Identifier
Created
Classification
Origin
09BAKU163
2009-03-02 14:01:00
CONFIDENTIAL
Embassy Baku
Cable title:  

AZERBAIJAN'S SOCAR INKS PSA WITH TOTAL TO

Tags:  PGOV PREL AJ ENERG 
pdf how-to read a cable
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DE RUEHKB #0163/01 0611401
ZNY CCCCC ZZH
R 021401Z MAR 09
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC 0848
INFO RUCNCIS/CIS COLLECTIVE
RUCNMEM/EU MEMBER STATES
RUEAIIA/CIA WASHINGTON DC
RHMFISS/CDR USEUCOM VAIHINGEN GE
RHEBAAA/DEPT OF ENERGY WASHDC
RUEKDIA/DIA WASHDC
RHEHNSC/NSC WASHDC
C O N F I D E N T I A L SECTION 01 OF 02 BAKU 000163 

SIPDIS

E.O. 12958: DECL: 03/01/2019
TAGS: PGOV PREL AJ ENERG
SUBJECT: AZERBAIJAN'S SOCAR INKS PSA WITH TOTAL TO
EXPLORE/DEVELOP OFFSHORE "ABSHERON" FIELD

REF: BAKU 558 (2008)

Classified By: Pol-Econ Counselor Joel R. Garverick, Reasons 1.4 (b,d)

C O N F I D E N T I A L SECTION 01 OF 02 BAKU 000163

SIPDIS

E.O. 12958: DECL: 03/01/2019
TAGS: PGOV PREL AJ ENERG
SUBJECT: AZERBAIJAN'S SOCAR INKS PSA WITH TOTAL TO
EXPLORE/DEVELOP OFFSHORE "ABSHERON" FIELD

REF: BAKU 558 (2008)

Classified By: Pol-Econ Counselor Joel R. Garverick, Reasons 1.4 (b,d)


1. (C) SUMMARY: French Company Total has signed an
Exploration and Development Production Sharing Agreement with
French Company Total for Azerbaijan's offshore "Absheron"
field, thought to contain gas and condensates. Gaz De France
is expected to be brought in shortly as the third partner. A
previous attempt to find gas in this block by Total, Chevron
and SOCAR in the late 1990s failed to find commercially
viable volumes of hydrocarbons. According to SOCAR President
Abdullayev, if this field 'hits,' first gas should be
approximately 2016. This deal is yet another sign that
Azerbaijan is eager to prove up its reserves and become a
'player' in regional and global energy markets, and that in
pursuit of this goal SOCAR is seeking alliances with
reputable IOCs for the development of its hydrocarbon sector.
END SUMMARY.


2. (C) In a high-profile February 27 signing ceremony at
SOCAR headquarters, SOCAR President Rovnaq Abdullayev and
Total Exploration and Development President Yves-Louis
Darricarrere signed an Exploration, Development and
Production Sharing Agreement (EDPSA) for the offshore
"Absheron" field. Under the deal Total will have a sixty
percent interest of the project and will be the operator for
the exploration phase, with SOCAR holding the other forty
percent. This field is thought to contain gas and
condensate. SOCAR and Total had signed the precursor to this
PSA, a "Heads of Agreement," in June 2008 (reftel).


3. (C) SOCAR President Abdullayev explained during the
ceremony that the PSA calls for Total to drill one
exploratory well within the next three years, to be followed
by up to two other exploratory wells if the first one is
successful. Darricarrerre expected this first exploratory
well to cost "approximately" USD 100 million.


4. (C) In comments to the press after the signing,
Darricarrere strongly hinted that Gaz De France, with SOCAR's
approval, would soon be brought into the project as a third
partner. When press asked why Total expected to find
sufficient Absheron hydrocarbons this time, after having come

up short previously, Darricarrere said that Total knew more
about the field and had a better plan on how and where to
drill.


5. (C) In pre-signing speeches, both SOCAR President Rovnaq
Abdullayev and Energy Minister Natiq Aliyev highlighted this
signing as yet another step in Azerbaijan's development of
its hydrocarbon sector in conjunction with global
International Energy Companies (IOCs). Total Exploration and
Development President Darricarrere cited the PSA as part of
Total's overall 'risky' global exploration strategy, and
evidence of its strengthened ties with the GOAJ (COMMENT: In
Azerbaijan, Total, although not a partner in the AIOC
Consortium, already has a five percent share of the BTC
pipeline, and a ten percent share both in the Shah Deniz
field and the related South Caucus Pipeline).


6. (C) BACKGROUND: In 1997, Chevron (30 percent) SOCAR (50
percent) and Total (20 percent) signed a similar Exploration
and Development PSA for Absheron, but the first exploration
well, drilled in 2001, revealed insufficient amounts to
justify further exploration, and the agreement lapsed in

2003. The Absheron Block is located in the Caspian
approximately one hundred kilometers east of Baku, due east
of the Shah Deniz field, in depths of 500 meters. END
BACKGROUND.


7. (C) In a February 27 meeting with DAS Matt Bryza after the
signing, SOCAR President Abdullayev said that although Total
has three years to do the initial exploratory work, he thinks
it will take no longer than 18 months. Commercial
exploitation should begin "around the time of Shah Deniz
Phase Two," i.e. approximately 2016. He told Bryza that
reserve estimates are 400-500 billion cubic meters, plus
condensate (NOTE: for comparison purposes, Shah Deniz reserve
estimates are as much as approximately one trillion cubic
meters).


8. (C) COMMENT: BP Azerbaijan, the 800-pound gorilla of
Azerbaijan's hydrocarbon sector, expected to be a part of
Absheron development. That SOCAR went with Total, and quite

BAKU 00000163 002 OF 002


possibly also Gaz De France, could well be a measure of GOAJ
pique at B Azerbaijan for perceived mishandling of its AIOC
and Shah Deniz operatorships. It is far too earl to know
whether Absheron has commercially viable gas deposits and if
so how quickly they can be developed, or for that matter
where would be the ultimate market for these volumes.
However, this deal is yet another sign that Azerbaijan is
eager to prove up its reserves and become a player in
regional and global energy markets, and that in pursuit of
this goal SOCAR is seeking alliances with reputable IOCs for
the development of its hydrocarbon sector. Total contacts in
Azerbaijan have commented to Embassy that negotiations with
SOCAR were professional and surprisingly incident-free. END
COMMENT.
DERSE