11.2 LUKoil's Activities D-222 / Yalama Project Expands

Summer 2003 (11.2)
Page 68

LUKoil's Activities
D-222 / Yalama Project Expands

Left: President of SOCAR Natig Aliyev and President of OAO Lukoil Vahid Alakbarov signing the package of agreements on additional terms for exploration and exploitation of perspective sea block D-222 (Yalama) located in the Azerbaijan sector of the Caspian Sea.

On April 4, 2003, Natig Aliyev, President of State Oil Company of the Azerbaijan Republic and Vahid Alakbarov, President of Open Joint Stock Company of Lukoil company signed a package of agreements on additional terms of exploration and development of prospective sea block of D-222 Yalama. This project is located in the northern part of the Azerbaijan economic sector of the Caspian.

As Fikrat Aliyev Representative of the President of Open Joint Stock Company of Lukoil in Azerbaijan, Georgia and Turkey said, "The PSA for exploration, development and share division of the product" from the contract areas was originally signed on July 3, 1997, in Moscow during the official visit of the President of the Azerbaijan Republic Heydar Aliyev to the Russian Federation. The contract area consisted of 1,287 km2. The contract was ratified by Milli Majlis (Parliament) on December 10, 1997.

Caspian Geophysical, "Petro-Alliance" and "Soyuzmorgeo" have conducted large-scale geological research and seismic work. Detailed interpretation of the results of seismic researches (2D and 3D), the evaluation of the structure of the block and the natural borders of the perspective oil and gas area structure showed that the actual structure extended beyond the contract area which was identified in 1997.

As a result, Lukoil approached SOCAR to expand the contract area up to 3,037 km2. This was negotiated and agreed upon and signed on April 4. The share partnership of Lukoil has been increased from 60% to 80%. SOCAR's share, which was 40%, has now been reduced to 20%.

Fikrat Aliyev pointed out that the block D-222 is the component of the largest perspective hydro-carbon structure of Yalama in the northeast part of the Caspian. This current structure is located approximately equally between Azerbaijan and Russian economic sectors of the Caspian Sea at a distance of 30 km offshore.

The depth of the Sea in the region of perspective structure of Yalama ranges between 80 and 700 meters. Drilling of the first exploration well will take place in the second half of 2004.

On April 4, Vahid Alakbarov, President of Open Joint Stock Company of Lukoil emphasized: "The activization of the works regarding the Yalama project correspond with our strategy connected with the necessity of concentration of financial and technical resources of the Company on the international projects in which the company is the operator. In fact, with this agreement Lukoil is expanding its activities in Azerbaijan, considering Azerbaijan as it did in the past as one of the strategic regions of its activities."

Fikrat Aliyev is convinced that increasing the contract area of Yalama to more than twice its original size gives Lukoil and SOCAR a very good chance to find hydro-carbon reserves in the northern areas of the Caspian Sea shelf which had not been developed earlier.