OREANDA-NEWS. June 11, 2010. Total E&P Absheron b.v. is ready to drill first exploration well ABX-2 at Absheorn block in Azerbaijani sector of the Caspian Sea to be one of the most expensive well ever drilled in the sea water area.

Jean Carriay, the manager for Absheron project, says that such well, with taking into account depth of sea and well itself cost USD 150-200 million.

Earlier the Company estimated expenditures on well drilling at the level of USD 100 million. It does not bring any precise estimates.

Already in January or February Total plans to uncover a producing reservoir on the block that will allow estimation of structure’s reserves. In connection with expected abnormally high pressure it was conducted modeling and simulation of behavior of strata. According to operator’s estimates, gas blowouts in the course of works will make 100,000 up to 400,000 cu m a day. Condensate blowouts will total up to 250 cu m a day but as the reservoir is emptied they will reduce to 100 cu m.

Drilling start is scheduled for this September and completion for April or May of 2011. Drilling of well Absheron-2 will be carried out from semisubmersible drilling rig named after Heydar Aliyev belonging to Maersk. The well with depth of 7,100-7,200 m will be drilled at sea depth of 470-480 m. Such well have type which is standard for development in the Caspian type. We expect positive results of the drilling.

Total will conduct drilling works within the PSA contract on exploration, development and production sharing of Absheron offshore structure. Under this contract, signed on 27 February 2009, equity stakes of SOCAR and Total (project operator) were originally 40% and 60% respectively. Then Total transferred a 25% stake to France’s GDF Suez, but kept operator status.

In June SOCAR’s first vice president Khoshbakht Yusifzadeh stated that Total would begin drilling the first exploration well on 1 September.

“In accordance with primary estimations, reserves of Absheron structure make up to 300 bn cu m of gas,” he said then.

The well will be located a little apart from the first exploration well drilled earlier at the structure. In specialists’ opinion, this will be more successful place. The planned depth is 7 140 m. When the well is drilled to depth of 6 900 m and Pereriv measures is reached, the issue with productivity of strata will become clear. Depth to 7 150 m supposes uncapping of Gala measure, which was not uncovered before.

Earlier the office of the Holland’s Total E & PI Absheron B.V. passed registration in the country. French citizen Marc Feuillade is the director of the office. The office is located in Baku at the address: 69, Nizami St., Baku.

At the same time SOCAR president Rovnag Abdullayev informed that first well drilling would begin by September, while industry & energy minister Natig Aliyev estimated structure’s reserves at the level of 200 bn cu m of gas.

The PSA was signed for 30 years. The contract area is 747 sq km. Under the contract, accompanying gas produced at the contract area will be transported to SOCAR free of charge. In case the natural gas resources are revealed at the contract area, SOCAR and Total will define additional terms of their commercial development of these reserves and on the basis of reached arrangement to work out and confirm work program.

Within 30 days since the contract came into force, Total has to pay a USD 1 million bonus. Also within 30 days after the work program is confirmed, Total will have to pay USD 1 million bonus per 100 million barrels of extracted hydrocarbons determined in the program. Furthermore, within 30 days since industrial development at the field was commenced, project operator is to pay a USD 25 million bonus.

During exploration period Total will also pay USD 2,000 per every square kilometer of the contract area.

During three-year exploration period, Total has to drill one exploratory well. If the drilling is a success, then the company is allowed to drill two more wells within forthcoming three years. The project will consist of two stages – development and exploration.

Under Total’s evaluations, investments in development period make USD 100 million, including drilling of the first exploratory well. Under SOCAR’s estimations, Absheron proved resources come to 300 bn cu m of gas and 45 million tons of condensate.

This field used to be developed by Total and Chevron, but in 2003 the companies decided to cancel the suitable agreement on exploration, development and production sharing from the offshore structure of Absheron.

In 2008, Total expressed interest in the field again and in February 2009 a suitable agreement was signed with SOCAR.

Till 2003, foreign contractors have invested USD 136.6 million in this field. Moreover, they have paid to Azerbaijan some bonuses and fees amounting USD 14.5 million and USD 39 million more as compensation for contractors’ refusal from drilling the second exploratory well in the field.