First quarter 2019 results

ACG participating interests are: BP (30.37 per cent), SOCAR (25.0 per cent), Chevron (9.57 per cent), INPEX (9.31 per cent), Equinor (7.27 per cent), ExxonMobil (6.79 per cent), TPAO (5.73 per cent), ITOCHU (3.65 per cent), ONGC Videsh Limited (OVL) (2.31 per cent).

BP Exploration (Caspian Sea) Limited is the operator on behalf of the Contractor Parties to the ACG Production Sharing Agreement.In the first quarter of 2019, we spent about $138 million in operating expenditure and over $279 million in capital expenditure on ACG activities.

In April 2019, the ACG partnership took a decision to commence the next stage of development of the ACG field with a $6 billion project which includes a new offshore platform and facilities designed to process up to 100,000 barrels of oil per day. The project is expected to achieve first production in 2023 and produce up to 300 million barrels of oil over its lifetime.  

Production

During the first quarter of the year, ACG continued to safely and reliably deliver stable production. Total ACG production for the first three months of 2019 was on average 571,000 barrels per day (b/d) (about 52 million barrels or 7 million tonnes in total) from the Chirag (43,000 b/d), Central Azeri (146,000 b/d), West Azeri (128,000 b/d), East Azeri (100,000 b/d), Deepwater Gunashli (96,000 b/d) and West Chirag (58,000 b/d) platforms.At the end of the first quarter, 119 oil wells were producing, while 42 wells were used for water and 7 for gas injection.

Drilling and completion 

In the first quarter, ACG completed 4 oil producer wells.

Associated gas

During the first quarter, ACG delivered an average of about 5.2 million cubic metres per day of ACG associated gas to SOCAR (0.5 billion cubic metres in total), primarily at the Sangachal Terminal but also to SOCAR’s Oil Rocks facility. The remainder of the associated gas produced was re-injected for reservoir pressure maintenance.

During the first three months of 2019, oil and gas from ACG and Shah Deniz continued to flow via subsea pipelines to the Sangachal terminal.

The daily capacity of the terminal’s processing systems is currently 1.2 million barrels of crude oil and about 80 million standard cubic metres of Shah Deniz gas, while overall processing and export capacity for gas, including ACG associated gas is around 100 million standard cubic metres per day.

During the first quarter, the Sangachal terminal exported more than 69 million barrels of oil. This included more than 61 million barrels through Baku-Tbilisi-Ceyhan (BTC) and around 8 million barrels through the Western Route Export Pipeline (WREP).

Gas is exported via the South Caucasus Pipeline (SCP), the South Caucasus Pipeline expansion system and via SOCAR gas pipelines connecting the terminal’s gas processing facilities with Azerigas’s national grid system.

On average, about 47 million standard cubic metres (about 1656 million standard cubic feet) of Shah Deniz gas was exported from the terminal daily in the first quarter of 2019.

The BTC Co. shareholders are: BP (30.1 per cent); AzBTC (25.00 per cent); Chevron (8.90 per cent); Equinor (8.71 per cent); TPAO (6.53 per cent); Eni (5.00 per cent); Total (5.00 per cent), ITOCHU (3.40 per cent); INPEX (2.50 per cent), ExxonMobil (2.50 per cent) and ONGC (BTC) Limited (2.36 per cent).

In the first quarter, BTC spent approximately $25 million in operating expenditure and about $6 million in capital expenditure.

Since the 1,768km BTC pipeline became operational in June 2006 till the end of the first quarter of 2019, it carried a total of about 3.2 billion barrels (around 425 million tonnes) of crude oil loaded on 4,159 tankers and sent to world markets.

During the first quarter of the year, BTC exported around 61 million barrels (over 8 million tonnes) of crude oil loaded on 74 tankers at Ceyhan.

The BTC pipeline currently carries mainly ACG crude oil and Shah Deniz condensate from Azerbaijan. In addition, other volumes of crude oil and condensate continue to be transported via BTC, including volumes from Turkmenistan, Russia and Kazakhstan.

Shah Deniz participating interests are: BP (operator – 28.8 per cent), TPAO (19.0 per cent), AzSD (10.0 per cent), SGC Upstream (6.7 per cent), PETRONAS (15.5 per cent), LUKOIL (10.0 per cent) and NICO (10.0 per cent).

In the first quarter of 2019, Shah Deniz spent $191 million in operating expenditure and more than $267 million in capital expenditure, the majority of which was associated with the Shah Deniz 2 project.

Production

During the first quarter of the year, the Shah Deniz field continued to provide deliveries of gas to markets in Azerbaijan (to SOCAR), Georgia (to GOGC and SOCAR), Turkey (to BOTAS) and to BTC Company in multiple locations.

In the first quarter, the field produced 4.3 billion standard cubic metres (bscm) of gas and about 1 million tonnes (7.5 million barrels) of condensate in total from the Shah Deniz Alpha and Shah Deniz Bravo platforms.

Production from Shah Deniz Bravo has been ramping up since the first gas delivery at the end of last July.

The existing Shah Deniz facilities’ production capacity is currently more than 56 million standard cubic metres of gas per day or more than 20 bcma.

Drilling

During the first quarter of 2019, Shah Deniz Alpha platform rig was on warm stack

.The Istiglal rig delivered one subsea well completion on the East South Flank and is currently performing completion operations on the West South Flank.  The Maersk Explorer rig drilled one well to its final depth and moved to rig certification.

The above two rigs have already drilled and completed four wells on the North Flank, four wells on the West Flank and four wells on the East South Flank. 16 wells have been drilled by the Maersk Explorer rig in total for Shah Deniz 2 production and subsequent ramp up. Drilling operations will continue to deliver all wells required to ramp up to plateau level.

The SCP Co. shareholders are: BP (28.8 per cent), TPAO (19.0 per cent), AzSCP (10.0 per cent), SGC Midstream (6.7 per cent), PETRONAS (15.5 per cent), LUKOIL (10.0 per cent) and NICO (10.0 per cent).

In the first quarter of 2019, SCP and South Caucasus Pipeline Expansion (SCPX) spent about $9 million in operating expenditure and more than $17 million in capital expenditure in total.

The SCP has been operational since late 2006, transporting Shah Deniz gas to Azerbaijan, Georgia and Turkey while SCPX commenced commercial deliveries to Turkey in June 2018.

The daily average combined throughput of SCP and SCPX was about 30 million cubic metres of gas per day during the first quarter of 2019.

The SCP and SCPX have a dual operatorship with BP as the technical operator being responsible for construction and operation of the pipeline facilities and SOCAR Midstream Operations, as commercial operator, responsible for the commercial operations of the pipeline..

On Shafag-Asiman, planning for the drilling of the first exploration well continues. Current plans are to commence drilling activities later this year.

Planning for the exploration wells drilling in the selected three prospective areas on Shallow Water Absheron Peninsula (SWAP) is ongoing with the view to commence to drill the first well later this year.

On Block D230, we are planning to conduct a 3D seismic acquisition in 2019. Based on the results of the seismic survey we will begin planning of the first exploration well in 2020.

 At the end of the second quarter of 2019, the number of BP’s Azerbaijani national employees was 2,510 including fixed-term employees.

Since mid-2018, 90 per cent of BP Azerbaijan’s professional staff has been nationals. Non-professional staff of BP in Azerbaijan is 100 percent nationalized.

During the first half of the year, ten senior national employees of BP Azerbaijan were appointed to leadership roles in BP’s UK, Iraq, Russia and other offices.

BP will continue its efforts to optimize its learning and development programmes and will activelyparticipate in public and private sector initiatives contributing to the development of the local talent market.

The success of projects in the Caspian region depends, in part, on the operators’ ability to create tangible benefits from these projects for the people of the region. To achieve this, BP and the co-venturers continue to implement major social investment projects, which include educational programmes, building skills and capabilities in local communities, improving access to social infrastructure in communities, supporting local enterprises through provision of access to finance and training, support for cultural legacy and sport, as well as technical assistance to public institutions.

In the first quarter of 2019, BP and the co-venturers in BP-operated joint ventures spent $0. 8 million in Azerbaijan alone on social investment projects.

BP (on behalf of the co-venturers in the joint ventures that it operates) will continue their social investment initiatives in support of local capacity-building and enterprise development throughout Azerbaijan to assist the country in strengthening its economy. 

Some examples of such projects in Azerbaijan are:

• BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) are supporting a programme aimed at enhancing employment opportunities for people with disabilities in Azerbaijan. The programme called “Enhancing employability skills for people with disabilities” aims to develop skills and capabilities of selected people with disabilities through trainings and other specialised activities. The project also provides psychological counselling sessions to enhance the participants’ self-confidence. The first phase of this project ended in January 2019. 22 participants in the first phase are currently employed by various organisations or are self-employed; eight participants were involved in internship programmes at various hotels in Baku; up to 10 participants have received initial offers for remote work and employment. We are planning to commence the second phase of the project in the third quarter of 2019.
• In addition, BP Azerbaijan has developed a special work placement programme to provide an opportunity for selected participants in the project to engage in an international working environment practicing their new skills and learning from experienced BP staff
• .The Enterprise Development Programme (EDP), initiated by BP (on behalf of the co-venturers in the joint ventures that it operates), is a multi-million-dollar initiative in support of local business development. The programme is part of the efforts to increase local content of contracts in Azerbaijan and contribute to the healthy and transparent development of the local economy. In the first quarter of 2019, 14 companies continued their participation in the BP and co-venturers’ funded capacity development activities.
• BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) are supporting secondary schools in enhancing IT skills teaching. As part of this 3-year initiative, a new curriculum for IT specialised secondary schools is being developed in cooperation with the Ministry of Education. In addition, 50 teachers representing 25 Baku schools have been trained to pilot and effectively use the new curriculum.
• BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) are involved in  the “Build your Future” project to support a large group of 11th grade students in their preparation for university admission exams. The participants in the project are selected from disadvantaged families. The project activities include two components – academic knowledge and social integration. The first two phases of the project were successful with  91 per cent of participants admitted to local universities. Phase 3 of the project is currently ongoing with 86 community-based students attending classes to prepare for university admission exams.
• BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) are supporting a capacity-building project for the communities along the pipeline route in Goranboy, Samukh, Shamkir, Tovuz and Agstafa districts. The project is designed to enhance the quality of English language teaching in the communities. The project started with a pilot phase and building on the success of that phase, it was extended to cover up to 165 teachers and 480 community members from 11 rural districts along the pipeline route. This was followed by phase 3 which is currently ongoing, involving 22 English language teachers from the targeted communities who were trained during first two phases and up to 330 community members from 11 districts (Agstafa, Samukh, Shamkir, Goranboy, Tovuz, Kurdamir, Hajigabul, Garadagh, Yevlakh, Ujar, Agdash).
• BP (on behalf of the co-venturers in the South Caucasus Pipeline Company) are implementing a project to build pre-school systems next to the already established early intervention services in 13 districts along the pipeline route and beyond - Hajigabul, Kurdamir, Agdash, Ujar, Yevlakh, Samukh, Goranboy, Shamkir, Tovuz, Agstafa, Agsu, Gobustan and Shirvan. The project is currently in phase 3. The previous two phases implemented in 2016-2018 established and made operational early intervention centres in 13 districts and pre-school systems in 3 districts. The project contributes to promotion of inclusive education through creation of synergy between the established early intervention services and the pre-school groups.
• BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) are supporting a livelihood generation project which initially covered 100 community members from the Yevlakh, Goranboy, Samukh and Shamkir districts by providing equipment, training and continuous consultancy in beekeeping and small farming. This project called “Sweet Gold” was then expanded to cover additional 600 community members in two more districts along the BP-operated pipelines- Agstafa and Tovuz. This new phase is for three years - 2018-2020 and, as part of it, 60000 nectar trees will also be planted for bee-breeding.
• BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) are supporting an environmental project - “Green Sangachal”, which aims to help improve the environmental conditions in the neighbouring communities.  As part of the project, it is planned to establish a green yard within one of the residential areas, which will be cleaned and fertilized in preparation for planting trees.
• BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) signed a new contract in 2018 to start a new project to bring to the country an internationally-practiced approach to treatment of people with Autism Spectrum Disorder (ASD). The project will help people with ACD integrate into society, adapt to mainstream education, engage in professional work environment and prepare for family life. The activities already undertaken include trainings provided to parents and professionals on innovative ways of treatment of autistic persons, as well as implementation of outreach and awareness programmes in the communities.
• BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) are supporting a new initiative which aims to establish a foundation “Course for Childhood Health, Education and Social Development (CHED)”. The project is designed to raise the quality of care for children with disabilities and their families by offering training opportunities for specialists from the health, education and social services sectors. The project will bring together higher education specialists from the USA and Azerbaijan to jointly establish within one of the local universities a new training programme certified by Georgetown University (USA).

In addition, in the first quarter of 2019, BP alone spent $0.14 million on sponsorship projects in Azerbaijan. These included:

• Support for the modernization of monitoring and evaluation e-infrastructure of the Centre for Analysis of Economic Reforms and Communication (CAERC) through development of a sophisticated software. The new software will help evaluate the measures undertaken by the government within the framework of the Strategic Road Maps for social and economic development of Azerbaijan. The software development is ongoing, in parallel with the trainings on how to use the software. The project is expected to be successfully completed in the 2nd quarter of 2019
• Translation from English into Azerbaijani and publication of 10 academic textbooks on sustainability and supply chain management; human resources management; media and mass communications; banking and financial markets, principles of marketing; fundamentals of management; political science; social sciences; case management; ethics and values in social work.  It is expected that this project will help raise the quality of teaching of these disciplines in higher educational institutions benefiting more than 17,000 students at 10 universities.
• BP’s business lectures at Baku Higher Oil School (BHOS) and the Azerbaijan State Oil and Industry University (ASOIU) by BP experts and senior executives are designed to support national petroleum engineers’ development in Azerbaijan.  As part of this initiative, BP senior managers and members of the leadership team regularly give lectures and make presentations at BHOS and ASOIU, sharing their knowledge and experience and providing information about BP’s activities, technology, operations processes and mechanisms.
• BP’s ongoing support for the development of sport through its partnership with Azerbaijan’s National Olympic and Paralympic Committees. As part of this partnership BP funds a series of development programmes and supports a group of national athletes. In 2016 BP extended its partnership agreement to support Azerbaijan’s national teams, both National Committees and a group of seven national athletes until the end of 2020.
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