OREANDA-NEWS. April 27, 2010. France’s Total begins practical realization of the PSA contract on exploration, development and production sharing of Absheron offshore structure. Under the contract signed on 27 February 2009, equity stakes of SOCAR and Total (project operator) are 40% and 60% respectively.

Earlier SOCAR’s 1st vice president Khoshbakht Yusifzadeh informed that the operator was ready to begin drilling of the first exploration well on the structure.

“According to Company’s plans, drilling will begin in the 2nd half of 2010,” Yusifzadeh said.

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

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.

Earlier Yusifzadeh suggested drilling of the well to the depth of 7,000 meters, in particular drilling down to productive strata – lower than Gala measure.

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 extra terms of their commercial development, elaborate 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.