OVL, partners renew Azeri oil field contract

New Delhi, Sep 18 ()

ONGC Videsh Ltd

and its partners in

Azerbaijan

's giant ACG oil fields have agreed to pay USD 3.6 billion bonus to the Azeri government for extension of the field contract by 25 years to 2049. Also, the partners will have their stake in the field trimmed as state-owned

SOCAR

raises its stake.

OVL

's share of the total bonus payments would be about USD 111 million and its stake will come down to 2.31 per cent from current 2.71 per cent, the company said in a statement. The Azeri-Chirag-Deepwater Gunashli (ACG) complex in the

Caspian Sea

produces most of Azerbaijan's crude oil. The partners have "entered into an agreement with the Azerbaijan government and

State Oil Company

of the

Azerbaijan Republic

(SOCAR) for extension of duration of the Production Sharing Agreement (

PSA

) for ACG oil fields until December 31, 2049," the statement said. Oil production from the field has been dropping for some years now. It fell 11 per cent to 585,000 barrels per day in the first half of 2017 despite the startup of a new platform in 2014 at a cost of USD 6 billion. While the extension of the production sharing contract, which was to expire in 2024, was necessary to ensure continued investment, SOCAR will see its stake in ACG rise from 11.6 per cent to 25 per cent. As a result, BP of UK will see its stake cut from current 35.8 per cent to 30.37 per cent.

Chevron

will see its stake trim from 11.3 per cent to 9.57 per cent while

Japan

's

INPEX

will have 9.31 per cent as against 11 per cent previously. Norway's

Statoil

will have 7.27 per cent stake (8.6 per cent previously),

ExxonMobil

6.79 per cent (8 per cent),

Turkey

's

TPAO

5.73 per cent (6.8 per cent) and Japan's

ITOCHU

3.65 per cent (4.3 per cent). "The agreement is subject to ratification by the

Parliament

(

Milli Majlis

) of the

Republic of Azerbaijan

," the statement said. As part of the agreement, the international co-venturers will pay a bonus of USD 3.6 billion to the State Oil Fund of the Republic of Azerbaijan, and SOCAR will increase its equity share in the ACG from 11.65 per cent to 25 per cent. "OVL's share of the total bonus payments is about USD 111 million," it said. The ACG oil fields are located in the Caspian Sea, about 100 kilometres east of

Baku

, the capital of Azerbaijan. The fields currently produce 585,000 barrels per day of oil, which is transported through the Baku-Tbilisi-Ceyhan (

BTC

) pipeline to

Ceyhan

on the

Mediterranean

coast of Turkey, from where it is shipped to customers. The existing production sharing agreement (PSA) for ACG was signed on September 20, 1994 for 30 years. "There is substantial amount of remaining oil and gas in the field and the PSA extension will benefit Azerbaijan and partners through sustained long term production," it said. OVL, the overseas arm of state-owned Oil and

Natural Gas Corp

(ONGC), had acquired 2.7213 per cent interest in the ACG and 2.36 per cent in 1,768-km BTC pipeline from

Hess Corporation

on March 28, 2013 for USD 1 billion. The BP-operated field at that time was producing around 700,000 barrels a day (35 million tonnes per annum) of crude oil. OVL's share of output was over 19,000 barrels a day or a little less than one million tonnes per annum. At the reduced production and stake, OVL's share would be about USD 13,500 barrels per day. ANZ MKJ
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