By Seymur Mammadov in Baku
Azerbaijan is becoming increasingly interested in oil and gas production in other regions of the world as it has enough experience to work effectively elsewhere. Baku is the first place on Earth where oil was extracted industrially. Offshore oil production also first began here. So, Azerbaijan believes it has a lot of offer its potential new partners.
The State Oil Company of Azerbaijan (SOCAR) is eyeing geological exploration in the Bulgarian sector of the Black Sea. According to the Bulgarian Ministry of Energy, the upcoming tender for the development of Block 1-26 Khan Tervel (formerly Teres) in the Black Sea was one of the main subjects of discussion during a recent meeting between Bulgaria's Minister of Energy Vladimir Malinov and Azerbaijan's Minister of Economy Mikayil Jabbarov.
The Khan Tervel field is located in Bulgaria's exclusive economic zone. It has been under exploration since 2002, but no exploratory drilling has been carried out so far. Bulgaria has repeatedly announced tenders for the exploration and development of hydrocarbons at Block 1-22 Teres, and in 2015, the block was offered to bidders along with the Silistar field.
Each time, the tender ended in failure. Either interested companies did not submit bids, or there were no applicants at all. Among other reasons, the failures are attributed to the stringent requirements imposed by Bulgarian on bidders, including the size of bank guarantees. Last year, Bulgaria made another attempt. The tender conditions require the winning company to conduct 3D seismic surveys, prepare a geological model to identify promising drilling sites, assess oil-bearing potential, and, if possible, drill an exploratory well. This is the minimum expected from the company that will be selected based on the tender results.
In 2019, Shell was unable to determine the exact volume of hydrocarbon reserves at the Khan Kubrat field. An appraisal well was drilled, but it did not find sufficient reserves to make it viable. The company's estimate of the probability of oil and gas being found was one in five. As a result, the work was halted.
Bulgaria is highly interested in developing its own fields. Geological studies and 3D seismic surveys conducted across the entire Bulgarian sector of the Black Sea indicate fairly high potential in terms of hydrocarbon reserves and extraction capabilities. Currently, Bulgaria is an exporter of oil and gas. It is also actively involved in the transit of Azerbaijani gas to Europe.
In October 2022, the inauguration ceremony of Gas Interconnector Greece-Bulgaria (IGB) took place in Sofia, and work is currently underway to expand its capacity. According to ICGB's Executive Officer Teodora Georgieva, it is planned to operate with expanded capacities from the fourth quarter of 2025 at the connection point in Stara Zagora and from the fourth quarter of 2026 at the connection point in Komotini. IGB meets almost half of Bulgaria's domestic demand for gas. The main goal of the ongoing work is to increase the pipeline's technical capacity to 5bn cubic metres of gas per year.
Despite these plans, Bulgaria seeks to ensuring its energy security by developing its own fields. Therefore, in the coming days, Bulgaria's Council of Ministers will open a tender for the exploration and development of oil and natural gas at Block 1-26 of the Khan Tervel field. The area covers more than 4,000 square kilometres, and the exploration permit will be issued for five years with the right to three extensions of two years each. Potential bidders must have a total net sales revenue of at least €150mn over the last three financial years.
SOCAR is, of course, interested in participating in oil and gas exploration at the Khan Tervel field. As we have already noted, the country has sufficient experience in similar projects, which the State Oil Company is eager to transfer to foreign sites, and SOCAR plans to step up its exploration activities outside of Azerbaijan.
The Azerbaijani company has certain plans for cooperation with the Turkish Petroleum Corporation (TPAO) in the Black Sea. SOCAR has been investing in and cooperating with TPAO since 1994, and now the companies are considering jointly developing a rich gas field located in the Turkish sector of the sea. Previously, Ankara discussed cooperation in this area with Russian and Iranian companies. But politically, Turkey has plenty of problems with both Russia and Iran to make cooperation difficult. Analysts believe that Turkey, as a partner, will likely settle on Azerbaijan, with which it has better relations, because it is easier to have a trusted partner in such complex and expensive projects.
Israeli gas field
While Azerbaijan's participation in Black Sea oil and gas projects is still being discussed, SOCAR already has a licence to work in the Israeli shelf of the Mediterranean Sea.
In October 2023, shortly after the Hamas terror attack, SOCAR, together with BP and NewMed, was given a licence to conduct gas exploration in the northern part of Israel's largest hydrocarbon field - Leviathan. A total of 12 licences were issued as a result of the tender. Licences to work in Zone I were issued to SOCAR, BP, and NewMed Energy. ENI and SOCAR will also act as operators. The winning companies have reportedly committed themselves to unprecedented investment in natural gas exploration over the next three years, with the possibility of extension to seven years if progress is made. During this period, new natural gas fields are expected to be discovered.
BP and SOCAR, in partnership with Israel's NewMed Energy (NWMDp.TA), applied for two offshore blocks near the Leviathan and Tamar fields, where gas is already being produced. A few years ago, SOCAR participated in energy resource exploration in Israel, but its efforts were not successful at that time. However, the situation and prospects are more defined this time.
Due to the escalation of the conflict in the Middle East, the project's implementation has been put on hold. It is reported that SOCAR is waiting for the right moment to start work with BP and NewMed on the I-6 cluster of the Leviathan field. The State Oil Company of Azerbaijan does not plan to quit the development of Israel's Mediterranean fields. This project will open a new chapter for SOCAR. Previously, the company's international projects were limited to oil refining and the sale of oil and gas. The Leviathan licence will allow it to establish itself as an energy entity operating outside Azerbaijan.
However, while conditions for starting work on the Israeli shelf have not yet been created, it is possible that participation in the tender announced in Bulgaria will become the main goal of the Azerbaijani company. It is high time for SOCAR to demonstrate its capabilities.
