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RR RUEHAG RUEHDBU RUEHROV RUEHSR
DE RUEHKB #0163/01 0611401
ZNY CCCCC ZZH
R 021401Z MAR 09
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC 0848
INFO RUCNCIS/CIS COLLECTIVE
RUCNMEM/EU MEMBER STATES
RUEAIIA/CIA WASHINGTON DC
RHMFISS/CDR USEUCOM VAIHINGEN GE
RHEBAAA/DEPT OF ENERGY WASHDC
RUEKDIA/DIA WASHDC
RHEHNSC/NSC WASHDC

C O N F I D E N T I A L SECTION 01 OF 02 BAKU 000163 
 
SIPDIS 
 
E.O. 12958: DECL: 03/01/2019 
TAGS: PGOV PREL AJ ENERG
SUBJECT: AZERBAIJAN'S SOCAR INKS PSA WITH TOTAL TO 
EXPLORE/DEVELOP OFFSHORE "ABSHERON" FIELD 
 
REF: BAKU 558 (2008) 
 
Classified By: Pol-Econ Counselor Joel R. Garverick, Reasons 1.4 (b,d) 
 
 ¶1. (C) SUMMARY: French Company Total has signed an 
Exploration and Development Production Sharing Agreement with 
French Company Total for Azerbaijan's offshore "Absheron" 
field, thought to contain gas and condensates.  Gaz De France 
is expected to be brought in shortly as the third partner.  A 
previous attempt to find gas in this block by Total, Chevron 
and SOCAR in the late 1990s failed to find commercially 
viable volumes of hydrocarbons.  According to SOCAR President 
Abdullayev, if this field 'hits,' first gas should be 
approximately 2016.  This deal is yet another sign that 
Azerbaijan is eager to prove up its reserves and become a 
'player' in regional and global energy markets, and that in 
pursuit of this goal SOCAR is seeking alliances with 
reputable IOCs for the development of its hydrocarbon sector. 
 END SUMMARY. 
 
¶2. (C) In a high-profile February 27 signing ceremony at 
SOCAR headquarters, SOCAR President Rovnaq Abdullayev and 
Total Exploration and Development President Yves-Louis 
Darricarrere signed an Exploration, Development and 
Production Sharing Agreement (EDPSA) for the offshore 
"Absheron" field.  Under the deal Total will have a sixty 
percent interest of the project and will be the operator for 
the exploration phase, with SOCAR holding the other forty 
percent.  This field is thought to contain gas and 
condensate.  SOCAR and Total had signed the precursor to this 
PSA, a "Heads of Agreement," in June 2008 (reftel). 
 
¶3. (C) SOCAR President Abdullayev explained during the 
ceremony that the PSA calls for Total to drill one 
exploratory well within the next three years, to be followed 
by up to two other exploratory wells if the first one is 
successful.  Darricarrerre expected this first exploratory 
well to cost "approximately" USD 100 million. 
 
¶4. (C) In comments to the press after the signing, 
Darricarrere strongly hinted that Gaz De France, with SOCAR's 
approval, would soon be brought into the project as a third 
partner.  When press asked why Total expected to find 
sufficient Absheron hydrocarbons this time, after having come 
up short previously, Darricarrere said that Total knew more 
about the field and had a better plan on how and where to 
drill. 
 
¶5. (C) In pre-signing speeches, both SOCAR President Rovnaq 
Abdullayev and Energy Minister Natiq Aliyev highlighted this 
signing as yet another step in Azerbaijan's development of 
its hydrocarbon sector in conjunction with global 
International Energy Companies (IOCs). Total Exploration and 
Development President Darricarrere cited the PSA as part of 
Total's overall 'risky' global exploration strategy, and 
evidence of its strengthened ties with the GOAJ (COMMENT: In 
Azerbaijan, Total, although not a partner in the AIOC 
Consortium, already has a five percent share of the BTC 
pipeline, and a ten percent share both in the Shah Deniz 
field and the related South Caucus Pipeline). 
 
¶6. (C) BACKGROUND: In 1997, Chevron (30 percent) SOCAR (50 
percent) and Total (20 percent) signed a similar Exploration 
and Development PSA for Absheron, but the first exploration 
well, drilled in 2001, revealed insufficient amounts to 
justify further exploration, and the agreement lapsed in 
¶2003.  The Absheron Block is located in the Caspian 
approximately one hundred kilometers east of Baku, due east 
of the Shah Deniz field, in depths of 500 meters.  END 
BACKGROUND. 
 
¶7. (C) In a February 27 meeting with DAS Matt Bryza after the 
signing, SOCAR President Abdullayev said that although Total 
has three years to do the initial exploratory work, he thinks 
it will take no longer than 18 months.  Commercial 
exploitation should begin "around the time of Shah Deniz 
Phase Two," i.e. approximately 2016.  He told Bryza that 
reserve estimates are 400-500 billion cubic meters, plus 
condensate (NOTE: for comparison purposes, Shah Deniz reserve 
estimates are as much as approximately one trillion cubic 
meters). 
 
¶8. (C) COMMENT: BP Azerbaijan, the 800-pound gorilla of 
Azerbaijan's hydrocarbon sector, expected to be a part of 
Absheron development.  That SOCAR went with Total, and quite 
 
BAKU 00000163  002 OF 002 
 
 
possibly also Gaz De France, could well be a measure of GOAJ 
pique at B Azerbaijan for perceived mishandling of its AIOC 
and Shah Deniz operatorships.  It is far too earl to know 
whether Absheron has commercially viable gas deposits and if 
so how quickly they can be developed, or for that matter 
where would be the ultimate market for these volumes. 
However, this deal is yet another sign that Azerbaijan is 
eager to prove up its reserves and become a player in 
regional and global energy markets, and that in pursuit of 
this goal SOCAR is seeking alliances with reputable IOCs for 
the development of its hydrocarbon sector.  Total contacts in 
Azerbaijan have commented to Embassy that negotiations with 
SOCAR were professional and surprisingly incident-free. END 
COMMENT. 
DERSE