BP Goes Deeper for Shah Deniz Gas

The SDX-04 appraisal and exploration well, some 70 kilometers south east of Baku, discovered a new high pressure reservoir in a deeper structure below the currently producing reservoir.

The well was drilled to a Caspian-record depth of more than 7,300 meters in the south western part of Shah Deniz by the semisub, Istiglal.

The exploration discovery represents a potentially significant find. There will be appraisal to fully delineate the new structure in the next few years.

In addition, during the appraisal phase, the well encountered gas condensate in the currently producing horizons extending the field to the south. Test flows were at the maximum capacity of the on-board equipment of 35 million standard cubic feet a day (1 million standard cubic meters a day). Results confirm sufficient gas at Shah Deniz for a second stage of development. Although further work is required to define this second phase it will likely be similar or larger than stage 1 - 8.6 bcma (billion cubic meters a year).

"The SDX-04 well is a major achievement and it justifies our plans for the next stage of development of the field. I am proud to say that the results of the well prove that it was worth making the effort to complete and test the deepest well ever drilled in the Caspian as we met both the appraisal and exploration objectives set for it," said Bill Schrader, President of BP Azerbaijan.

"We believe the results have significantly added to our understanding of the entire field. Such a deep, high pressure reservoir will require new technologies that are presently under development in the industry. This is a tremendous success for the Shah Deniz partnership and for Azerbaijan," Schrader added.

StatoilHydro's Executive Vice President for International Exploration and Production, Peter Mellbye, said "Shah Deniz is a big gas and condensate field by international standards. We are very pleased that the well has proven that there are reserves that have the potential of more than doubling the output from the field."

Mellbye further went on to say "We believe that gas from the Stage 2 development can contribute to cover the domestic demand for gas in Azerbaijan, as well as supplying gas not only to the regional markets Georgia and Turkey, but also to markets in the European Union. And, by extending the Shah Deniz value chain beyond Turkey, Azerbaijan will become a supplier of gas to Europe, and the first step in making the fourth corridor for gas supply to Europe will be made. We are ready to work with Azerbaijan and our partners to commercialize the gas from Stage 2."

The parties to the Shah Deniz production sharing agreement (PSA) are: BP (operator - 25,5%), StatoilHydro (25,5%), the State Oil Company of Azerbaijan Republic (SOCAR - 10%), LUKOil (10%), NICO (10%), Total (10%), and TPAO (9%).

The previous three exploration and appraisal wells, started in 1999, (SDX-01, SDX-02 and SDX-03) were designed to appraise and delineate the now producing stage 1 reserves in northern flank of the field. They focused on two structures -- the Fasila Suite and the Balakhany VIII interval.

The Shah Deniz field lies in water depths between 50 meters and 600 meters, some 70 kilometers south east of Baku. The Shah Deniz PSA was ratified on October 17, 1996.