Azerbaijan International 4.2 - SOCAR Section - AIOC: Current Developments by Einar Bergh

Summer 1996 (4.2)
Page 40

Signing of the Agreement between Azerbaijan and Georgia for the Western Pipeline for Early Oil. (L-R): Terry Adams, President of AIOC; Eduarde Shevardnadze, President of Georgia; and Natig Aliyev, President of SOCAR. In Tbilisi on March 8, 1996. Photo: Oleg Litvin for AIOC.

Left: Construction of the oil pipeline from Baku to the Black Sea Port of Batum (Georgia). Photo in Kurdamir, Azerbaijan 1928. Courtesy National Photo Archives.

Georgia Signs Pipeline
Major international agreements have been signed between Azerbaijan and Georgia during the State Visit of President Heydar Aliyev to Tbilisi on March 8, 1996. In addition, pipeline agreements were also concluded between AIOC, SOCAR and these two countries. Commitments were finalized to reactivate the pipeline reticulation between Baku and the Black Sea. Terry Adams, President of AIOC, led the AIOC delegation and signed the agreements on behalf of the foreign shareholders.

Following the ceremonies in Tbilisi, Adams visited the Georgian port of Supsa with Mr. Gia Chanturia, President of GIOC, (Georgia International Operating Company) where a Western pipeline terminal is planned. They also visited Poti, where pipe and other supplies and equipment for AIOC will be transited for shipment by train to Baku. At the port of Batumi high level discussions took place with the head of the Adjarian Autonomous State.

At the beginning of May, an International Business Conference was hosted by President Shevardnadze in Kutaisi and Mr. Adams was invited to be one of the major speakers. He took a SOCAR-AIOC delegation with him to the Conference.

Left: Again AIOC's Booth for the 96 Caspian Oil and Gas Exhibition is the model of the ancient Fire Temple, the original of which still exists in Baku. Inset of Fire Temple on postcard dates to 1911. Courtesy: Yakub Karimov.

Early Oil-Summer 1997
All of the necessary Early Oil transportation agreements have been signed for both the Northern Route through Russia and the Western Route through Georgia. The combined capacity of the two pipelines will be sufficient to carry crude oil from the Chirag I production platform, a possible second platform during Early Oil and some third party volumes.

The production start-up on Chirag I is now scheduled to begin during the summer of 1997, with oil being transported initially through the Northern pipeline from Baku through Russia then on to the Russian port of Novorossiysk on the Black Sea.

Japanese Join Consortium
The Japanese company, ITOCHU, has purchased McDermott's entire share of 2.45% of the PSA (Profit Sharing Agreement) in AIOC. Now eight countries are represented in AIOC-Azerbaijan, US, UK, Norway, Russia, Turkey, Saudi Arabia and Japan. ITOCHU is a large industrial group with an energy division and pipe manufacturing activities. ITOCHU had previously won a contract from AIOC to supply pipe for the project.

Also pending is Pennzoil's sale of 5% of its 9.8175% share to ITOCHU. This would reduce Pennzoil's share to 4.8175% and bring ITOCHU's up to 7.45%.

Module Refurbishment Program
The Chirag I topside modules previously removed from the platform are now undergoing refurbishment at the SPS Yard outside Baku, as is the Kaspmorneft semi-submersible drilling rig. The vessel, Santa Fe, will operate the rig during its three well appraisal drilling program, beginning this August.

Offshore pipelines and terminal
A 16-gas pipeline from the fields offshore to the gas treatment plant at Oil Rocks and a 24-oil pipeline to a new terminal near Sangachal southwest of Baku will be completed in time for production start-up during the summer of 1997. The terminal will be located about two kilometers inland from shore.

Zykh Yard-Pipe Coating
The Zykh Construction Yard in Baku has been chosen as the site for the Coating Plant for AIOC's offshore pipe. Some upgrade work will need to be done on the facility before the pipe coating can begin. Coating is the process by which layers of insulation and concrete are applied to lengths of pipe before they are used in offshore pipelines. The first large shipment of pipe was scheduled to arrive in Poti in Georgia in mid-May and to be transported by rail to the Zykh yard in Baku.

Environmental Meetings
The second public meeting on the AIOC Appraisal Drilling Environmental Impact Assessment was held in the Nizami Museum in Baku on Sunday, March 24th. Students, scientists and journalists attended the presentations and participated in the questioning afterwards. One of the tentative conclusions based on AIOC's analysis of the Environmental Survey Data so far was that the environment was less polluted than the literature had indicated.

On April 24, a third Environmental Impact Meeting was held for Environmental Specialists in AIOC's offices. As reported in this column in the Spring 1996 issue of Azerbaijan International, this is the first time in the history of Azerbaijan's oil and gas industry that the public has been invited to participate in open dialogue about the environmental impact of a development project.

In the beginning of May, Azerbaijani specialists of the Joint Environmental Committees which were established in connection with AIOC's project went to Norway and Great Britain to observe environmental programs and activities in the oil and gas sector.

The Environmental Impact Assessment Report for AIOC's Appraisal Drilling program was submitted to the State Committee for Ecology on April 30th. The overall Environmental Impact Assessment for the project will be submitted in June.

Management Team Reorganized
Earlier this year, John Hollis of British Petroleum was appointed Senior Vice President (Technical) in AIOC. The Vice Presidents of Operations, Projects and HSE (Health, Service and Environment) report to Hollis, as does the newly appointed Manager of Development Planning, Mike Crews from Exxon. Art McHaffie's title is now Executive Vice President (Commercial).

Cultural Programs
The Community Concerts in Baku which AIOC & SOCAR have initiated this year have become very popular both among Azerbaijanis and expatriates. Perhaps the greatest interest so far was evidenced at the "Jazz at the Opera" Concert at the Opera and Ballet Theater on March 6th. Three Baku jazz bands performed as did the well-known young female vocalist and jazz pianist, Aziza Mustafa-Zadeh, who is now performing internationally.

On March 28th, a "Young Talents Concert" was held in the German Church. Young performers from the schools of Baku had been selected by a special jury. Nazrin Rashidova, eight-year-old violinist originally from Baku, who now studies at the Purcell School of Music in London, was invited to perform as one of the main performers of the evening. She was accompanied by the Gara Garayev State Chamber Orchestra and her mother, Sadagat Mammadova, on the piano.

Roshan Guliyev, 16, playing Hedike's "Concert Etude for Trumpet & Orchestra" at the "Young Talents Concert" sponsored by SOCAR and AIOC. March 28, 1996, at the German Church.

Gulnara Mammadova, 8, brilliant young pianist who played Azerbaijani Composer Azizli's "Preludes" and Pipper's "Bounce" at the "Young Talents Concert". Despite the fact that she can't reach the pedals,
she has incredible control.

Surkhai Askerov, 13, singing Mozart's "Aria by Kerubino from the Marriage of Figaro" at the "Young Talents Concert." He was accompanied by the Gara Garayev State Chamber Orchestra.
Photos: Oleg Litvin.

"Dance is Forever" Program (April 26) in the Opera and Ballet Theater featured various forms and styles of dance, from international folk dance via ballroom dance to ballet, rock and roll and choreographed dance from Broadway shows.

AIOC has also launched a "Young Musician of the Year" program in Azerbaijan for various instrument categories-Organ, piano, and strings. The organ competition was held April 27th. This was the first Organ Competition in more than 30 years of organ instruction by the Academy of Music. The concert was held in the German Church. The standard of musicianship was very high. Irada Aliyev won First Place. Tarana Karimova and Fuad Abdullayev shared Second Place. Nazakal Rimazi took Third Place. Zakiya Qasimova was awarded "Best Performance by an Azeri Composer".

A piano competition is being held in May. The Strings Competition will follow in November 1996. At the end of the year, a jury will select and name "The Young Musician of the Year" from among all the instruments.

Caspian Oil and Gas Exhibition
AIOC plans to make a very strong presence at the 96 Caspian Oil and Gas Exhibition and Conference in Baku on June 4-7, 1996. Dr. Terry Adams will speak about "AIOC: Vision and Reality" on June 5th. The AIOC Environment Manager, Dr. Liz Rogers, will speak on June 6th about "The Environmental Challenge for AIOC." Dr. Jack M. Colonell will also speak at the same session about "AIOC's Caspian Environmental Baseline Study Program." AIOC's stand is modeled after the design of Baku's "Fire Worshippers' Temple."

On Monday, June 3, on the eve of the opening of the oil show, AIOC and SOCAR will host a joint reception at the Villa Petrolea, (AIOC's new office building named after the Nobel Brothers' Residence). This will give an opportunity for the invitees to see AIOC's newly refurbished building.

Pipe Coating at the Zykh Yard
AIOC has awarded a contract to Bedero Price for the application of the corrosion and concrete coat of 50 kilometers of 16" gas pipeline and 190 kilometers of 24" oil pipeline. The work scope of this project will be a cooperative and joint effort between the management and workers of SOCAR, AIOC and Bedero Price. Site preparation has already begun by SOCAR. The work scope will include refurbishment of the rail spur into Zykh and the upgrading of the existing pipe coating plant.

The Azerbaijan portion of this contract is estimated to be about US $4.5 million. Skilled labor previously used at the Zykh pipecoating yard will be employed to carry out this work. Trucks, cranes and earth-moving equipment will be employed from Azerbaijani contractors. Land fill materials and aggregate for the concrete will be obtained from Azerbaijan.

Coating operations will start around August 15, 1996, and continue through February 1997. An estimated 150 Azeris will be employed for the contract period. Pipe is expected to arrive in Baku by the end of May via rail from the port of Poti, Georgia.

AIOC Hires Azerbaijanis
Azerbaijan International Operating Company (AIOC) has begun the implementation of a long-term plan directed at recruiting, training and developing Azerbaijani Nationals. Their goal is to place Azerbaijani national employees in 90 percent of AIOC professional positions and in 95 percent of non-professional positions within five years of commencement of first oil from Full Field Development.

In February, AIOC began the process of identifying employees who will be groomed for management and technical positions. AIOC will also be recruiting Azerbaijani nationals from the following sources: 1) SOCAR; 2) universities in Baku, Europe and the US; and 3) experienced individuals from within the Azerbaijan workforce. These sources will provide a pool of national employees which will rise to various levels in the organization. To expedite the recruiting process, AIOC Human Resource professionals are conducting meetings with embassies and universities in Baku. AIOC anticipates placement in high-level, non-technical positions will begin to occur within three years, and placement in high-level technical positions within five to nine years. Such placements will, wherever possible, replace foreign expatriate personnel.

1996 Caspian Oil and Gas Exhibition
The Third International Caspian Oil & Gas Exhibition will take place at the Baku Sports Center, June 4-7, 1996. Each year the Show has grown substantially although from the start. A record attendance is expected as more than 150 international companies will be exhibiting. President Heydar Aliyev will open the Exhibition on Tuesday morning (June 4).

Seven countries are sending Representatives on the Ministry level to take part in the Opening Ceremonies with him. They include: Charles B. Curtis, Deputy Secretary of Energy (USA); Jens Stoltenberg, Minister of Industry and Energy (Norway); Tim Eggar, Member of Parliament and Minister of Industry and Energy (UK); K. Zaldastanishvili, Minister of Economic Relations (Georgia); Alexandru Stanescu, Minister for Industry (Romania); Husnu Dogan, Minister for Energy and Natural Resources (Turkey); and B. M. Kuandykov, President of the State Company Kazakhstancaspishelf on behalf of Nurlan Balgimbayev, Minister of Oil and Gas (Kazakhstan).

Conference Sessions include: Tuesday-June 4: "Enabling Technology." Wednesday-June 5: Keynote Addresses by Natig Aliyev, President of SOCAR; and Terry Adams, President of AIOC followed Temel Iskit, Turkish Deputy Undersecretary of the Ministry of Foreign Affairs speaking about "Political Economics of the Caspian Region." On Thursday-June 6: "Downstream Technology and Development" and "Environmental and Safety Challenge." The highly coordinated Caspian Oil and Gas Exhibition and Conference is organized by Spearhead Exhibitions in London. See 96 Bilingual Resource Directory in back of magazine.

From Azerbaijan International (4.2) Summer 1996
© Azerbaijan International 1996. All Rights Reserved.

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