Surakhany bloc most successful and productive among production sharing agreements

Surakhany Operating Company is the most successful among the operation companies operating onshore Azerbaijan. By October 1, 2014 $74,400,000 was transferred to the State Oil Fund of Azerbaijan (SOFAZ) from development of the Surakhany onshore field.

A source from SOFAZ told Turan’s correspondent that “the funds were received since commissioning of the production sharing agreement (PSA) and till now none of the operation companies has brought so much profit to the state from the onshore fields.”

The contract for the Surakhany project was signed on August 16, 2005 in Baku between SOCAR (25%) and Raffi Oil offshore company (UAE – 75%). This was the 26^th PSA signed by SOCAR since September 1994.

Total area of the contract bloc located 14 km northeast of Baku is 13 sq.km. Development of the Surakhany group of fields started in 1904 and since that time till mid 2055 114,597,000 tons of oil and over 10 billion cub.m. of gas was extracted here. The peak of oil production on the field occurred in 1931 and it produced 4,189,000 tons of oil.

Then SOCAR’s geologists believe that the residue extractible resources of the contract area total 6,822,000 tons.

After that in 2011 SOCAR posted information on its web site that volume of oil extracted on the contract area reached 115,500,000 tons. (Although the operator Rafi Oil joined the Extractive Industry Transparency Initiative (EITI) in 2006, it has never released any statement for press about its operations). This means that during 5.5 years 1 million tons of oil was extracted as  a part of PSA.

According to the contract conditions, the project operator has committed itself to increase daily oil production on the contract bloc by 1.5 times within two years. The contract, which has been discussed and approved by the parliament deputies, envisaged that the contractor commits itself to increase production up to 257,000 tons by 2014.

Considering this data (during 2005 130,000 tons of oil was produced on the field), in 2007 Rafi Oil had to extract about 200,000 tons of oil on the Surakhany field to fulfill the contract obligations. However, the production  program has been overfulfilled during 5 years. It is not clear why this offshore company successfully extracting oil on this field has decided to leave this project.

Another offshore company from Dubai – UGE Lanser PTI – has become the new operator of the Surakhany Operating Company. Since 2011 it has been fulfilling its contract obligations even more successfully. During 2013 it extracted a record  volume of oil – 573,000 tons – on the Surakhany field and the contract obligations has been overfilled by 2.2 times.

The operation company numbers 1,427 employees, including foreign specialists. After coming of UGE Lanser all 1160 employees have kept their jobs.—0—