The $6 billion development plan is the next major step in the ongoing development of the ACG field in the Azerbaijan sector of the Caspian Sea.
The project is planned to increase oil production and recovery from the ACG field through a new offshore facility which is designed to fill a critical gap in the field infrastructure between the existing Deepwater Gunashli (DWG) and Chirag-1 platforms.
Rovnaq Abdullayev, president of the State Oil Company of the Azerbaijan Republic (SOCAR), said: "Today's event is a step forward towards realisation of Azerbaijan's energy production growth plans aimed at positioning the country as one of the major suppliers to the world's oil markets. We believe the project's immediate benefits are even more valuable to us because for the first time the project's world class multi-billion dollar facilities will be fabricated inside the country fully utilising local resources."
"This is a clear indication that since the construction of its first offshore platform Azerbaijan has succeeded in developing and upgrading its oil industry capabilities including workforce and infrastructure to world standards," Abdullayev added.
Rashid Javanshir, BP Azerbaijan president, said: "This is an extremely important project which marks the continuation of the outstanding work undertaken jointly by SOCAR and AIOC since the start of development of the ACG field. I am sure I speak for all AIOC shareholders when I say how proud we are to have taken this major investment decision. It underlines the confidence we all have in the future of Azerbaijan and in our joint success."
The COP development will allow recovery of an additional 360 million barrels of oil in total. This aim will be achieved by installing new wells that will primarily target the currently producing Fasila reservoirs and also the Balakhany X, IX and VIII reservoirs above the Fasila.
Some $4 billion of the total project value will be spent on the construction of facilities and the pre-drill programme, and the balance of the sum will be spent on the platform development well drilling during the production period.
First oil from the Chirag Oil Project, the latest stage in ACG's development stretching back more than 15 years, is expected in late 2013.
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ACG participating interests are: BP (operator - 34.1%), Chevron (10.2%), SOCAR (10%), INPEX (10%), Statoil (8.6%), ExxonMobil (8%), TPAO (6.8%), Devon (5.6%), ITOCHU (3.9%), Hess (2.7%).
The ACG Production Sharing Agreement (PSA), signed in September 1994, covers the 30 year development of the Azeri-Chirag-Gunashli contract area. It was ratified by the Milli Majlis and became effective on December 12 the same year, having already become known in Azerbaijan and elsewhere as "the Contract of the Century".
The AIOC was established by international oil companies from six countries, which together with SOCAR, are shareholders in this major field development.
From the start, the activity level in AIOC has been exceptionally high. The field has been developed in several phases: Chirag has been producing since 1997 as part of the Early Oil Project (EOP). This was followed by Azeri Project Phase 1 - Central Azeri production in early 2005. Successive Phase 2 included West Azeri, which started production in January 2006, East Azeri started production in October 2006 and Phase 3 - Deepwater Gunashli started up in April 2008. The next step of development of ACG is the Chirag Oil Project which is currently at the execute stage with first oil expected in 2013. Overall production from all phases is expected to be about 1 million barrels per day.
Potential ultimate recovery from the field is estimated at over 5.0 billion barrels of oil - a super-giant field on any global basis. To date about 1.4 billion barrels (about 188 million tonnes) of oil has been produced from the field.