BAKU, Azerbaijan, Nov.3
By Leman Zeynalova – Trend:
Canadian Zenith Energy company has detailed the reasons of abandoning Azerbaijani assets, namely, the Contract Rehabilitation Area of Muradkhanli-Jafarli-Zardab block of onshore oil fields, Trend reports.
On March 2, 2020, Zenith Energy announced that in view of the company’s strategic focus on pursuing large-scale oil production and development opportunities in Africa, it will hand over the Contract Rehabilitation Area to Azerbaijan’s state oil company SOCAR.
The handover of the Contract Rehabilitation Area (CRA) was effectively concluded in June 2020. The Group continued to operate the CRA from March 2020 until June 2020 when the handover of the CRA was completed.
The Group achieved a near total reduction of operating expenses in Azerbaijan upon completion of the handover of the Contract Rehabilitation Area. The Group explained this decision stating that initially in 2015, it viewed the Azerbaijani acquisition as an important opportunity and its main asset, which was acquired with no consideration because of the then-ongoing oil crisis.
This acquisition greatly helped the Group gain credibility and presence whilst it was preparing for Admission to the London Stock Exchange Main Market. However, after several years and more than US$5 million invested, the Company decided to abandon the operations in Azerbaijan due to the challenging geology of the oilfield and its production reservoirs, the unreliability of historical field data rendering the planning and execution of well interventions significantly more difficult, as well as the poor condition of many of the Soviet-era wells. These were the contributing factors which prevented the Group from achieving the minimum production levels which they were contractually obligated to meet.
The Group’s inability to meet these levels within a specified time period resulted in a material breach of the contract. The Group entered into discussions with SOCAR and reached agreement in March 2020 to handover the CRA and assets after a 3-month transition period.
Azerbaijan’s state oil company SOCAR and Zenith Aran Oil Company signed a REDPSA in March 2016 for a block that includes the Muradkhanli, Jafarli and Zardab oil fields. Zenith Energy Ltd established its subsidiary company Zenith Aran Oil Company Ltd for production operations in these three fields. Production under the agreement began in August 2016.
The total area of the Muradkhanli, Jafarli and Zardab fields is 642.2 square kilometers, and according to the contract, it is divided into rehabilitation and exploration territories.
The Muradkhanli-Jafarli-Zardab block is located in the Yevlakh-Agjabadi oil and gas region of Imishli district of Azerbaijan. The Muradkhanli field was discovered in 1971, Jafarli - in 1984, and Zardab - in 1981.
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