While those hundreds of early wells in Azerbaijan, dug manually over the dim and distant centuries, were very crude affairs, by the year 1900 the country had 3,000 producing onshore oil wells. In terms of its offshore sector of the Caspian Sea, the first well was drilled in 1949 on the Nesh Dashlary field and commissioned to produce 715 b/d of oil.

Fast forward to the current day, and this mostly benign offshore environment is experiencing a massive surge of investment in new projects, almost entirely dominated by the three Caspian oil powerhouses of Azerbaijan, Kazakhstan, and Russia.

Azerbaijan remains by far the largest offshore producer in the Caspian at present and is busy trying to add to its riches, with the current major project list headed by Phase 2 of BP’s giant Shah Deniz gas development. This flagship project is still in the study phase of a production-sharing agreement (PSA) that extends to 2036 after a deal signed between Azerbaijan’s state oil company Socar and the Shah Deniz partners BP, Statoil, and Total.

Led by BP (with a 25.5% working interest), the US $25 billion second phase of development will, once it gets a final investment decision, eventually triple overall production from the 30-Tcf field and deliver an additional 565 Bcf/year of gas and up to 100,000 bbl of condensate (Phase 1 already is producing 317 Bcf/year after coming onstream in late 2006).

The second phase for the field, which lies around 70 km (43 miles) offshore, will include two new bridge-linked production platforms, 26 to 30 subsea wells to be drilled with two semisubmersible rigs, 500 km (311 miles) of subsea pipelines installed in up to 550 m (1,805 ft) of water, a 16-Bcu m/year upgrade for the South Caucasus Pipeline, and expansion of the Sangachal Terminal. Further pipelines will be built and expanded to transport Shah Deniz gas through Turkey and Europe, totaling more than 4,000 km (2,485 miles).

First gas is penciled in for late 2017 once a final investment decision is made around mid-2013.

Project pioneer role for BP

BP has been a pioneer in Azerbaijan since the early 1990s and is the largest foreign investor in the country. It has spearheaded the way with the shallow-water Azeri, Chirag, and Guneshli (ACG) oilfield development, and it remains busy with the large amount of work left to do on that project. With a figure approaching $2 billion in capex, this world-class development has been producing an average of 823,100 b/d from the Chirag, Central Azeri, West Azeri, East Azeri, and Deep Water Gunashli (DWG) platforms.

With the $6 billion Chirag oil project having a new 48-slot fixed platform installed in the Chirag-Deepwater Gunashli area in 170 m (558 ft) of water, the production, drilling, and quarters facility will be partially integrated

with the existing DWG facility via subsea pipelines for the export of produced water for disposal and the receipt of injection water for reservoir waterflood.

Around $4 billion of the total will be spent on the construction of the facilities and the predrill program, with the remainder to be spent on platform development well drilling during the production period. First oil is planned to flow later this year from the field, which lies approximately 120 km (75 miles) southeast of the capital city of Baku.

The new platform will primarily enable additional targets to be drilled in the Pereriv and Balakhany reservoirs. The project also will allow a dedicated waterflood into the Balakany reservoirs through the new platform and a waterflood into the Pereriv reservoirs through two subsea water injection wells.

BP also is the operator of the Shafag-Asiman PSA in the Azeri sector of the Caspian Sea and is currently examining seismic data shot over the license in 2012.

Absheron plans move on

The other major project emerging offshore Azerbaijan is Total’s Absheron field, for which the company submitted a formal notice of discovery and commerciality in July 2012. The field is operated by the company on behalf of its partners Socar and GDF Suez.

This is a block with some history as it was originally operated in the late 1990s by Chevron, which must be having some regrets after pulling out in 2003 after drilling an unsuccessful well in 2001 and deciding it did not want to drill another.

Sitting in 500 m (1,640 ft) of water approximately 100 km (62 miles) offshore, Total decided the block remained prospective and signed a heads of agreement in 2008 with Socar to be the operator of the block. Total signed a full PSA the following year and was joined by French compatriot GDF Suez.

The submittal of the formal notice of discovery and commerciality in 2012 was a key milestone for the Absheron block following the drilling of the discovery well in September 2011 with the Absheron X-2 probe. One of the hydrocarbon-bearing intervals was tested at 3.4 MMcf/d of nonassociated gas, and during the production test, nearly 2,500 b/d of 42.5°API condensate also was produced.

Total estimates gas resources of 530 Bcf to 1 Tcf of gas with condensates in the Balakhany and Fasila formations in the northern compartment of the structure. The elongated structure straddles approximately 270 sq km (104 sq miles), and the cumulative net pay is more than 160 m (525 ft) thick.

Absheron is expected to be developed using a limited number of wells in a first phase of development, with an ongoing work program of studies and surveys still under way to better delineate the project. A 3-D seismic campaign also will be shot this year, and more appraisal wells may be drilled to better assess the extent and geometry of the structure.

Northern Caspian

To the north of Azerbaijan’s Caspian sector lies Kazakhstan’s own very shallow waters, where Eni and its partners are in the process of developing the giant and remote Kashagan field in the North Caspian PSA around 80 km (50 miles) southeast of the coastal port of Atyrau. The field extends over a surface area of approximately 75 km by 45 km (47 miles by 28 miles), with the reservoir lying some 4,200 m (13,780 ft) below the seabed.

The PSA also contains other fields such as Kashagan Southwest, Kalamkas, Aktote, and Kairan and will remain the sector’s main focus for E&P activity over the next few years.

Via the North Caspian Operating Co. NV, Eni is responsible for the execution of the first development phase and for the onshore part of the second development phase for this technically challenging field, which has estimated recoverable reserves of at least 13 Bbbl, making it one of the largest oil fields ever discovered.

With the development plan outlining a phased approach with the aim of producing between 7 Bbbl and 9 Bbbl of gross recoverable reserves, expandable to 13 Bbbl through partial gas reinjection, this is another world-class project for the Caspian.

This is a project that has plenty of technological challenges because the area is ice-bound for around five months of the year. This is largely due to the fact that there is low salinity because of freshwater from the Volga River combined with the shallow water and winter temperatures of below -30°C (-24°F). As a result, ice drifts and ice scouring place heavy pressure on construction activities.

High-pressure sour gas

Despite this, the first phase is progressing well using advanced techniques to cope with high reservoir pressures (11,168 psi of initial pressure), the presence of high concentrations of HS, and tough environmental conditions.

First oil is being forecast for June or July this year, with the overall scheme involving production hubs located on platforms and artificial island mounds (mainly to act as ice barriers), collecting production from satellite islands where production wells are being drilled.

In the first development phase oil and nonreinjected sour gas will be treated in the hubs and delivered, through two separate lines, to onshore treatment plants (located at Bolashak, near Atyrau). The oil will be further stabilized and purified. Natural gas will be treated for the removal of HS and will be mostly used as fuel for the production plants; the remaining amount will be marketed.

The initial phase is expected to produce around 370,000 b/d of oil, with a possible increase to 450,000 b/d. This will be added to in second and third development phases by contributions from other discoveries in the PSA area, with successful appraisal wells already drilled on the Aktote, Kairan, and Kalamkas structures. Partners in Kashagan are Eni, ExxonMobil, Shell, Total, ConocoPhillips, Inpex, and the state-owned KazMunaiGas.

Kashagan was discovered in 2000 and declared commercial in 2002 but has suffered several schedule rethinks in terms of its onstream date due to its challenging technical, logistical, and environmental nature. Some estimates put the total cost of developing the field at a massive $46 billion.

Kazakhstan has ambitions to be a world top 10 oil producer. It currently lies in 18th place, but if and when Kashagan hits its production figures, it will help double the country’s output before 2020.

Russian sector activity

In the Russian sector of the northern Caspian there are already eight large fields confirmed and a further 16 prospective structures, but progress has been relatively slow until the past couple of years.

It is Lukoil that has taken the lead here, with first oil produced from the Yury Korchagin field in 2010 after a discovery well was drilled in 2000. With recoverable reserves put at more than 1 Btons of oil equivalent, the ice-resistant production facility IRP-1 is being used to produce the field and is bridge-linked to the IRP-2 accommodation platform.

The produced oil is transported to a floating storage unit 58 km (36 miles) away via a 12-in. subsea pipeline before being offloaded to shuttle tankers.

More recently the pace of activity has stepped up again, with Lukoil pushing on with the development of its Vladimir Filanovsky field, which holds an estimated 1.1 Bbbl of recoverable oil and 1 Tcf of recoverable gas. The development will be followed around two years later by two gas-condensate discoveries – Sarmatskoye and Khvalynskoye.

The Russian operator estimates investment of $3.5 billion for the exploration and development of the field, which was discovered in 2005. Located around 50 km (31 miles) offshore in 10 m (33 ft) of water, it is expected to be commissioned in 2015. Unlike Kashagan, the field contains oil with sulfur content of just 0.1%.

The field will be developed via an ice-resistant fixed platform, a living quarters module platform, a central processing platform, and a risers block platform, all bridge-linked. The Vladimir Filanovsky hydrocarbons will be piped to the Yury Korchagin field infrastructure. Construction work includes the laying of 330 km (205 miles) of subsea pipeline and 350 km (217 miles) of onshore pipeline.

Construction of a transport and installation barge (TIB) to be used for construction of the offshore platforms got under way in December 2012 and was scheduled for delivery in March 2013. The TIB, with a loading capacity of 13,450 tons, will be used for pile-mounting the structures of the offshore platforms and installing the bridge links using a 400-ton offshore crane. Transportation and installation of the platforms and bridges will be carried out by Saipem.

Lukoil to spend $22 billion

The TIB also will assist in the installation of the topside sections of the platforms. The construction of subsea pipelines to connect the two offshore fields began in April 2012. The pipelines will measure 40 km (25 miles) in length and will be equipped with band anodes, a three-layer polypropylene coating, and a solid concrete ballasting coating. Development drilling work is expected to get under way this year.

Filanovksy is something of a strategic gateway project for Lukoil in the Caspian Sea. The company has plans in place to invest up to $22 billion in an ongoing exploration and development campaign in the Russian sector of the sea. That is approximately 25% of its total capex budget for 2011 to 2021.

The company also has previously outlined plans for up to 28 new platforms and more than 1,000 km (621 miles) of pipeline to develop its fields and prospects in the area over the next decade.

The recent progress in Russia and the ongoing activity in Azerbaijan and Kazakhstan demonstrate once more that the Caspian not only has a long history already in place but also a long and productive upstream future ahead of it.