OVL, partners renew Azeri oil field contract

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 $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 $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 $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 $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 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 $1 billion.