AZERBAIJAN EXPECTED TO EARN $100 BILLION FROM WESTERN OIL DEAL

AZERBAIJAN EXPECTED TO EARN $100 BILLION FROM WESTERN OIL DEAL

A new deal between the government of Azerbaijan and a group of Western oil companies on Caspian Sea oil fields, agreed upon late last month, could earn the Azeris more than $100 billion, industry sources said Tuesday.

The deal covers development of the Azeri and Chirag fields in the Caspian Sea.As part of the contract the two sides had agreed an 80-20 production sharing deal, which would also see the Western companies make around $25 billion.

The deal still is subject to approval by the government of Azerbaijan, and ratification by its Parliament and by the respective boards of the Western companies involved.

The Western consortium is led by British Petroleum Co. in partnership with Den Norske Stats Oljeselskap A/S, or Statoil, the Norwegian state oil company.

Other companies involved are Amoco Corp., Pennzoil Co., Ramco Oil Services Inc., Unocal Corp., McDermott International Inc. and Turkish Petroleum Co.

BP/Statoil holds 36.7 percent of the project; Amoco, 24.3 percent; Pennzoil, 17 percent; Unocal, 16 percent; McDermott, 3.5 percent, and Turkish Petroleum, 2.5 percent.

"We are encouraged by the progress we're making towards an equitable arrangement, which would form the basis for considerable Western investment in Azerbaijan," a spokesman for BP said.

Under the contract, the Western companies will pay a signature bonus to Azerbaijan of $500 million, of which half is due upon ratification of the agreement by the Azeri Parliament and the other half on completion of export pipeline agreements.

However, the oil firms are being allowed to deduct money already paid to Azerbaijan for appraisal and other technical work from the signature bonus.

Development of the two new fields is expected to cost more than $7 billion.