The Caspian International Petroleum Company (CIPCO) announced on January 22 that it is closing down its project to develop the “Karabakh” offshore oilfield in Azerbaijan’s sector of the Caspian Sea. Three test wells, the last of which was drilled last autumn, found oil and gas in amounts deemed insufficient for commercial exploitation. CIPCO management maintains that development would be unprofitable even when oil prices recover from their current slump. CIPCO had until February 1999 to complete its three-well exploratory program and make a final decision on the project’s future.
The CIPCO consortium, which is folding, is made up of the U.S. company Pennzoil as project operator, with a stake of 30 percent; the alliance of Russia’s Lukoil and Italy’s Agip; and Azerbaijan’s State Oil Company. Signed in 1996, the production-sharing contract was Azerbaijan’s second after the 1995 “deal of the century.” The “Karabakh” field’s reserves were estimated at 100 million tons of oil, and the value of the investment at US$1.7 billion over a twenty-five-year period. CIPCO has spent approximately US$150 million thus far on the project (Dow Jones Newswires, The Financial Times, January 22).
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