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In 1996, CIECO established ITOCHU Oil Exploration (Azerbaijan) Inc., a wholly-owned subsidiary, to acquire a 3.9205 % interest in a Production Sharing Agreement (PSA) for three fields in the South Caspian Sea. Azeri, Chirag and he deepwater Gunashli fields (ACG) are located approximately 120 kilometers southeast of Baku, Azerbaijan.
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CIECO's participation in the ACG Project marked the first time that a Japanese or East Asian company had ever become a partner to a PSA for this region.
A multinational consortium of ten international oil companies, the "Azerbaijan International Operating Company (AIOC)" is conducting the operations in the ACG fields. Parties to this PSA include the State Oil Company of the Azerbaijan Republic (SOCAR) and international oil companies from the U.K., U.S., Norway, Turkey and Japan.
Often referred to as the "Contract of the Century" because it is expected to involve investment of approximately US $14 billion, the PSA has a thirty-year term and covers an offshore contract area of 432 square kilometers. The PSA grants the oil companies the right to develop the ACG fields and to market the produced oil.
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In November 1997, first oil was produced from Chirag-1, the initial platform in the ACG fields, and was delivered through the Northern Export Route pipeline to a terminal at Novorossiysk, on the Russian coast of the Black Sea. The first ACG lifting occurred at Novorossiysk in March 1998.
In February 2005, oil production was started from Central Azeri Platform - Phase 1, as part of the ACG Full Field Development. In addition, West Azeri production began in December 2005 as the part of the Phase 2. At the middle of 2006, approximately 500,000 bopd of oil was produced from these platforms. The total production is expected to plateau at 1,100,000 bopd by 2010 following completion of Phase 2 and Phase 3.
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