If the present shortage of offshore drilling installations in the Caspian is to be solved, it appears to be through the "rig club" scheme operating in the region. Of course the alternative to joining such a club, which is basically a time-share deal for drilling rigs, is new-builds, and that could lead to a future glut - at least as costly as a scarcity of units. However, new technology may bring down both the drilling costs as well as the risk of overcapacity to a significant extent.

The Shelf-3 jackup, moored at the beach of Shekhov south of Baku, is considered obsolete to the extent that repairs would be much too expensive ever to be earned back. The same is true for the other Soviet-built drilling barge Shelf-1. Only Shelf-7, now in the docks of Astrakhan, could be employed for deepwater wells.
It is likely that the rig will be made ready by Lukoil for the deepwater sector of its offshore block. Lukoil has been granted exclusive drilling rights in the entire Russian sector of the Caspian Sea. The rig is, however, disputed by the governments of Russia and Azerbaijan. According to insiders, a compromise is under negotiation according to which Lukoil would commit itself to use Shelf-7 for its D-222 block off the Apsheron coast.
This spring, the Trident-20, brought in by Schlumberger's subsidiary Sedco piece by piece from Singapore and put together on the spot, is to start drilling its first well for Elf Aquitaine off the Talysh coast.
"It is the fifth of its kind," Elf's director in Baku, Jean-François Daganaud, told Hart's E&P. "It is one of the North Sea types, meaning solid and powerful. The whole structure weighs no less than 40,000 tons, with an air-gap of 40ft.

Feet on the ground
"This is more than we actually need, but the reason is that waves on the North Sea can be up to 40ft high, whereas in the Caspian they are never higher than 20ft. But the most important thing is that it has its feet on the ground - literally speaking. Floating installations, like those in the Gulf of Mexico, always carry a relatively high risk."
The "jackup club" using the Trident rig consists of Elf, for its Lenkoran-Deniz block, Mobil, which runs the Oguz consortium, Agip for its Kurdashi block, and a Japanese consortium consisting of Japex, Inpex, Itochu and Teikoku. Together, their reserves are estimated at about 500 million tonnes of oil, the development of which, if confirmed, will cost up to US $7 billion.
"We [Elf], Mobil, Agip and the Japanese group have signed a contract with Sedco for the use of the Trident-20 for 3 years," said Daganaud, "of which 2 years have been fully scheduled now. We are the first to use it for one well, after which Mobil gets it for its first well. Then we get it back for our second well, and then it goes to Agip for their first one. Then Mobil gets it back for their second well, after which the Japanese consortium JAOC will drill their first two wells with it. What happens next has not been decided yet.
"Much will depend on who finds how much oil. Whoever hits rich reserves will


also be able, technically speaking, to use the jackup for production."
The formation of rig clubs is widely seen
as an important step in the direction of better cooperation between companies in Azerbaijan, and could even lead to an all-Caspian exchange of technology between companies working in different Caspian littoral state sectors. So far, political trouble has been the main obstacle to such a development, but on a company level the readiness seems to be there.

Shortfall
Yet the rig clubs have failed to fill all the gap - even those of their own members. Mobil is still without equipment for its Salavan/Dalga/Lerikh block. Its future partner Exxon is looking for a rig for its semishallowwater Nakhchivan, average depth 150ft, north of Socar's Oily Rocks. Moncrif will have to find an installation for its Padar-Harami concession.
Finally Statoil, which hopes to sign an agreement with Socar and the Azeri government for the exploration and development of a block of its own this spring, will also face the dilemma between queuing up and investing a considerable amount of money into exploration drilling equipment.
"We prefer to join one of the existing clubs, or to hook up to a new one," Statoil's Baku vice president, Torulf Gjedrem, said. "We will only need a rig or a jackup for a limited period, which is unlikely to justify the investment.
"As for using rigs for production, it is indeed technically possible. But if you take into account that a fixed production platform costs no more than $100 million, using rigs or jackups for production is a relatively expensive solution."

Investment
According to Elf's Daganaud, a jackup should work for 10 years to make the investment worthwhile. In the case of deepwater rigs, this period is substantially longer, given the construction and maintenance costs.
To make matters even more complicated, conditions on the sea floor differ from block to block, meaning that rigs and jackups will often have to be upgraded with new provisions in order to become fit for the next job.
Among the most recent technical innovations to arise to combat the Caspian Sea's unstable and swampy seabed condition are special "suction-embedded" mooring systems, with which large quantities of mud around the anchors are "sucked up" and the anchors are buried under a thick layer of material.
It is likely that more technical innovations will come to the market in the near future.
"The big dilemma is between ensuring you have enough installations at your disposal, or accepting to queue up," Daganaud concluded.
"The danger of the former option is that installations may lay idle for certain periods, which costs a lot of money. The risk of the latter option is that companies may have to wait for their turn, which also costs money.
"The problem with the Caspian is that the rig and jackup business is no open market, like it is in the rest of the world where rigs move from one side of the globe to the other. This is why there is no competition on the offering side, and oil companies over here have to work according to complicated schemes, rather than leaving the business to the mechanism of free offer and demand."