AZERBAIJAN: CENTRAL AZERI PLATFORM IN ACG OIL

C O N F I D E N T I A L SECTION 01 OF 02 BAKU 001195 SIPDIS E.O. 12958: DECL: 12/23/2018 TAGS: PGOV PREL AJ ENRG SUBJECT: AZERBAIJAN: CENTRAL AZERI PLATFORM IN ACG OIL MEGA-FIELD RESUMES PRODUCTION; NO PLANNED 2009 OPEC-RELATED PRODUCTION CUTS REF: A. A) BAKU 919 ¶B. B) BAKU 883 ¶C. C) BAKU 897 Classified By: CDA Don Lu, reasons 1.4 (b,d) ¶1. (C) SUMMARY: After having been shut down since September 17, the Central Azeri (CA) Platorm in Azerbaijan's offshore ACG oil mega-field has begun to resume production, leading to an overall increase of production in the ACG field to approximately 690,000 bpd. However, limits on handling any concomittant increase in associated gas produced might well limit oil production increases in the short- to mid-term. Both BP and SOCAR officials expressed confusion in reference to GOAJ Energy Minister Natiq Aliyev's December 17 comments that Azerbaijan stood ready to decrease oil production by 300,000 bpd in solidarity with OPEC, with no one knowing of any such intention. END SUMMARY. ¶2. (C) According to a BP Azerbaijan senior executive with whom EnergyOff spoke on December 22, BP is still investigating the exact cause of the gas leak that caused the CA Platform shutdown (Refs B,C),with remedial work and data gathering ongoing. (COMMENT: Other AIOC partners have previously told EnergyOff that BP might prove reluctant to share its findings on the gas leak's cause even within the AIOC Consortium, for reasons of culpability should the leak have been due to operator error). ¶3. (C) As of December 19, after extensive analysis and testing, ACG operator BP Azerbaijan has begun to resume oil production at the Central Azeri (CA) Platform, with three wells currently producing, leading to total ACG production of approximately 690,000 bpd on December 21. BP expects to gradually bring more wells from the CA Platform back on line. ¶4. (C) Manning on the CA Platform itself is back up to 140 people. At the time of the gas leak detection manning was approximately 220 persons, all of whom were evacuated when the leak was discovered. ¶5. (C) The limiting factor to increasing oil production from CA wells is the associated gas, which must be either brought onshore, re-injected or flared: - RE-INJECTION: There will be no resumed gas or water injection back into the field until BP has determined the source of the leak and that it is safe to resume re-injection. BP envisions that water re-injection can be restarted before gas re-injection, but there is currently no specific date earmarked for resuming water (or gas) re-injection. - ONSHORE DELIVERY: The maximum level of ACG associated gas that can be brought to shore is a little over 300 million standard cubic feet a day (mmscf/d),with maximum levels being delivered to shore before the accident . It is committed in its current protocols with SOCAR to deliver 140 mmscf/d in 4Q 2008, and 200 mmscf/d in 1Q 2009. - FLARING: Both Azerbaijan and the AIOC Consortium which runs the ACG field wish to keep flaring as low as possible, with the GOAJ stipulating a soft limit of o/a 100 mmscf/d (for December 19 the ACG field was flaring approximately 125 mmscf/d). ¶6. (C) As CA wells are brought on-line, BP intends to reduce production from some wells from the Eastern Azeri (EA) platform with a high gas-to-oil ratio, so that the ACG Field's overall oil production can be increased with a proportionally smaller increase in the associated gas. ¶7. (C) For internal planning purposes, BP Azerbaijan is estimating ACG production next year averaging 700,000 bpd, with CA back at previous production levels no later than June ¶2009. BP is currently working with SOCAR and partners to develop a plan which will deliver more than the base case of 700,000 bpd. BAKU 00001195 002 OF 002 300,000 BPD PRODUCTION CUT? -------------- ¶8. (U) On December 18 GOAJ Energy Minister Natiq Aliyev told OPEC delegates in Algeria that Azerbaijan was seriously considering becoming an OPEC member, and that it was prepared to reduce oil output by 300,000 to 540,000 down from the current 840,000 bpd, below Azerbaijan's "top capacity" of one million bpd. ¶9. (C) A high-level SOCAR executive subsequently told EnergyOff that he did not know what prompted these comments from the Energy Minister, who he said lacked a knowledgeable support staff for energy issues (the expertise residing in SOCAR and with the IOCs). He added that for 2009, SOCAR envisioned ACG oil production at around 750,000 bpd, SOCAR oil production at 180,000 bpd, and Shah Deniz (condensate) production at 50,000 bpd. He thought it highly unlikely that any production cuts would occur in 2009, saying that if any did they would come from non-contract areas (i.e. from SOCAR production). BP and other AIOC Consortium members contacted by EnergyOff were somewhat dismissive of Energy Minister Aliyev's comments on possible production cuts, implying that one often has to take his public pronouncements with a grain of salt. LU