The Bahar Project
Greenfields Petroleum Corporation, through its wholly owned subsidiary Bahar Energy Limited (BEL), owns an 80% interest in the Exploration, Rehabilitation, Development and Production Sharing Agreement (the “ERDPSA”) with SOCAR and its affiliate SOCAR Oil Affiliate (“SOA”) in respect of the offshore block known as Bahar Gum Deniz (the “Bahar Project”), which consist of a Contract Rehabilitation Area (“CRA”) including the Bahar Gas Field and the Gum Deniz Oil Field and an Exploration Area (“CEA”). The ERPSA was ratified by the Azerbaijan Parliament on 27 April 2010 and became effective on 1 October 2010.
BEL and SOA with 80% and 20% participating interest, respectively, in the Bahar Project, are the designated contractors (“Contractor Parties”) to the ERDPSA. BEL formed Bahar Energy Operating Company Limited (“BEOC”) for the purpose of acting as operator of the Bahar Project under a Joint Operating Agreement (“JOA”) on behalf of the Contractor Parties. BEOC is also the designated agent on behalf of the Contractor Parties for the marketing and collection of proceeds from oil and gas sales under the terms of a Joint Lifting Agreement (“JLA”) between BEOC, SOCAR, the State Oil Fund of Azerbaijan (‘SOFAZ”) and the Contractor Parties.
The Bahar Project has the obligation to deliver to SOCAR, at no charge, 5% of the production (referred to as "Compensatory Production"), at no charge, for the first three years of the ERDPSA and 10% from the fourth year forward, until the cumulative Compensatory Production delivered equals a specified target amount for oil and for natural gas, calculated separately.
Upon assuming control of operations on October 1 2010 and after approval by SOCAR of the "Rehabilitation and Production Programme" for the Bahar and Gum Deniz fields, BEL had the obligation to achieve an average daily rate of petroleum production from the CRA (“Target Production Rate 1”, or “TPR1”) of 6,944 barrels of oil equivalent per day (“boe/d”) for ninety (90) consecutive days. Meeting TPR1 would result in the realization of a 25 years term production agreement for the CRA. On 31 January 2014, BEOC met TPR1, which secured for the Contractor Parties the development and production rights in the Bahar Project for a term expiring 21 June 2036.
BEL was also obligated to carry SOA’s 20% share of expenditures in the CRA until production rates were the equivalent of 9,259 boe/d (“Target Production Rate 2” or “TPR2”) for thirty (30) consecutive days. Meeting TPR2 would cause for BEL to end its carrying obligations and SOA to become fully responsible for the funding of their share of expenditures. On 31 March 2014, the TPR2 was achieved and SOA became obligated to start paying its share of the Bahar Project costs from 1 April 2014 forward. The accumulated balance of the SOA carry is reimbursed to BEL out of SOA’s share of entitlement petroleum from the CRA which will be allocated to BEL until full recovery of the carry.
As of 31 December 2017, the Contractor Parties and BEOC are in full compliance with the ERDPSA and JOA’s contractual terms.
In respect to the Bahar Project, we will stay focused in materializing production increase opportunities from currently producing wells while further developing previously discovered proved undeveloped reserves. Our comprehensive plan for the CRA includes workovers and recompletions, drilling, waterfloods and exploration of other strata.
In relation to Bahar Gas Field and the Gum Deniz Oil Field, we intend to advance its plan of development by: (a) upgrading platforms and facilities; (b) introducing high rate gas compression; (c) installing down hole electric submersible pumps; (d) introducing modern completion techniques; (e) completing previously unperforated pay zones in existing wellbores; (f) capitalizing on understanding of reservoirs gained from analysis of data from over 700 previously drilled wells; (g) re-drilling NKP wells in the Bahar Gas Field; (h) reinitiating waterfloods in the Gum Deniz Oil Field; (i) acquiring and processing additional 3D seismic; and (j) piloting new waterfloods in the Bahar Gas Field.