VZCZCXYZ0001
RR RUEHWEB

DE RUEHMO #0321/01 0251521
ZNR UUUUU ZZH
R 251521Z JAN 07
FM AMEMBASSY MOSCOW
TO RHEHAAA/WHITE HOUSE WASHDC
RUEHC/SECSTATE WASHDC 6861

UNCLAS MOSCOW 000321 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
DEPT FOR EUR/RUS WARLICK AND GUHA 
DEPT FOR EB/ESC SIMONS 
DOE FOR HARBERT AND EKIMOFF 
DOC FOR 4231/IEP/EUR/JBROUGHER 
NSC FOR GRAHAM AND MCKIBBEN 
 
E.O. 12958: N/A 
TAGS: ETTC ECON ENRG EPET RS IR NO
SUBJECT: RUSSIAN ENERGY: LUKOIL UPDATE ON ANARAN 
PROJECT 
 
REF: A. MOSCOW 124 
 
 ¶B. 06 STATE 201110 
 ¶C. 06 STATE 179840 
 
Sensitive but Unclassified; not for internet 
distribution. 
 
¶1. (SBU) On January 19, post received a status report from 
Lukoil on the Anaran project in Iran.  The following is an 
unofficial Embassy translation of the original Russian 
text. 
 
¶2. (SBU) Begin text: 
 
"The Anaran Project Status (as of 17 Jan 2007) 
 
A service contract regarding exploration activities within 
the Anaran Bloc was signed back on April 9, 2000 by and 
between the National Iranian Oil Company (NIOC) and the 
Norwegian-incorporated Saga Petroleum Iran AS.  The 
Subcontract Agreement between Hydro Zagros Oil and Limited 
[sic.] as the Contractor and LUKOIL Overseas Anaran Ltd. as 
the Subcontractor for the Anaran Bloc was signed on 
02/14/2003, with the Agreement becoming effective on 
09/26/2003. 
 
The Parties' shares in the Agreement: 
Hydro Zagros Oil and Gas AS - 75% 
LUKOIL Overseas Anaran Ltd. - 25% 
 
Operator: 
Hydro Zagros Oil and Gas AS is the operator of the project. 
 
Obligations regarding the Bloc Exploration Contract: 
 
The Minimum Work Program under the Contact is as follows: 
Processing of previous 2D seismic: 1,150km 
Gathering, processing, and interpretation of 2D seismic 
data: at least 780km 
Drilling of five wells, including 3 exploratory wells 
Minimum investment for the program: USD 46.79 million 
Program life: 4.5 years. 
 
Conditions for LUKOIL Overseas to farm in: 
 
LUKOIL Overseas Anaran Ltd. paid USD 12.9 million as 25% of 
the historic costs incurred during 2000-2002; 
 
LUKOIL Overseas Anaran Ltd. paid USD 1 million as an 
additional bonus for moving the project forward; 
 
LUKOIL Overseas Anaran Ltd. would pay another USD 2.5 
million to the Operator should a field development contract 
be signed with NIOC. 
 
License bloc location: 
 
Anaran Bloc area: 3,540 sq. km 
The Bloc in located in the foothills of Zagros in western 
Iran, Ilam Province, near the border with Iraq. 
 
Geological exploration results: 
 
- Azar 1 well was abandoned for technical reasons. 
Insurance was paid in 2005. 
- The tests of Azar 2 well were completed in August 
¶2005.  Commercial crude inflows obtained.  The 
total production rate for 6 objects (4 in Lower 
Sarwak and 2 in Upper Sarwak) amounted to some 
2,000 metric tons for day on various chokes. 
- Shengule West 1 well was spudded on October 14, 
2006, and it was completed in late October (bottom 
hole at 4,516m). 
 
During the well tests, a maximum daily production rate of 
978 cu. m was obtained in Shengule West 1 within the Upper 
Sarwak interval on a 96/64 choke at a buffer pressure of 28 
bar; H2S content amounted to 2.5% while the crude density 
varied from 0.898 to 0.905 g/cm3. 
 
Azar Filed commercialization report and MDP preparation: 
 
¶1. The Declaration on the Azar Field Commercialization 
was signed by the NIOC on June 11, 2006, and became 
effective on August 1, 2006.  At that time, NIOC approved 
 
the STOIIP of 2.07 billion barrels of crude oil. 
¶2. The Operator of the Anaran Project submitted a 
preliminary MDP to NIOC in mid-October 2006, which 
contained the following numbers: 
- STOIIP: 2.07 billion barrels of crude (about 390 
million metric tons of crude oil), crude density of 
0.865 - 0.845 g/cm3.  The recoverable reserves amount 
to over 300 million barrels. 
- Number of development wells: 15 
- Daily crude production: 58,000 barrels 
- A 16-inch oil pipeline will be built intended to make 
a link to the existing infrastructure at the Akhwaz 
Field. 
- The NIOC will determine the development pattern for 
the field at a later date.  At the moment, several 
options are under consideration: crude production at 
free flow with subsequent reservoir pressure 
maintenance with gas injector wells. 
- The oil recovery factor may vary dependent upon the 
selected field development pattern.  If gas injection 
is selected, the RF is projected to reach 16%. 
 
¶3. The final version of the MDP including the field 
facility construction plan should be finalized by April 1, 
¶2007.  The total budget needed to prepare the MDP is 
expected to be over USD 40 million. 
 
The budget of the Anaran Project on a yearly basis (in USD, 
millions): 
 
Years     Actual budget/LOHL share 
2000-2002     51.6/12.9 
2003      59.67/14.9 
2004      39.65/9.91 
2005      57.80/14.45 
2006      41.1/10.25 
Total for the     249.1/62.25 
Project excluding 
Well tests and MDP 
costs 
 
The current status of the Project: 
 
All Project activities have been halted.  The only thing 
the Project Operator is doing at the moment is working on 
the MDP.  Most of this work is being done outside Iran. 
The NIOC granted another one-year extension of the term of 
the Agreement with no amendments to the Budget.  Due to the 
unavailability of a complete set of logs in Shengule West 1 
well, it is very likely that NIOC may not acknowledge the 
second find at the Shengule bloc.  (It is not possible to 
do logging within Sarwak as the far end of the drilling 
string was left behind at the bottom hole). 
 
End text. 
 
BURNS