IOR / EOR screening of Azerbaijan

Time

Pro

du

cti

on

ra

te

Farm-in

Base line production

Possible Farm-in opportunity into existing field

Contract Type: Rehabilitation PSA

Farm-in continues to produce field on base line productionOPEX recovered from production income

Time

Pro

du

cti

on

ra

te

Farm-in

Improved Oil Recovery

Base line production

Improved Oil Recovery Phase

• Mainly acceleration of production by workover, infill drilling, de-bottlenecking, etc.

• CAPEX/OPEX recovered from proceeds above baseline productionRemainder shared acc. PSA

Time

Pro

du

cti

on

ra

te

Farm-in

Enhanced Oil Recovery

Base line production

Enhanced Oil Recovery Phase

Additional recovery by gas / heat / chemicals injection

CAPEX/OPEX recovered from proceeds above baseline production Remainder shared acc. PSA

Time

Pro

du

cti

on

ra

te

Farm-in

Base line production

Field Abandonment

P&A of wells, removal of facilities, pipes etc., environmental clean-up

Project categories:What is doable for Western partner

Company? • doable:– Geological setting:

favourable no. of layers & compartments

– Rather low Recovery Factor: sufficient potential for improvement

– Manageable for Westerns partner company: technology, manpower

– Environmental risks (mainly before farm-in) controllable

• not doable:– Too many layers / compartments

– Current recovery factor very high: only small improvement at high cost

– Too large for any western partner Company to handle:1000s of wells, too large local organisation

– Uncontrollable environmental risks:e. g. high surface contamination

doable

too small

doable

large enough

not doable

(too) large

not doable

small

do

ab

ilit

y

no

yes

small largemateriality

cutoff

doable

too small

doable

large enough

not doable

(too) large

not doable

small

do

ab

ilit

y

no

yes

small largemateriality

cutoff

12

34

Project categories:

• Assuming cut off value: 50 mmbo (100%) above base line production(arbitrary volume set for country entry)

• Required OOIP:@ 10% increase of RF: 500 mmbo

@ 20% increase of RF: 250 mmbo

@ 25% increase of RF: 200 mmbo

doable

too small

doable

large enough

not doable

(too) large

not doable

small

do

ab

ilit

y

no

yes

small largemateriality

cutoff

doable

too small

doable

large enough

not doable

(too) large

not doable

small

do

ab

ilit

y

no

yes

small largemateriality

cutoff

12

34

Assumptions

• 50% recovery factor is achievable

• Fields with already >50% recovery to be discarded: additional increase too expensive

• The “old giants” to be discarded: - too many wells (huge manpower/time effort for field modelling)- long production history (?data documentation)- wells (at least for a large part) very old (technical state)

Screening Method

1. Discard small fields: OOIP < 100 mmbo

2. Discard fields below cutoff: 0.5 * OOIP – PP >= 50 mmbo

3. Discard “old giants”

Uncertainties:

• Accuracy of volumes

• Applicability of IOR/EOR

• Efficiency of IOR/EOR

• Access to some fields

Oil

originally

in place

PP

reserves

IOR

EOR

50% of OOIP

First run: Reserves Figures different public sourcegive OOIP: taken from IHS

Two fields out of 33 reported by public and research source fit the criteria.

field name Current operators

Oil In Place

(IHS source)

MMbbl

PP

reserves

public

source

MMBBL

PP vs

OIIP (%)

Remaining

up to cut

off @ 50%

IOR/EOR

potential to

cutoff MMbbl

Producti

on start remarks

Bibiheibat NOC 2,300.20 1,208.70 53 -3% above cutoff 1873 "old giant"3996 wells

Surakhany NOC 1,512.00 899.1 59 -9% above cutoff 1904 "oil giant" 2463 wells

Gala NOC 875 486.7 6 -6% above cutoff 1932 1500 wells

Kharachuhur Karachukhur OC 498.2 309.2 62 -12% above cutoff 1928 1056 wells

Balakhani Sabunchi

Ramani Balakhani OC 5,226.00 1,996.30 38 12% 235.6 1871

3"old giants"all

together 11450 wells

Kurovdag Shirvan oil JV 1,375.00 294.3 21 29% 84.2 1955 1151 wells

Kursangi Salyan oil JV 985.8 182.4 19 31% 57.5 1962

Siazan Monocline NOC 653 125.6 19 31% 38.6 1941

Neftchala

KhylliGushkhana AnshadPetrol JV 626.9 116 19 31% 36.5 1937-78

Lokbatan Puta

Gushkhana NOC 850 332.7 39 11% 36.1 1927

Ramana (JV area) Azgernoil JV 507.5 152.3 30 20% 30.5 1871

no OOIP available,

assumed 30%

recovery

Binagadi Gyrmaki

Chahnaglar

Sulutepe Masazyr

Fatmai Global Energy OC 955 421.8 44 6% 24.6 1896-1980

group of 6

fields(=smaller

figuers per field)

Karagabli Salyan oil OC 685 58.2 8 42% 24.2 1960

Shabandag

Shubany Yasamal

Ateshgah NOC 344 92.5 27 23% 21.4 1908

group of 4

fields)=smaller

figures per field)

Zygh Global Energy OC 338.4 101.5 30 20% 20.3 1935

no OOIP available

assumed 30%

recovery

Hovsan Global Energy OC 353 50.9 14 36% 18.1 1948

Buzovna Mashtaga Buzovan Mashtaga OC 578 249.4 43 7% 17.1 1940

Umbaki NOC 233 39.5 17 33% 13 1951

Mishovdag Karasu OC with Global Energy 366 165.6 45 5% 7.9 1956

Kalamadin Karasu OC with Global Energy 129.5 38.9 30 20% 7.8 1980

no OOIP available

assumed 30%

recovery

Zira NOC 51.2 15.4 30 20% 3.1 1956

no OOIP available

assumed 30%

recovery

Naftalan NOC 257.9 0.8 0 50% 0.4 1950

Second run: IHS OOIP/Reserves Figures

Two fields out of 82 fields and discoveries reported by IHS fit the criteria.

field nameCurrent

operators

Oil In

Place (IHS

source)

MMbbl

PP

reserves

(IHS

source)

MMBBL

PP vs

OIIP (%)

Remaining

up to cut

off @ 50%

IOR/EOR

potential to

cutoff MMbbl

Producti

on startremarks

Bibiheibat NOC 2,300.20 1,208.70 52 -2% 1873 "old giant"3996 wells

Surakhany NOC 1,512.00 899.1 57 -7% 1907 "oil giant" 2463 wells

Gala NOC 875 486.7 55 -5% 1932 1500 wells

Binagadi Global Energy OC 499 53 -3% 1896 2863 wells

Kharachuhur Karachukhur OC 498.2 309.2 56 -6% 1927 1056 wells

Chakhnaglyar Global Energy OC 131 55 -5% 1932

Kurovdag Shirvan oil JV 1,375.00 458 33 17% 76.4 1956 1151 wells

Kursangi Salyan oil OC 985.8 267.1 27 23% 61.2 1963

Karagabli Salyan oil OC 685 136 20 30% 41.0 1960

Siazan

MonoclineNOC 653 128.3 20 30% 38.9 1941

Neftchala Khylli

GushkhanaAnshadPetrol JV 598 114 19 31% 35.3 1931

Lokbatan Puta

GushkhanaNOC 850 350.7 41 9% 30.6 1927 group of 3 fields

Shabandag

Shubany Yasamal

Ateshgah

NOC 344 104 30 20% 20.6 1920 group of 4 fields

Balakhani

Sabunchi RamaniBalakhani OC 5,226.00 2,572.00 49 1% 20.2 1871

3"old giants"all

together 11450 wells

Naftalan NOC 257.9 49.1 19 31% 15.2 1873

Hovsan Global Energy OC 353 141 40 10% 14.2 1952

Umbaki NOC 233 40.3 17 33% 13.2 1951

Sulutepe AzEn oil OC 245 85 35 15% 13.0 1920

Mishovdag Karasu OC with Global Energy366 154 42 8% 12.2 1958

Buzovna

MashtagaBuzovan Mashtaga OC 578 263 46 4% 11.8 1941

Kalamadin Karasu OC with Global Energy134.1 40.2 30 20% 8.0 1979

no OOIP available

assumed 30%

recovery

Karadag NOC 114.5 34.4 30 20% 6.9 1946

no OOIP available

assumed 30%

recovery

Zygh Global Energy OC 233 104 45 5% 5.6 1937

Kurovdag: Basic Information

- Infill drilling and workover- Massive water flood program- Multi-layer, compartments and overpressure

Onstream Onshore

Location Timetable

Azerbaijan Onshore, Lower Kura Trough Discovery Date 1955

Block: Kurovdag, Area: 115 km² Production Started 1957

Producing Horizons: 14 zones Peak Oil Production (41,310 b/d) 1965

Apsheronian Issue Date Sep-1997

Akchagylian Final Expiry Sep-2027

Productive Series

Depth range: 600 - >4,300 m Cumulative Production (31.12.2006) 259.2 mmbo

Number of wells 1370 Remaining 2P Reserves (01.01.2009) 40 mmbo

active on 01.03.2006 337

average flow rate 15 bopd

water cut ~85%

Operator Participants %

JV Shirvanoil Ltd Global Investment Energy (since Jan 2008) 51

SOCAR 49

Kurovdag: Maps & Sections (IHS)

Kursanga: Basic Information

- Rehabilitation of 250-350 wells, 50 new wells- Pre-1999: water injection programme failed due to overpressure- Multi-layer, compartments and overpressure

Onstream Onshore

Location Timetable

Azerbaijan Onshore, Lower Kura Trough Discovery Date 1961

Block: Kursanga-Garabagly, Area: 450 km² Production Started 1962

Producing Horizons: ~14 zones Peak Oil Production (9,280 b/d) 1970

Apsheronian Issue Date Apr-1999

Akchagylian Final Expiry Apr-2029

Productive Series

Fault blocks in field: >24

Depth range: 2,100 - 4,800 m Cumulative Production (31.12.2006) 77.6 mmbo

Number of wells 768 Remaining 2P Reserves (01.01.2009) 70 mmbo

active on 06.2008 173

Operator Participants %

Salyan Oil Ltd SOCAR 50

CNPC (Hong Kong) (since 2002) 25

CNPC (since 2002) 12.5

PetroChina (since 2006) 12.5

Kursanga: Maps & Sections (IHS)