13:31 19.07.2019

SOCAR and Trident score same number of points in bidding for Dolphin hydrocarbon section

3 min read
SOCAR and Trident score same number of points in bidding for Dolphin hydrocarbon section

The interdepartmental commission for concluding and implementing production sharing agreements (PSAs) in a tender for the development of the Dolphin hydrocarbon section on the Black Sea shelf has given the same number of points (170 points) to bids of Caspian Drilling International and Trident Black Sea.

This is seen by the draft decision of the commission dated July 10, the text of which was published by the Ekonomichna Pravda media outlet.

According to the document, Caspian Drilling, a subsidiary of the State Oil Company of the Azerbaijan Republic (SOCAR) plans, in case of victory, to drill 32 wells (under the base-case scenario) by the end of the tenth year of the project. It also plans to achieve annual production of 5 billion cubic meters of gas, as well as obtain the accumulated production of 13.5 billion cubic meters. The volume of investments in this scenario could exceed $1 billion.

Among the comments to the company are the conditions of distribution of products in favor of the state. Thus, the proposed share of Ukraine in profitable products is 20%, and some of the products, due to which the investor will have its expenses compensated, may account for 69%. In addition, it is noted that currently all available Caspian Drilling platforms are located in the Caspian Sea, and therefore it is unclear what equipment will carry out drilling on the Black Sea shelf, and when it will be able to arrive in the Ukrainian water area.

"In addition, one should take into account certain risks associated with the political relations of Azerbaijan and the Russian Federation, as well as with joint projects of SOCAR, Russian banks and energy companies (in the territory of both countries), because of which the Ukrainian project can become a bargaining chip, " the document says.

In turn, Trident Black Sea (a subsidiary of American Trident Acquisitions Corp.) turned out to be a company that offered the best production sharing conditions. Thus, the minimum share of the state in profitable production is 30% with production of 1 million tonnes of oil equivalent (TOE) per year (depending on the volume of production, the share of the state grows and reaches 70% with the indicator of 20 million TOE per year). At the same time, the highest share of compensatory production is 60%.

It is noted that the bidder has a platform in the Black Sea area, which automatically removes any potential complications that may be associated with the movement of equipment through the Bosphorus and the Dardanelles. At the first stage of exploration, the company guarantees financial investments of at least $200 million, which is also the best offer from the bidders. With optimistic developments, investment in development and production at the site will be $1 billion.

At the same time, this bidder's weak point is related to decision-making, which may carry the risk of shareholders refusing to agree on the financial obligations mentioned in the bid.

"The interdepartmental commission did not agree on the winner of the tender for concluding an agreement on production sharing at the Dolphin site. None of the bidders was able to get enough votes to make an approving decision with the necessary majority of commission members present," the document says.

The proposal of U.S. Frontera scored 120 points, and that of the Ukrainianbidder, Ukrnaftoburinnya, 150.

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