Canadian company plans to begin drilling of new wells in onshore block

Baku. 10 October. REPORT.AZ/ Zenith Aran Oil Company Ltd., daughter company of Zenith Energy in Azerbaijan plans to begin the drilling of new wells in onshore block of oil fields Muradkhanli-Jafarli-Zardab in December 2018, ARC Ratings said in a rating on Zenith Energy, Report informs.

Each new well, circa 4,500 meters deep, will take 3 months to be completed and is expected to add an average of 450 bopd of production. The estimated cost per well is around USD 4.0 million. The Group plans to drill 165 new wells until the end of the concession (23 years left), starting the drilling of 1 in 2018 and 2 in 2019.

Since becoming the operator, Zenith Aran has commenced a progressive programme of workovers and refurbishments of the existing wells (44 in total). The Company has undertaken 7 workovers between the effective date of the REDPSA in August 2016 and March 2018. This has already increased production by 25 bopd to 300 bopd presently.

Currently, the average cost of production is around 19 USD/bbl and this is estimated to fall to 13 USD/bbl when production hits 1,000 bopd.

It is estimated that 12 wells will be worked over in 2018, 15 wells in 2019 and 11 wells in 2020, with an estimated average increase of production of 15 bopd per well, a conservative number used for the Company’s forecast. Average cost estimated for the workover of each well is around USD 50 thousand and is expected to continue being financed by the operations’ cash flow.

On March 16, SOCAR and Zenith Aran Oil Company Ltd. signed an agreement on restoration, exploration, development of the block which includes oil fields Muradkhanli-Jafarli-Zardab and Production Sharing Agreement (PSA). The agreement was ratified by Azerbaijani parliament on June 14. Production from the field commenced on August 11. The agreement will be valid for 25 years and extension of more five years has also been taken into consideration. The total area of the fields is 642.4 m2.