Umid-Babek Offshore Oil & Gas Project May be Joined by Lukoil

Lukoil, one of Russia’s leading oil and gas operators working in the Caspian Sea region, has entered into talks with SOCAR to negotiate a stake in the offshore Umid-Babek project. Azerbaijan’s state oil company SOCAR has partnered with Nobel Upstream, an independent UK company, since 2008, exploring and appraising the block, which is located on a site around 75km from Azerbaijan’s capital Baku.

Umid-Babek Discovery and Complexities

The Umid gas field was discovered by SOCAR and Nobel Upstream in 2010, when it was hailed as the biggest offshore gas field discovery in Azerbaijan since Shah Deniz, which was discovered in 1999. Pilot production was launched at Umid in 2012, and a total output of 1.8 bcm of natural gas together with the associated condesate has been achieved since then. During this time the Babek prospect also underwent 3D seismic acquisition. However, further appraisal was deferred until a Risk Service Agreement (RSA) between SOCAR and Nobel Upstream could be completed. Having executed the RSA in 2017, SOCAR and Nobel Upstream have recommenced appraisal and have begun seeking an international operating partner with the technical experience required to operate a complex, deep, high-pressure offshore gas field.

Lukoil Operations

Lukoil has a strong presence around the Caspian Sea area, with two gas fields having entered production and several more under operation in the Russian section. The Lukoil group announced plans to acquire two subsea blocks earlier in 2018, located offshore Kazakhstan. Lukoil’s Chief Executive Officer Vagit Alekperov commented that the company was counting on new assets and negotiating with SOCAR in regard to the Umid-Babek development.

Gas Output

Data collected by SOCAR suggests that the Umid-Babek field contains an estimated 600bcm of natural gas, along with condensate totalling around 800 million barrels. SOCAR and Nobel Upstream intend to install two production platforms at Umid-Babek, with production starting in 2022 for Umid and 2023 for Babek. The annual output of gas from Umid-Babek can be sold domestically in the Azerbaijan market, or externally via export through the Southern Gas Corridor, which is due for completion in 2020.