Socar and its partners BP, Statoil, ExxonMobil, Canada’s Encana and Turkey’s TPAO abandoned the contract for Araz-Alov-Sharg project, in a deep-water section of Caspian.
Almost 20 years after signing a production-sharing agreement for deep-water prospect offshore Azerbaijan, state-owned Socar and its partners terminated it for political reasons.
“We don’t have such a contract, not any more,” industry sources familiar with the situation told NGE.
Other sources hinted that the decision was a result of force majeure as one partner could not fulfil its contract obligations.
The PSA was signed in 1998 but has been dormant since 2001.
Iran and Azerbaijan have disputed ownership of the Araz-Alov-Sharg fields since a confrontation between Iranian gunboats and two BP exploration vessels at the turn of the century.
Tehran claimed that the agreement was not valid owing to the undetermined legal status of the Caspian Sea.
In 2000 BP which was the operator for the project completed 3D seismic shooting in the area and in 2001 it revisited the area, but it was forced to leave when an Iranian gunboat threatened to open fire.
BP and its partners subsequently decided to suspend their agreement with Socar until all political disputes were settled.
“BP has no plans for on-site work in the Alov contract area until Caspian littoral states reach an agreement on offshore demarcation of the sea,” the operator repeated in its annual reports, adding that it was continuing studies off-site.
The Alov, Araz, Sharg contract area covers about 1,400 km² and lies about 120 km southeast of Baku in water depths between 300 and 800 metres. Azeri geologist believes the reservoir contains huge gas and condensate reserves.
Iran meanwhile has been considering its own exploration plans for the Alov block that it called Alborz. Last November Iran energy officials said Iran has resumed talks with Brazil’s Petrobras for deepwater exploration and drilling projects in the Caspian Sea.
Khazar Exploration & Production Company reached an agreement with Petrobras in 2010 on developing two exploration blocks in deep-water Caspian, but international sanctions forced the Brazilian major to leave Iran, according to Iranian media reports.
The blocks were presumably located at the same area as the Araz-Alov-Sharg prospect. Iran claims a fifth of Caspian territory, which it says puts this area into its sector of the sea.
International boundaries and other rights and obligations are not defined in the same way for seas and lakes and some claim that the Caspian Sea is really a lake, being completely enclosed. However the five states that border it have not got round to sorting the problem out.