Azerbaijan may develop its shale deposits – SOCAR says

Oil derricks on the shore near Baku, Azerbaijan
Source: DollarPhotoClub

Azerbaijan – the second-largest oil producer in the former Soviet Union – may engage in the exploration of its shale resources, but the development of these deposits will depend on profitability – Azerbaijan’s energy giant SOCAR announced.

“In this regard [shale oil and gas production], there is some disagreement, but we believe that Azerbaijan has the ability to extract oil and gas from shale, whatever the results are,” said Khoshbakht Yusifzade, the first vice-president of SOCAR, on April 29 in Baku.

He explained that, at present, most extraction carried out by SOCAR was conducted at a depth of 6,000-7,000 meters, where finding oil was unlikely. These are predominantly condensate fields.

“The reason is that we are now working on subsurface fields. Accordingly, it is unlikely we will find oil at a depth of 6,000-7,000 meters. Basically it is gas fields. Of course, there are also condensate wells in the amount of 240 million tons of condensate,” Yusifzade said.

When asked about what action needs to be taken in order to increase the country’s declining oil production, Mr Yusifzade gave the need to increase oil recovery as the most important factor.

“To date, we have produced 1 billion metric tons of oil onshore,” he said.

“However, there is balance reserve and production reserve,” he explained. “Production reserve in Azerbaijan is only 40 per cent. If we can increase the production reserve by 10-20 per cent, it is possible to significantly increase oil production.”

Speaking to Vestnik Kavkaza, Ilham Shaban, the head of the Center for Oil Research, said that most fields in Azerbaijan were aged 50-60 years, some over a century old. Their extractability is about 15-16 per cent, underwater fields have 25 per cent. One oil well 3,500-4,000m deep may cost $5-10 million. Measures to improve extraction efficiency will cost about $2 million.

Mr Yusifzade said a special commission has been created, which is working to increase the oil recovery factor.

“Another question is the study of Mesozoic sediments,” Yusifzade said. “Today we are working in this field with the companies Total, ConocoPhillips, Statoil. Also, negotiations on this issue are underway with ANAS.”

However, Energy Minister Natig Aliyev remineded that the Mesozoic layer was up to 10,000 meters deep, and so the development of the shale reserves there will depend on profitability.

The last piece of the puzzle to increase oil recovery is achieving production of oil and gas from shale, Yusifzade concluded.

Azeri shale gas fields, located at the territory of Gobustan, Shemakha and other regions, have already attracted interest from oil and gas majors, but so far Azerbaijan has been slow in deciding whether these deposits will be explored.

With the startup of the Shah Deniz – one of the world’s largest natural gas and condensate fields – in late 2006, Azerbaijan became a natural gas net exporter. Shah Deniz Full Field Development is expected to have peak capacity of 565 Bcf (in addition to the 315 Bcf in Phase I), making it one of the largest conventional gas development projects anywhere in the world. It is understandable, therefore, that exploring unconventional deposits has traditionally been low on the country’s agenda.

Back in June 2014, Vitaliy Baylarbayov, SOCAR deputy vice-president said in an interview with Reuters: “We are exploring shale gas production potential, but I don’t think we’ll start its production in Azerbaijan any time soon”.

Mr Yusifzade’s comments might signal a change in direction.

 

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