In Fact, Phase 2 of Shah Deniz is a Very Important Project, But It is Also a Very Costly One
An interview with Marc Feiullade, Country Reprenstative of TOTAL to Azerbaijan.
AT: Total Azerbaijan is about to start exploration and drilling in Absheron field. It must be the deepest exploration well (deeper than 7000 meters) in the Caspian Sea among the drilled ones. It is clear that the drilling of this well will be under difficult geological conditions and will require more finance than previously drilled wells in the Caspian Sea. What makes Total implement the project which carries high risk?
First, it is essential to recall that Total Exploration & Production (E&P) has now been in Azerbaijan for more than 15 years and our presence almost coincides with the renaissance of the ancient, but still young Republic of Azerbaijan.
During this time, Total has demonstrated its strong commitment to the success of the industry in Azerbaijan through its active participation across the oil & gas sector: exploration, development, production and transportation of going to drill is very challenging and it will be one of the deepest wells drilled in the south Caspian Sea. Moreover, the water depth in this area is around 500m, the geology is very complex and the high pressure that we’ll probably face can be even higher than the pressure encountered in the Shah Deniz field.
Taking into account all these challenges, the absolute priority in the preparatory work carried out for the well was given to safety and environment at all stages and in all areas.
In case there is a discovery on Absheron, new challenges will emerge to develop a field with 500m of water depth and very high pressure. As we demonstrated in other places, the quality of our team together with SOCAR and our capacity to develop new technologies will allow us to move forward in the production phase.
AT: Total has 10% in « Shah Deniz » project the largest gas field of the Caspian Sea. “Phase 2 ” project is expected to be sanctioned in 2011 in the frame of “Shah Deniz” agreement. It is the biggest project in oil and gas sphere of Azerbaijan. Will the implementation of this project make it possible for Azerbaijan to prove himself as a new player in the European gas market?
ln fact, Phase 2 of Shah Deniz is a very important project, but it is also a very costly one. Therefore, before to go ahead with this development, the export of the gas should be secured by gas sales contracts and establishment of reliable transport and transit infrastructures.
The MOU signed between Azerbaijan and Turkey in June 2010 with an option of selling additional 6 billion cubic meters per year to Turkey, which also fixes the principle of transit of volumes up to 10 billion cubic meters per year to Europe, gives a good opportunity to the Azerbaijani gas for the decades to come.
Today, all the parties concerned work hard to finalize and implement all the necessary agreements required by middle of 2011 to execute this MOU. The teams working on these agreements under the leadership of SOCAR are moving forward. There are lots of issues to be investigated and clarified, such as purchase conditions for the final customers, infrastructures of transit through Turkey, etc., as well as the upstream issues related to the optimization of Phase 2 gas production. All of these must be managed and finalized in 2011 in order to start the detailed engineering of the project. Definitely, the year 2011 will be crucial to achieve effective gas sales of Phase 2 in 2017. The successful execution of all these aspects of the project will allow opening a route to Europe for substantial volumes of gas in conformity with the objectives expressed in die MOU signed between Azerbaijan and Turkey.
AT: Let’s imagine that as a conclusion of exploration in Absheron 200-300 billion m3 gas reserves are available to extract. Of course 5-6 years are required for the use of it. Then there will be need for another gas pipe line as Baku-Tbilisi-Erzurum gas pipeline will operate fully to export gas of “Shah Deniz”. How do you think, is it possible to imagine any route for transferring gas of “Absheron” to Europe?
Let`s start drilling the exploration well before speaking about the reserves of Absheron! Anyway, in case we have a positive result, the first commercial gas from the field can be envisaged in 2020 the earliest, taking into account the time needed for the exploration and the appraisal works to be carried out before taking any decision on feasibility of the project and its further development.
With such a schedule one can imagine that all the today’s solutions will be envisaged, as well as the diversification routes of the emerging export markets. However, export solutions for new sources of gas in Azerbaijan will probably con-sider also other possible sources of gas from neighboring countries.
AT: Total has special place in development of economic relations between Azerbaijan and France. From this point of view what is your opinion on cooperation ties of Total with SOCAR and Azerbaijan?
It is true that being present in Azerbaijan for more than 15 years, Total established a close relationship with SOCAR and the Azerbaijani authorities.
Furthermore, Total has always shown a genuine interest for the people in Azerbaijan by facilitating and financing projects in the fields of education, health and art. Without such confidence it would have been impossible to prepare such a difficult well as Absheron-2 in less than 18 months since signing of the PSA with SOCAR. Let me take this opportunity to thank warmly the Azeri Authorities and SOCAR for their continuous support.
It is my sincere wish that Total expands its activity in Azerbaijan in the coming years in close cooperation with Azerbaijani authorities and SOCAR for the benefit of Azerbaijan and its oil & gas industry.