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EBRD investment boosts onshore oil development in Azerbaijan
Two onshore oilfield blocks in Azerbaijan will be developed with financing of up to US$ 50 million (€ 55 million) from the European Bank for Reconstruction and Development (EBRD). The funding consists of a loan of US$ 40 million (€ 44.4 million) to Karasu Development Company and an equity investment for a maximum of US$ 10 million (€ 11.1 million) in Kura Valley Holdings.
The project involves the rehabilitation of the Mishovdag and Kemaleddin fields and the development of the larger Padar Block located approximately 80 km south of Baku in desert and scrubland. Under a four-year programme, well repairs will be undertaken, existing wells will be completed and infill drilling will be carried out. Two additional wells will be drilled on an extension area alongside the existing wells and using existing facilities. Stringent environmental and health and safety programmes will be implemented.
"This project supports independent oil companies, which play an important role in onshore production," said Peter Reiniger, Business Group Director at the EBRD. Mr Reiniger added: "This is the first conversion of a joint venture into a production sharing agreement in Azerbaijan, and the transaction will help increase competition in the oil sector in the country."
The fields are currently operated by AzerPetoil, a joint venture between the Azeri State Oil Company and Pet Oil of Ankara, Turkey. Under the project, a production sharing agreement will be drawn up between the existing parties and Moncrief Oil, the US-based oil company and the project sponsor. The project will be implemented through two special purpose companies, Karasu Development Company and Kura Valley Holdings, which are majority owned by Moncrief Europe & Asia Holding Partnership.
Richard W. Moncrief, CEO of Moncrief, said: "We are extremely pleased that the EBRD has agreed to join us as our partner in these projects, which we hope and believe will contribute in a significant way to economic development in Azerbaijan."
The project involves an initial equity investment of US$ 5 million (€ 5.5 million) for 6 per cent of the shares of Kura Valley Holdings, granting full capital and voting rights. A further equity investment of US$ 5 million (€ 5.5 million) on subsequent offerings will also be permitted.
There are 720 wells on the Mishovdag field (200 oil producing) and 190 fields on the Kemaleddin field (80-110 oil producing). The Mishovdag development dates from the 1960s and the Kemaleddin field development dates from the 1980s. Both fields are in need of assistance regarding pipelines, tanks and reserve pits, and a remediation programme has been developed.
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