2011 full year results

ACG participating interests are: BP (operator – 35.8%), Chevron (11.3%), SOCAR (11.6%), INPEX (11%), Statoil (8.6%), ExxonMobil (8%), TPAO (6.8%), ITOCHU (4.3%), Hess (2.7%).

During 2011, ACG spent $699 million in operating expenditure and $1.912 million in capital expenditure. For 2012, we expect to spend about $708 million in operating expenditure and $2,516 million in capital expenditure on ACG activities.

Production

In 2011, ACG produced on average 717,600 barrels per day (b/d) (261.9 million barrels or 35.4 million tonnes in total) from the Chirag, Central Azeri, West Azeri, East Azeri and Deepwater Gunashli platforms.

At the end of the year a total of 63 oil wells were producing, while 32 wells were used for injection in the ACG field, as follows:

Chirag had 15 wells (10 oil producers and 5 water injectors), producing on average of 74,400 b/d.

Central Azeri (CA) had 19 wells (14 oil producers 1 water injector and 4 gas injectors producing on average 192,0 b/d.

West Azeri (WA) had 21 wells (15 oil producers and 6 water injectors), producing on average 198,400 b/d.

East Azeri (EA) had 15 wells (11 oil producers and 4 water injectors), producing on average 125,600 b/d.

Deep Water Gunashli (DWG) had 25 wells (13 oil producers and 12 water injectors), producing on average 127,200 b/d of oil.

Associated gas

During the year, BP as operator of the ACG field continued to supply associated gas via the 28” gas subsea pipeline from three platforms (CA, WA and EA) to the Sangachal terminal and from there into Azerigas’ national grid system for domestic use. Some of the associated gas produced from the Chirag platform was sent to the SOCAR compression station at the Oil Rocks via the existing 16” subsea gas pipeline. The rest of the associated gas from the ACG platforms was sent via in-field subsea gas pipelines to the compression and water injection platform (C&WP) on CA for re-injection to maintain pressure in the reservoir. Gas injection activities currently continue from five wells on CA.

In 2011, we delivered around 9.1 million cubic metres (about 320.2 million standard cubic feet) per day of ACG associated gas to SOCAR. In total, we delivered about 3.3 billion cubic metres (116,873 billion standard cubic feet) of associated gas to SOCAR in 2011 which exceeded (by about 43%) our plan of 2.3 billion cubic metres (over 80 billion standard cubic feet) of associated gas for the full year. In 2012 we expect is to deliver about 3 billion cubic metres (about 106 billion standard cubic feet ) of associated gas to SOCAR.

Drilling and Completion Activity

In 2011 seven ACG oil wells, one Shah Deniz appraisal well and one Shah Deniz gas producer well were delivered. Two Chirag Oil Project (COP) pre-drill wells were drilled and suspended at the 13 3/8’’ casing shoe and one COP pre-drill well was drilled to the top set at 9 5/8” casing shoe. New wells delivery activities continued on SDX7Ay well which is expected to be delivered in the second quarter of 2012. CA and DWG platforms started new well delivery activities on B01y gas injector and E16 oil producer wells respectively. Planned rig maintenance is on progress on the Chirag platform.

Chirag: Rig maintenance will continue until the second quarter of 2012. Intervention activities have been performed in five wells adding 5,000 barrels of oil equivalent per day (boed) annualized production rate.

Central Azeri: The B04z oil producer well completed on the 13th of March 2011. Rig maintenance was completed in July 2011. B18y was successfully drilled to reservoir zones, completed and was put on production on the 28th of October. The B01z well de-completion operations started on the 23rd of December 2011 followed by drilling B01y sidetrack well.

B01y was drilled, completed and handed over to production on 19th of February, 2012. The remaining plan for 2012 is to drill one pilot well - B24, in the second quarter, deliver one oil producer well - B25, in the third quarter, and one gas injector well - B26, which is planned for the fourth quarter of 2012.

West Azeri: C25z oil producer was completed in April 2011. The C15z oil producer well was then successfully sidetracked and drilled to target depth, completed and handed over to production on the 17th of October 2011. Planned well intervention activities were also performed on three West Azeri wells adding 8,000 boed annualized production rate. Intervention activities were also performed on well C14 (sand shut off) and well C07 (gas lift retrofit) in December 2011.

At the beginning of 2012, gas lift retrofit operations was performed on C07 well. This was continued by recompletion operations on C04 well which were completed in February 2012. The same activity is now in progress on C16 well. Following this we plan to deliver one oil producer well – C26 in the third quarter of 2012.

East Azeri: The D19 producer well was completed on the 23rd of January 2011. The D20 pilot well was drilled and geo-steered through the reservoir section to define the oil-water contact. The well’s pilot hole was then plugged and abandoned. The D20z sidetrack well was drilled and suspended at the 9 5/8’’ casing shoe. Five yearly rig maintenance and drilling control monitoring systems upgrade was completed in September 2011. Four well intervention works resulted in gaining of 7,800 boed gross annualized production rate. Drilling activities on D20z resumed in November 2011. D20z was successfully drilled to target depth, completed and handed over to production on the 31st of December 2011.

Our plan for 2012 is to deliver one oil producer well – D16 in the third quarter and another oil producer well - D21 in the fourth quarter.

Deepwater Gunashli (DWG): The E15z oil producer was drilled, handed over to completion operations and was put on production on the 13th of October 2011. This was followed by a conductor driving campaign. After the successful conductor driving campaign, Drilling Control Monitoring System (DCMS) upgrade and planned rig maintenance was performed on the DWG platform. Drilling activities started on E16 oil producer well on the 29th of December 2011 with delivery planned for the second quarter of 2012. We are planning to start the next well - E17 in the fourth quarter of 2012 and to complete it in the second quarter of 2013.

In the second quarter of 2012 the Dada Gorgud rig will start DWG subsea wells drilling activities with H05 and H06 wells. Plans are to start these wells in June and suspend in the third quarter of 2012 at 13 3/8” casing point. After that the rig will move to COP to continue the pre-drill programme.

Chirag Oil Project (COP) pre-drilling: The COP pre-drill campaign started in April 2010 and continued in 2011. The Dada Gorgud semi-submersible rig completed five yearly certification and upgrade as planned. Two pre-drill wells were drilled to 13 3/8’’ casing point and suspended. Six pre-drill wells were drilled to 20’’ casing point and suspended. Three pre-drill wells were drilled and suspended at the 30’’ conductor shoe point. The pre-drill well J03 was then drilled and suspended at 9 5/8’’ casing shoe. Following this drilling activities started on well J02 on the 25th of December 2011 which was delivered on the 27th of January 2012.

After the planned BOP maintenance programme, the COP pre-drill programme has resumed on J05 well, which is planned to be finished by the end of the first quarter of 2012. We are planning to do the same drilling activity on J07 and J11– in the second quarter, J10 and J14 – in the third quarter, J08, J13 and J12 – in the fourth quarter of 2012.

Shah Deniz: The SDA06 gas producer was completed and handed over to production on the 28th of May 2011. Following this BOP change out activities were completed on the Shah Deniz platform. Intervention activities were also performed on SDA05x and SDA06 wells. We are planning to start drilling of sidetrack well SDA03Y in the fourth quarter of 2012.

Shah Deniz Full Field Development (FFD): The SDX06 well was successfully drilled to reservoir section with the Istiglal rig. The well was suspended for future completion operation on the 9th of March 2011. Afterwards, the SDX07A was spudded in March 2011 and is expected to be completed in the third quarter of 2012. The next well is planned to be started in the fourth quarter of 2012 with drilling to be finished in the second quarter of 2013.

Chirag Oil Project (COP)

In 2011, COP construction activities continued on schedule and according to plan.

Overall the project has made very good progress at all of fabrication sites with 54.7 per cent of work scope already completed.

In 2011, COP accomplished the following activities:

At the ATA (AMEC-Tekfen-Azfen) yard:

Achieved 8.7 million man hours without DAFWC (day away from work case)
Continued to hire and re-hire personnel for the fabrication and erection of the DeckCurrently there are up to 3,957 personnel at site including client, contractor and sub contractors
Trained in excess of 400 welders, 100 of these were on stainless steel and duplex materials previously performed out of country
COP Drilling facilities fabrication and construction which was previously undertaken out of country progressing well, now 73.5% complete
Completed skidway erection of all Weather Deck sections
Completed installation of drilling support module onto Topside Deck
Commenced integration activities between Topside and Drilling facilities
Completed steel erection of DES modules 01 & 02
Completed first Mechanical Completion handover
Finalising assembly of the Derrick module
Completed installation of Main Power Generators
Commenced installation of Living Quarter modules
Commenced assembly of the Separator Module

Through our construction contractors COP currently employs site 3,957 people at the ATA yard and 81% of these are Azerbaijani nationals.

At Baku Deepwater Jackets Factory (BDJF):

Completed our upgrade programme to the BDJF facility to undertake all jacket fabrication activities in the country
Total workforce now stands at 1321 including client, contractor and sub contractors
External competency training programme for workforce continues with 888 personnel of the 1066 personnel having been trained and passed various courses to date
Rolling and fabrication in the workshops continues, with increased level of activity being done under cover
Weather damage repairs to the heavy welding line now complete and line working again
Assembly of launch runners complete
Centre box frames 3 and 5 and conductor frames assembly complete on site
Roll-ups of frame 3 and frame 5 into Centre-box completed
Started jacket level 1-3 assembly and level 5-7 assembly
Preparation for roll up of outer frames 1 and 7 now underway
Blasting and painting continue on legs, bracings and associated items
Pile sleeve assembly started
Riser and j-tube fabrication has started in the workshops
Started jacket tower frame assembly
Prepared the first Pile Cluster (B1) for coating

Marine and Subsea activities:

Completed STB-1 dry docking
STB-1 first inclining test performed

Completed generation of CTR’s for PLBG reactivationAT CPC:

Coating plant reactivated
Coating pre-qualifications conducted
Coated bends from Europe received
Pipe coating production commenced
Partial pipe load in 18" spool / line pipe
Pipe coating 30”/ 18" spool pipe/ Linepipe

Through our construction contractors COP currently employs over 5000 people and more than 90 per cent of these are Azerbaijani nationals.

COP milestones for 2012 are:

At ATA:

Completion of DSM integration of Weather Deck 1Q
Complete assembly of Separator module 1Q
Complete Derrick installation 1Q
First system Mechanically Complete 2Q
First Main Generator Mechanically Complete 2Q
Commissioning complete of first Main Generator 3Q
Commissioning complete of Export Compressors 3Q
Topside & Drilling facilities Mechanically Complete 4Q
Commissioning complete of Flash Gas Compressors 4Q

At BDJF:

Carry out frame 1 roll-up Q2
Carry out frame 7 roll-up Q2
Erect tower frame 1-2 Q2
Erect tower frame 6-7 Q2
Install Flotation tank on frame 1 Q2
Install Flotation tank on frame 7 Q2
Barge STB1available on site Q3
Jacket ready for sail away Q3
Piles ready for sail away Q3

Marine and Subsea activities:

Complete STB-1 mounting of sponsons and second inclination testQ1
STB-1 handover to SOCAR Q1
Dry docking of PLBG Q1
Reactivation of PLBG Q2

Reactivation of DBA Q4AT CPC:

Complete load in of 18” linepipe Q1
Complete load out of 18”&30” spool pipe and bends Q1
Complete 16”&18”CC coating Q1
Complete 14”&16”CWC coating Q1
Complete load out of 14”&16”spool pipe and bends Q2
Complete dredging of harbour channel approach Q2
Linepipe readiness for load out to PLBG Q2
Contingency pipe preservation and storage Q3

Export operations

Baku-Tbilisi-Ceyhan (BTC)

Shah Deniz

Shah Deniz Full Field Development (FFD)

Shah Deniz Stage 2, or Full Field Development (FFD), is a giant project that will bring gas from Azerbaijan to Europe and Turkey. This will increase gas supply and energy security to European markets through the opening of the new southern gas corridor.

The project is expected to add a further 16 billion cubic meters per year (bcma) of gas production to the approximately 9 bcma from Shah Deniz Stage 1. It is one of the largest gas development projects anywhere in the world.

Plans for the project include two new bridge-linked offshore platforms; 26 subsea wells to be drilled with 2 semi-submersible rigs; 500 km of subsea pipelines built at up to 550m water depth; additional export capacity in Azerbaijan and Georgia; expansion of the Sangachal Terminal.

October 25, 2011 marked an important milestone which will support the continued development of Shah Deniz FFD project towards a final investment decision. Azerbaijan and Turkey signed a number of key gas export related agreements to enable Turkey to buy gas from Azerbaijan and to transit Azerbaijan gas through Turkey to Europe. These agreements have allowed Shah Deniz to proceed with its European pipeline selection process, and to confirm gas sales agreements with potential customers.

Gas from Shah Deniz FFD will follow almost the same route as the current South Caucasus Pipeline (SCP) through Azerbaijan and Georgia. In Turkey, according to the recently signed agreements, transportation of Shah Deniz FFD gas to the European markets will either use existing BOTAS transmission network or new pipeline infrastructure – the so-called Trans-Anatolian-Pipeline. These options are currently being evaluated with decision expected later this year.

Since October 2011, Shah Deniz has also been working to assess the options that will deliver gas from Turkey onwards to Europe. Significant progress has been made in this evaluation process with three 3rd party pipeline projects considered: IGI Poseidon and TAP to Italy, and Nabucco towards Central Europe. A fourth project towards Central Europe, SEEP, which has been proposed by members of the Shah Deniz consortium, is also being considered. During the evaluation process the Shah Deniz Export Negotiating Team (ENT), led by SOCAR and including BP, Statoil and Total, decided that the consortium would select a single pipeline to Italy and a single pipeline towards Central Europe for further consideration. The Shah Deniz consortium will then work with the owners of these two selected pipeline projects in order to develop their proposals further over the next year.

Based on the publicly communicated selection criteria the ENT recently decided that the Shah Deniz consortium would now undertake exclusive negotiations with the Trans-Adriatic Pipeline (TAP) for the route to Italy. The proposal from IGI Poseidon for this export route will not be considered further at this stage.

No decision has yet been made on the selection of a single pipeline towards Central Europe. This is expected to happen in 2012. Following this decision, a final route selection will be made no later than the Final Investment Decision for Shah Deniz FFD.

SD FFD current plans are to continue the engineering studies that will enable the project to move into the front-end engineering design phase in 2012 and refine cost estimates to support a sanction (final investment decision) in 2013.

The South Caucasus Pipeline (SCP)

The SCP Co. shareholders are: BP (technical operator – 25.5%), Statoil (commercial operator - 25.5%), Azerbaijan SCP Ltd. (10%), LUKOIL (10%), NICO (10%), Total (10%), and TPAO (9%).

In 2011, SCP spent $8.8 million in capital expenditures. The plan for 2012 is to spend $15 million in SCP capital expenditures.

The pipeline has been operational since late 2006 transporting gas to Azerbaijan and Georgia, and starting July 2007 to Turkey from Shah Deniz Stage 1.

During 2011, SCP’s daily average throughput was 12.5 million cubic meters (440 million cubic feet) of gas or about 76,000 barrels of oil equivalent per day.

The SCP has a dual operatorship with BP as the technical operator being responsible for construction and operation of the SCP facilities and Statoil, as commercial operator, is responsible for SCP's business administration.

Exploration

People

Sustainable development initiatives

Success of our projects in the Caspian in part depends on our ability to create tangible benefits from our presence for the people of the countries where we operate. To achieve this, we continue to carry out major sustainable development initiatives 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, as well as technical assistance to public institutions.

In 2011, BP and co-venturers spent about $3.12 million in Azerbaijan alone on such sustainable development projects.

BP and its co-venturers will continue their sustainable development initiatives to support local enterprise development and capacity building throughout Azerbaijan to assist the country in strengthening its economy.

The most recent examples of such initiatives have been:

BP and its co-venturers’ new major sustainable development initiative in support of the communities neighbouring BTC/SCP pipelines. The project is designed to provide sustainable income generation and capacity-building opportunities for community members involved in the agricultural sector. The programme scope includes construction of 132 greenhouses, a community bakery and 96 bee keeping set-ups and equipment in addition to transference of skills and knowledge required to sustainably manage these businesses and facilities.
“Meet the Buyer” exhibition hosted by BP and its co-venturers. The event was part of BP’s and its co-venturers’ commitment to helping local companies increase their participation in BP-operated projects through enhancing their capabilities, developing their business and building relationship with their potential clients. More than 80 local small and medium enterprises (SME’s) that completed our Enterprise Development and Training Programme over the last few years exhibited their products and services to more than 150 local and international buyers. It is planned that the event will become annual.
BP and co-venturers’ grant agreement between with Eurasia Partnership Foundation (EPF) to jointly support local governance, youth capacity building and environmental initiatives along BTC/SCP pipelines in Azerbaijan. The project aims to enhance effective governance capacity of municipalities in addressing local sustainable development challenges. The project will also focus on the role of young people in addressing local development and environmental challenges in communities.
A new School of Project Management (SPM) established by BP and its co-venturers in Azerbaijan. SPM has just completed a highly successful first year of operation. The school is designed to develop project management capabilities of individuals representing the private and public sectors. SPM provides access to a globally-recognized, comprehensive project management programme by the industry leader, ESI International. It focuses on simultaneous goals of improving immediate project management performance and establishing long term project management capability in the country.
BP and co-venturers’ award of a major grant to the local business service provider AZERMS LLC for implementation of the enterprise development and training programme (EDTP) to develop local oil and gas sector companies.
BP and its co-venturers’ support to the Ministry of Economic Development focused on macroeconomic analysis and forecasting through EU-based think tank.
BP and its co-venturers’ economic capacity building project for youth– it aims to support primarily young community entrepreneurs in their efforts to enhance capacities, increase revenues and contribute to youth social welfare via sustainable and market driven solutions.
BP and its co-venturers’ project to support needy families with children through increasing quality of and access to innovative pre-school programmes.
BP and its co-venturers’ project aimed to create a new centre of entrepreneurship for young people. The centre functions as a special business and management unit within Ganja vocational training centre.
BP and its co-venturers’ project to provide community-based support to dairy producers to help increase dairy production by small and medium-sized farmers.
BP's ongoing support for the Baku-based Qafqaz University to broaden its scope to cover undergraduate education in three engineering disciplines, including chemical, and mechanical engineering (total value - $2,240,000 BP’s contribution $1,150,000). As part of this project the chemical engineering department was established in 2009 and in 2011, BP opened five fully equipped modern laboratories for this department. The laboratories specialize in general chemistry, analytical chemistry, organic chemistry, chemical engineering and physical chemistry. In 2011, the mechanical engineering department was opened at the university with 16 students admitted for the first year. The plans are to open fully-equipped mechanical engineering laboratories for this department in 2012.
BP’s ‘Business Journalism’ training programme to help develop national business journalism capacity and bridge local journalists with international journalistic standards. The latest part of this training was conducted in September – October, 2011 and it included multimedia and video editing sessions.
BP’s annual bursary awards to a large group of first and second year students of the Azerbaijan State Oil Academy. The bursary awards programme is part of BP’s educational support commitment and is aimed at promoting the best students specializing in petroleum engineering, geosciences, oil mechanical, process automation, energy power at the State Oil Academy.
BP’s ongoing Geosciences and Engineering Speaker Series initiative which is designed to enhance commitment by future generations of engineers to promoting geosciences in Azerbaijan.

Download the presentation slides about our business performance

For further information please contact:Tamam Bayatly, BP Baku Press office,

telephone: 994 (0) 12 599 4557

ACG participating interests are: BP (operator – 35.8%), Chevron (11.3%), SOCAR (11.6%), INPEX (11%), Statoil (8.6%), ExxonMobil (8%), TPAO (6.8%), ITOCHU (4.3%), Hess (2.7%).

The BTC Co. shareholders are: BP (30.1%); AzBTC (25.00%); Chevron (8.90%); Statoil (8.71%); TPAO (6.53%); ENI (5.00%); Total (5.00%), Itochu (3.40%); INPEX (2.50%), ConocoPhillips (2.50%) and Hess (2.36%).

Shah Deniz participating interests are: BP (operator – 25.5%), Statoil (25.5%), SOCAR (10%), LUKOIL (10%), NICO (10%), Total (10%), and TPAO (9%).

During 2011, Shah Deniz spent $190.7 million in operating expenditure and $674.9 million in capital expenditure.

In 2012, we are planning to spend $211.5 million in operating expenditure and $1,340 million in capital expenditure on Shah Deniz activities.

Production

In 2011, the field continued to produce from four wells to deliver gas to the markets of Azerbaijan, Georgia and Turkey. The gas from Shah Deniz Stage 1 continues to be sold to Azerbaijan, GOGC (Georgia), BOTAS and the BTC Company.

In 2011, the field produced about 6.67 billion cubic meters (more than 235 billion cubic feet) of gas and 1.8 million tonnes (14 million barrels) of condensate or about 18.3 million cubic meters of gas per day (645 million standard cubic feet per day) and about 38,300 barrels of condensate per day.

Since the start of Shah Deniz production in late 2006 till the end of 2011 29,902 million standard cubic meters (1,056 billion standard cubic feet) of Shah Deniz gas, and 63.7 million barrels (8 million tonnes) of Shah Deniz condensate was exported to the markets.

Production is expected to increase as new platform-drilled wells are brought on stream over the next few years. Plateau production from Stage 1 is currently expected to be approximately 9 billion cubic meters of gas per annum and approximately 50,000 b/d of condensate.

The SCP Co. shareholders are: BP (technical operator – 25.5%), Statoil (commercial operator - 25.5%), Azerbaijan SCP Ltd. (10%), LUKOIL (10%), NICO (10%), Total (10%), and TPAO (9%).