Shah Deniz South Caspian Sea, Azerbaijan

The Shah Deniz oil field lies between Mobil's Oquz, Chevron's Asheron and Exxon's Nakhchiuan fields. Its name can be translated as 'King's Sea'.

The prospect is situated in the South Caspian Sea, off the Azerbaijan shore, approximately 70km south-east of Baku. It lies in water depths ranging from 50m in the north-west, to 600m in the south-east. The Production Sharing Agreement (PSA) area covers approximately 860km².

BP, with a share of 25.25% in the project, is the operator. The other PSA partners are StatoilHydro (25.5%), Socar, LUKOil and NICO (10% each) and TPAO (9%). The PSA was ratified in October 1996.

In 2007 the project spent $170m in operating expenditure and $364m in capital expenditure. For 2008, BP plans to spend $123m and $496m respectively.

Reserves

The Shah Deniz structure lies 35km south-east of the Bahar field and 70km south-west of the supergiant Gunashli-Chirag-Azeri oilfield complex. With a vertical relief of over 1.5km (1 mile), the mapped structure encloses an area in excess of 300km². The main reservoir rocks within the structure are expected to be at a total depth of 5km to 6.5km and they have been folded into a relatively simple dip-closed anticline structure.

Recoverable reserves for the first stage of development are put at 22.1trn cubic feet of gas and 750m barrels of condensate. Development of the reserves at depths of 600m has been carried out using technology originally developed for the northern North Sea and the Gulf of Mexico.

Seismic

In the summer of 1997, over 22,000km of modern 3D seismic data was acquired about the Shah Deniz PSA contract area, by the Azerbaijan seismic company, Caspian Geophysical. After the data had been acquired using their ship, the MN Baki, Caspian Geophysical processed it in their centre in Baku.

Subsurface geology

Immediately prior to the 3D data acquisition, additional data was compiled, concerning the water depth and the near-surface conditions over Shah Deniz. This detailed bathymetry provided information on the faults associated with mud diapir collapse, shallow gas, debris flows 1,000m below the seabed and modern-day features such as mud volcanoes and seabed channels. In total, 12 separate mud volcanoes have been identified. The largest of these, north of the reservoir, produces a major debris flow over 5km wide.

Exploration

The first three exploration and appraisal wells (SDX-1, 2 and 3) were started in 1999 and were designed to appraise and delineate the reserves in the northern flank of the field. They focused on two structures – the Fasila Suite and the Balakhany VIII interval – which form the basis of the field’s first stage of development.

In November 2007, BP announced it had discovered a new, high-pressure reservoir in a deeper structure beneath the nortern flank. The SDX-4 well was drilled to a Caspian-record depth of 7,300m in the southwestern part of Shah Deniz, and tests showed a flow of 35m standard cubic feet per day, with likely reserves similar to if not larger than those in stage one. This will form the basis of the second stage of development once appraisal over the next few years has delineated this new structure.

Then, in December 2007, BP spudded the first platform-drilled well, SDA-5, which is designed to reach a depth of 7,180m. BP plans to begin drilling one more well in 2008, which is scheduled for completion in early 2009.

Development

Stage one of Shah Deniz includes an upstream and a midstream development. The upstream development consists of a 15 well-slot TPG 500 type production, drilling and quarters platform which is installed in 105m of water; three subsea pipelines of 90km each – a 26in pipeline for gas and a 12in pipeline for condensate, and a 4in monoethylene glycol pipeline – from the TPG 500 to the Sangachal terminal in the Azerbaijan capital, Baku; and gas and condensate processing facilities in the onshore terminal.

The midstream development consists of a new gas export system, the South Caucasus Pipeline (SCP), from Azerbaijan through Georgia to the Turkish border. The 690km, 42in SCP has a capacity of about 565bn cubic feet / year and has been built in the same corridor as the 1,760km Baku-Tbilisi-Ceyhan (BTC) oil export pipeline – the second longest in the world. It then links up at the Georgian-Turkish border to a 250km Turkish state-owned BOTAS pipeline that runs to Erzurum, where it enters Turkey’s domestic supply. This stage of production supplies Azerbaijan, Georgia and Turkey.

Production

Gas and condensate production started in December 2006. In 2007, the field produced a total of about 110bn cubic feet of gas and 0.8m tons of condensate. In 2008, Shah Deniz is forecast to produce about 271bn cubic feet of gas and 1.9m tons of condensate.

As of mid-2008, daily Shah Deniz production stood at about 700m standard cubic feet of gas and about 40,000 barrels of condensate from four wells. Production will increase as new platform-drilled wells are brought on stream later in 2008 and during 2009. Plateau production from stage one will be about 304bn cubic feet of gas per annum and about 45,000 barrels of condensate per day.