Karabakh

Karabakh Oil Field Profile

Location and Geology

The Karabakh oil field is located approximately 120 kilometers offshore Baku, Azerbaijan, in the northern part of the Absheron archipelago in the Caspian Sea. It is situated close to other major fields, including the Azeri-Chirag-Gunashli (ACG) field and the Shallow Water Gunashli (SWG) field[3,.

The field lies at a water depth of up to 200 meters, with the oil reservoir located approximately 3.4 kilometers beneath the seabed.

History and Development

• The Karabakh field was initially explored under a production sharing agreement (PSA) signed on November 10, 1995, between the State Oil Company of the Azerbaijan Republic (SOCAR) and a consortium led by Caspian International Petroleum Company (CIPCO). This agreement was ratified by the Parliament of Azerbaijan on February 13, 1996, and came into force on February 28, 1996. However, the development was abandoned in 1999 due to non-commercial discovery.
• In May 2018, a new risk service agreement (RSA) was signed between SOCAR and Equinor (formerly Statoil) for the appraisal and development of the Karabakh field.

Current Development Status

• The current development project involves a joint venture between SOCAR and Equinor. Equinor completed the environmental impact assessment (EIA) for the Karabagh oil field development in April 2018.
• Appraisal drilling for oil resources began in December 2019, and a major oil discovery was confirmed in March 2020.
• The main jacket for the Karabagh field, weighing 16,000 tonnes, was launched in August 2020. The jacket was fabricated by SOCAR at the Heydar Aliyev factory and will be installed at a water depth of 182 meters.

Infrastructure and Operations

• The development plan includes the drilling of six crude production wells and three water injector wells. Additionally, there will be three gas wells as part of the project.
• The Karabagh production platform will be connected to the BP-operated West Chirag platform of the ACG field, from where the oil and gas output will be sent onshore to the Sangachal terminal.
• The field is expected to produce approximately 11 million barrels of oil and 1.5 billion cubic meters (bcm) of gas per year.

Contractors and Partners

• BOS Shelf, a subsidiary of SOCAR, was contracted for the construction of the Karabagh jacket.
• Caspian Drilling Company signed a contract with Equinor for drilling appraisal wells in the Karabagh offshore field in March 2019.
• Caspian Geophysical was awarded a contract for a 3D seismic survey of the Karabagh offshore oil field development in 1996.

Reserves and Production

• The Karabagh oil field is estimated to hold approximately 60 million tonnes (or around 398.98 million barrels) of oil reserves in place.
• Production from the Karabakh field is expected to start in 2025, with peak production forecasted in 2027. The field is expected to continue production until it reaches its economic limit in 2080.

Economic and Financial Aspects

• The development cost for the Karabakh project is estimated to be around $578 million.
• The project is considered to have robust economics, with a breakeven price around $32 per barrel, indicating it will likely be sanctioned further to complete the topside construction and installation.

Future Prospects

• Equinor is currently exploring the potential sale of its business in Azerbaijan, which includes its 50% interest in the Karabakh Operating Company. However, the project's future remains positive due to its strong economic viability.
• Additional exploration around the Karabakh field could benefit from the installed infrastructure, with scope for expansion if additional resources are discovered.