The cost of implementing Phase-3 of the development of the Azeri-Chirag-Gunashli fields, which involves the development of the deep-water section of the Gunashli field, will be 20%-30% more than the cost of Phase-1, which involves the development of the central part of the Azeri field, Azerbaijan International Operating Company President David Woodward told journalists.

"The concept for Phase-3, which was recommended to AIOC shareholders, is similar to the concept for Phase-1. In the deep-water section of Gunashli it is planned to build a production platform with 48 wells and one gas and water injection rig, linked to the production rig. The concrete cost of Phase-3 will be established after an engineering study, but preliminary information indicates that its will be 20%-30% more expensive than Phase-1," Woodward said.

He explained this increase as being due to a few differences in the projects. In particular, Gunashli is a deeper structure than Azeri. Moreover, the full development of the Gunashli structure involves the drilling of separate wells, without rigs, with the installation of subsea wellheads, which is not the case with Phase-1. Woodward also noted that as the deep-water part of Gunashli is a depleted field from the first day of production, additional measures would have to be taken to maintain pressure in the oil bed (water injection).

The AIOC president noted that the concept for Phase-3 would be confirmed by AIOC shareholders in September 2003, after which detailed engineering work will be carried out. The sanctioning of Phase-3 is expected in mid-2004.

Phase-3 of the Azeri-Chirag-Gunashli project is the last stage of the project's development. The amount of reserves to be extracted during Phase-3 is 1.1 billion barrels of oil, from total reserves at the Azeri-Chirag-Gunashli block of 5.3 billion barrels (730 million tons).

Construction of a 48-well platform is currently underway at the central part of the Azeri field, as part of Phase-1 of the project. Construction work has been started under Phase-2, involving the installation of two 48-well platforms in the western and eastern sections of the Azeri field. Phase-1 will cost $3.4 million.

With the completion of all construction work on the three phases, it is expected that oil production from the Azeri-Chirag-Gunashli block will amount to about 1 million barrels per day from 2009.