Lukoil in talks to join Umid-Babek project

30 May 2018, Week 21, Issue 983

Russia’s Lukoil, a leading operator in the Caspian Sea, is eyeing a stake in Azerbaijan’s offshore Umid-Babek oil and gas project.

“We are counting on new assets, and we are looking at the Umid-Babek block,” Lukoil CEO Vagit Alekperov told local news agency APA last week. “Negotiations are under way with SOCAR regarding the development of this block.”

Umid-Babek is situated about 75 km southeast of Baku, in waters 170 metres deep. SOCAR, Azerbaijan’s state oil company, partnered with UK independent Nobel Upstream to explore the block in 2008, and two years later they discovered the Umid gas field. At the time, SOCAR described Umid as Azerbaijan’s biggest find since Shah Deniz, a giant offshore field identified in 1999.

SOCAR and Nobel launched trial production at Umid in 2012, achieving an output of 357 mcm in 2014. They also carried out a 3D seismic shoot at the Babek prospect.

The pair halted development of the block in late 2014, however, after experiencing technical problems in the production process. Umid contains an estimated 600 bcm of gas and 800 million barrels of condensate, according to Nobel. But these resources are located over 6,000 metres under the seabed in high-pressure and high-temperature reservoirs, presenting challenges to development.

SOCAR and Nobel have been seeking an international partner with the financial and technical clout to bring Umid into commercial production for several years now, thus far without success. Norway’s Statoil was rumoured as a potential candidate in 2014, but no deal was announced. SOCAR also held talks with Total in October last year, in the hope of bringing the French major on board.

SOCAR began a fresh search for investors in April this year.

Lukoil has an extensive business in the Caspian region. The private company operates a number of fields in the Russian section of the Caspian Sea, two of which have already entered production. It also holds minority stakes in the onshore Tengiz and Karachaganak in western Kazakhstan. Earlier this year Alekperov announced the group was looking to acquire two subsea blocks off the coast of Kazakhstan.

Nobel and SOCAR intend to launch production at Umid and Babek in 2022 and 2023 respectively, using two platforms. Umid alone is anticipated to yield an annual output of 3-4 bcm of gas, which could be sold on the Azeri market or exported to Europe via the Southern Gas Corridor (SGC) pipeline network, scheduled for completion before 2020.

Joseph Murphy

Edited by

Joseph Murphy


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