum adasi, Sangachal - Duvanny, Khara-Zira island, Bulla, Darwin Bank etc. The technique and technology of drilling operations (including prospecting and exploratory drilling) for the construction of hydraulic engineering oil facilities, and the infrastructure for oil production at sea are developing.

At this stage, a number of new oil and gas condensate deposits onshore were also discovered and commissioned (Kurovdag, Mishovdag, Kursangi, Garabagly, Galmaz, Garadagh and others).

The fourth stage begins in 1969 and coincides with the first period of the leadership of Azerbaijan by national leader Heydar Aliyev, when the oil and gas industry of Azerbaijan, like all sectors of the national economy of the republic, embarked on the path of dynamic development.

In this period, a new era begins in the history of the oil and gas industry of Azerbaijan, especially in the development of oil production at sea. In 1970, the production association Kaspmorneft was created. The Ministry of Oil Industry of the USSR, taking into account the experience of Azerbaijani oil specialists in the field of work in the Caspian Sea, assigned the exploration, drilling, development, production and other works in all sectors of the Caspian Sea under the jurisdiction of the USSR to the Azerbaijani oil workers (since 1970, the Caspian Sea was divided into sectors) .

The fifth stage is characterized by the collapse of the USSR and covers the era of independence and the new history of Azerbaijan.


Oil today

Currently, the country is taking steps to accelerate drilling operations so that some deposits should be working at full capacity since by the middle of the next decade.

Today, one of the priorities for Azerbaijan is implementation of the project under an agreement , which is called the "Contract of the Century", on the development of a block of oil and gas fields Azeri-Chirag-Guneshli. In 1981-1987, three oil fields were discovered in the Caspian Sea east of the Absheron Peninsula - Azeri, Chirag and Guneshli. The "Contract of the Century" was signed on September 20, 1994 in Baku and prolonged till 2050 last year.

The signing and implementation of the "Contract of the Century" is a vivid evidence of the realization of the oil strategy, which constitutes the concept of economic development of independent Azerbaijan.

The block of Azeri-Chirag-Guneshli (ACG) deposits has made a great contribution to the economy of Azerbaijan over 25 years. Over the years, more than 3.5 billion barrels of oil have been produced from the ACG and a total of $36 billion have been invested in the project.

The second giant field is the Shah Deniz field, which is considered one of the largest offshore gas fields in the world discovered over the past 20 years. Its reserves are estimated at 1.2 trillion cubic meters.

With this gas, which will go towards Europe through the Southern Gas Corridor, are connected Azerbaijan's prospects for becoming an important gas supplier for the EU countries.

The Southern Gas Corridor is one of the EU's priority projects and provides for the transportation of 10 billion cubic meters of Azerbaijani gas from the Caspian region through Georgia and Turkey to Europe.

In addition to Shah Deniz, Azerbaijan connects its gas future with other large fields, such as Absheron, Umid, and Babek and expected future discoveries in deep waters, for instance, Shafag-Asiman prospect.

Moreover, the very fact that Umid deposit was discovered in 2010 by Azerbaijani specialists is encouraging. This is the first field discovered by the State Oil Company of Azerbaijan (SOCAR) during the years of independence. The total reserves of the field are estimated at 200 billion cubic meters of gas and 40 million tons of condensate.

Today, the specialists of oil sector in the country are mostly Azerbaijani nationals. For example, at the end of the second quarter of 2019, the number of BP's Azerbaijani national employees reached 2,510 people including fixed-term employees.

Since mid-2018, 90 per cent of BP Azerbaijan's professional staff has been nationals, and non-professional staff of BP in Azerbaijan is 100 percent nationalized.

It is noteworthy that in 2018, Azerbaijan's state oil company SOCAR carried out drilling operations with a length of more than 160.000 meters, with the exception of operating companies and joint ventures. Compared to the previous year, SOCAR increased drilling operations by 16.6 percent.

There are different drilling companies operating in Azerbaijan including SOCAR-AQS, Caspian Drilling Company, Turan Drilling and Engineering, which is the joint venture of SOCAR-AQS and KCA Deutag, and others.

Each of these companies is carrying out an enormous work in this sphere. For example, Caspian Drilling Company plans to commence drilling on the Karabakh field in the fourth quarter of the year. The company's Istiglal rig continues to drill in Shah Deniz field. SOCAR-AQS continues drilling wells at the West Absheron, Gunashli, and Bulla fields.

The signing of international oil agreements has laid a solid foundation for the development of fruitful and mutually beneficial cooperation with the states of the companies participating in the oil agreements, created favorable conditions for further strengthening the country's geopolitical position and accelerating the process of integration into the global economy.

In order to turn young independent Azerbaijan into a modern, strong state with sustainable economic development, the national leader Heydar Aliyev defined an oil strategy as the main direction.

The new oil strategy ensured the attraction of foreign investors to the development of Azerbaijan's oil fields, diversification of crude oil transportation routes, efficient management of oil revenues and Azerbaijan's entry into a new stage of development.

Azerbaijan is already the leading state in the region and the oil factor plays an important role in the development of its economy. Income derived from the oil sector is being transferred to the development of the non-oil sector, which means the prosperity of the country's economy as a whole.

The article is written to be presented at the competition titled '25th anniversary of the Contract of the Century' held by SOCAR-AQS and Azerbaijan Press Council among media representatives.

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History, present and future prospects of drilling in Azerbaijan's oil and gas industry

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