Azerbaijan's gas strategy pays off as TotalEnergies fires up production from Absheron field Review by Caliber.Az

The energy crisis in Europe over the past year and a half has clearly confirmed the importance of hydrocarbons for the energy security of the Old World. Azerbaijan, which signed a Memorandum of Strategic Partnership in the field of energy with the Europeans a year ago, plays a special role in ensuring natural gas supplies to the EU countries.

According to new estimates, the projected reserves of "blue fuel" in Azerbaijan are forecasted at about 4 trillion cubic metres, and with the support of foreign partners all new gas fields are being developed. Thus, on the eve of the State Oil Company SOCAR and its French partner TotalEnergies announced the kick-start of production within the first phase of the Absheron gas condensate field in the Caspian Sea.

Located one hundred kilometres southeast of Baku at a depth of 500 metres in the Azerbaijani sector of the Caspian Sea, the Absheron field was discovered by Azerbaijani geologists in the 1960s and today it is recognized as the second largest gas field after Shah Deniz. An agreement on exploration, development and production sharing in the Absheron offshore block with a contract area of 747 square kilometres was signed on February 27, 2009, for a period of 30 years.

This contract is being implemented on a parity basis - SOCAR Absheron and Total E&P Absheron each hold a 50 per cent stake in the project, and the operator is the Joint Operating Company of Absheron Petroleum B.V. (JOCAP). In 2019, the partners completed the drilling of the 7,411-meter-deep ABD-001 production and appraisal well in the Absheron field.

The first phase of development includes the construction of a subsea production well, which is connected to a new gas receiving and primary processing platform, in turn, linked to SOCAR's offshore infrastructure in the Oil Rocks field. Notably, the Absheron IHS receiving platform is the first remotely operated platform in the Caspian Sea and will be controlled from the Central Control Room at Oil Rocks.

The field's total reserves are estimated at 350-360 billion cubic metres of gas and 100 million tons of condensate and will be developed in stages: according to SOCAR, the first stage is expected to produce 1.5 billion cubic metres per year.

"We are very pleased to announce the launch of the Absheron gas field as a result of the successful work of our exploration team. This project is in line with the company's strategy to meet the growing demand for gas and also strengthens our partnership with SOCAR," said Nicolas Terraz, president of the exploration and production segment at TotalEnergies, quoted by the company's website.

The start of gas and condensate production at the new Absheron field is a landmark event: it confirms Azerbaijan's large enough reserves of "blue fuel" in offshore fields, and also testifies to the effective policy of international partnership to attract investment and the most modern technologies in the production sector. In particular, as Regis Agut, Managing Regional Director of TotalEnergies in Azerbaijan, recently noted, the production processes at Absheron are planned to be carried out using "green" technologies and with minimal CO2 emissions.

"All this will allow us to achieve sustainability and safety in natural gas production. We have developed a Smart Home Data Centre at our head office where we monitor the drilling process and project efficiency, and this data centre allows us to monitor all TotalEnergies fields in the world," Agut said.

The development of the Absheron field will contribute to the supply of gas to the domestic market: first of all, it concerns the corporate sector - thermal power plants, and petrochemical enterprises (producers of nitrogen fertilizers, methanol, etc.). This project will also help to increase supplies to potential consumers, including those in the rapidly reviving towns and villages of the Karabakh region.

On the other hand, it will be possible to transfer the "blue fuel" produced in other fields to international markets due to Absheron's production capacity. The demand is quite high, given the Memorandum of Strategic Partnership in the field of energy signed between Azerbaijan and the European Union in July 2022, which envisages a doubling of Azerbaijani natural gas exports to more than 20 billion cubic metres by the end of 2027, thus increasing the coverage of new countries with Azerbaijani gas supplies.

It should be noted that today Azerbaijani gas in the European region is exported to Italy, Greece, Bulgaria and Romania, and this year these supplies are planned to reach about 12 billion cubic metres. Moreover, over the past year and a half, more than 10 countries have lined up with a request to Azerbaijan to either increase gas supplies or to start them.

Azerbaijani gas exports are indeed dynamically growing, and this is confirmed by statistics: in 2021 exports amounted to 19 billion cubic metres, in 2022 increased to 22.6 billion cubic metres, and in 2023 it is planned to increase total external supplies to 24.5 billion cubic metres.

"Gas exports from Azerbaijan in 2023 will exceed 24 billion cubic metres, half of which will be directed to Europe. Due to the expansion of the South Gas Complex and the implementation of the Ring of Solidarity project, the number of countries buying Azerbaijani gas will increase from 6 to 10.

Accordingly, Azerbaijan is working on obtaining additional volumes of gas: recoverable reserves are estimated at 933 billion cubic metres, proven reserves - 1.7 trillion cubic metres, forecasted - about 4 trillion cubic metres," Energy Minister Parviz Shahbazov said.

In late May, Azerbaijani President Ilham Aliyev noted, speaking at the opening ceremony of the 28th International Exhibition "Caspian Oil and Gas", that the republic has sources to increase supplies to at least 20 billion cubic metres by 2027. The head of state recalled that one of the sources for increasing production is the largest gas field Shah Deniz and the new Absheron gas field.

At the same time, Azerbaijan is actively cooperating with its strategic partner BP to produce deep gas from the Azeri-Chirag-Guneshli field block, and it is expected that the first gas will be produced here by the end of 2024.

It should be noted that reserves of deep gas at ACG are currently forecasted at about 300 billion cubic metres. In turn, the reserves of Shah Deniz field are estimated at 1.2 trillion cubic metres of gas, and condensate - 240 million tons. At the same time, 192 billion cubic metres of gas and 41 million tons of condensate were produced from this field from the beginning of its operation until May 1, 2023, i.e. not more than one-sixth of the available reserves.

As for the potential for further increase of natural gas supplies after 2027, the resource base for this is also quite extensive: in the long term, the potential of such new fields as Umid, Babek, Nakhchivan, Shafagh-Asiman, the total capacity of which is approaching 1 trillion cubic metres of gas, will be used.

Moreover, as SOCAR First Vice President Khoshbakht Yusifzadeh recently noted, it is planned to revise the potential of gas fields, to conduct technical assessment anew, and in this regard, the State Oil Company will cooperate with French TotalEnergies.

It should be noted that the projected reserves of the Shafagh-Asiman block are 500 billion cubic metres of gas and 65 million tons of condensate, while the potential of Absheron is estimated at 350-360 billion cubic metres. Also, according to preliminary data, deposits of the Babek prospective field are estimated at 400 billion cubic metres of gas and 80 million tons of condensate.

Thus, Azerbaijan's impressive gas reserves make our country a key partner of the EU in the supply of "blue fuel" for many years to come. Having become a guarantor of Europe's energy security, our country, in addition to tangible revenues from the export of gas raw materials, enters the electricity market of the Old World and gains access to know-how in "green" energy and hydrogen production, not to mention the long-term geopolitical advantages of such cooperation.