2014 year end results

ACG participating interests are: BP (operator – 35.8 per cent), SOCAR (11.6 per cent), Chevron (11.3 per cent), INPEX (11 per cent), Statoil (8.6 per cent), ExxonMobil (8 per cent), TPAO (6.8 per cent), ITOCHU (4.3 per cent), ONGC Videsh Limited (OVL) (2.7 per cent).

In 2014, we spent approximately $1 billion in operating expenditure and $2.3 billion in capital expenditure on ACG activities.

Production

In 2014, ACG marked a major milestone by starting production from the Chirag Oil Project (COP). First Oil from the West Chirag platform was achieved on 28 January from one of the pre-drilled wells. Since that time West Chirag production has been increasing to its current level of over 90,000 barrels per day from six wells.

In 2014, ACG continued to deliver stable production. Total ACG production in 2014 was on average 638,000 barrels per day (b/d) (233 million barrels or 31.5 million tonnes in total) from the Chirag (61,900 b/d), Central Azeri (156,500 b/d), West Azeri (149,300 b/d), East Azeri (74,200 b/d), Deepwater Gunashli (145,900 b/d) and West Chirag (50,200 b/d) platforms.

At the end of the year, a total of 84 oil wells were producing, while 39 wells were used for gas or water injection.

As part of the ACG annual work programme, a planned maintenance programme (turnaround - TAR) was implemented on the Central Azeri platform on 31 October - 27 November. Such activities are an important part of maintaining the high plant efficiencies that have been achieved on ACG.

Drilling and completion

In 2014 ACG delivered 14 oil producer wells and 4 water injection wells and 1 cutting re-injector well.

Associated gas

In 2014, ACG continued to deliver associated gas from the DWG platform via the 28” gas subsea pipeline directly to the Sangachal terminal and from there into Azerigas’ national grid system for domestic use.

Gas from the three Azeri platforms - CA, WA and EA – continued to be sent via in-field subsea gas pipelines to the compression and water injection platform on CA. From CA it was partly re-injected to maintain pressure in the reservoir and partly delivered to the Sangachal terminal.

Most of the associated gas from West Chirag was exported to the Sangachal terminal.

Most of the associated gas produced from the Chirag platform continued to be sent to the SOCAR compression station at the Oil Rocks. In 2014 we completed the planned work on the flash gas compressors and pipelines which allowed us to significantly reduce flaring on Chirag.

In 2014, ACG delivered an average of 7.55 million cubic metres per day of ACG associated gas to SOCAR (2.76 billion cubic metres in total).

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 oil and about 29.5 million standard cubic metres of Shah Deniz gas, while overall processing and export capacity for gas, including ACG associated gas is about 49.3 million standard cubic metres per day.

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

In 2014, the Sangachal terminal exported over 298.5 million barrels of oil. This included over 260 million barrels through Baku-Tbilisi-Ceyhan (BTC), over 31.4 million barrels through the Western Route Export Pipeline (WREP), about 5.3 million barrels by rail and about 1.84 million barrels via a condensate export line.

The BTC Co. shareholders are: BP (30.1 per cent); AzBTC (25.00 per cent); Chevron (8.90 per cent); Statoil (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), ConocoPhillips (2.50 per cent) and ONGC (BTC) Limited (2.36 per cent).

In 2014, BTC spent $0.2 billion in operating expenditure and $0.1 billion in capital expenditure.

BTC’s throughput capacity is currently 1.2 million b/d.

The 1,768km BTC pipeline became operational in June 2006. Since that time BTC has carried a total of about 2.1 billion barrels (280 million tonnes) of crude oil loaded on 2793 tankers and sent to world markets.

In August, BTC celebrated the loading of the 2 billionth barrel of oil at the Ceyhan terminal in Turkey.

In 2014, BTC exported 262 million barrels (34.8 million tonnes) of crude oil loaded on 362 tankers at Ceyhan.

The BTC pipeline currently carries mainly ACG oil and Shah Deniz condensate from Azerbaijan. In addition, crude oil from Turkmenistan and Kazakhstan continues to be transported via BTC. In addition, in February 2014, the direction of flow through the SOCAR-operated Northern Route Export Pipeline (NREP) was successfully reversed. This was a result of a collaborative effort by BP and SOCAR to activate some facilities along NREP. Commercial agreements were finalised which allowed NREP volumes to be exported via BTC.

Shah Deniz participating interests are: BP, operator (28.8 per cent), AzSD (10.0 per cent), SGC Upstream (6.7 per cent), Statoil (15.5 per cent), Lukoil (10 per cent), NICO (10 per cent) and TPAO (19 per cent).

In 2014, Shah Deniz spent approximately $0.4 billion in operating expenditure and $3.9 billion in capital expenditure, the majority of which was associated with the Shah Deniz Stage 2 project.

Production

In 2014, the Shah Deniz field continued to provide reliable deliveries of gas to markets in Azerbaijan (to SOCAR), Georgia (to GOGC), BTC Company and Turkey (to BOTAS).

In 2014, the field produced 9.9 billion standard cubic metres of gas and 2.3 million tonnes (18.7 million barrels) of condensate.

During 2014, the existing Shah Deniz facilities were further de-bottlenecked which increased their production capacity from 27.3 million standard cubic metres to 29.5 million standard cubic metres of gas per day.

Drilling

In 2014, Shah Deniz completed a number of major well work-over jobs which enhanced reliability and integrity of the existing well stock and commenced drilling a new production well.

Throughout 2014 the Istiglal and Heydar Aliyev rigs continued drilling operations in support of the Shah Deniz Stage 2 pre-drill programme. These two rigs have already completed seven production wells in preparation for the first gas. Drilling operations will continue towards delivery of all wells required to reach the planned plateau level.

In 2014, the Shah Deniz Stage 2 project made a very good progress with a number of milestones achieved ahead of schedule including yard upgrades and commencement of fabrication of decks, jackets and subsea equipment.

Most of the major engineering, construction and supply contracts, valued at about $10 billion, were awarded and work started in all construction areas across Azerbaijan.

In Azerbaijan, over 9,500 people are already involved in construction activities across all main contracts and 90% of them are Azerbaijani nationals.

On 20 September, the Sangachal Terminal near Baku hosted the groundbreaking for the Southern Gas Corridor. This marked a major milestone in the realisation of the project which will provide for export of 16 billion cubic metres per year (bcma) of gas from the giant Shah Deniz field through some 3,500 kilometres of pipelines to Georgia, Turkey, Greece, Bulgaria, Albania and Italy.

The SCP Co. shareholders are: BP, operator (28.8 per cent), AzSCP (10.0 per cent), SGC Midstream (6.7 per cent), Statoil (15.5 per cent), Lukoil (10 per cent), NICO (10 per cent) and TPAO (19 per cent).

In 2014, SCP spent about $50 million in operating expenditure and $0.9 billion in capital expenditure.

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 2014, SCP’s daily average throughput was 18.286 million cubic metres of gas per day.

In 2014 SCPX project contracts award continued with most of the major contracts already awarded and work already started along the pipeline route across Azerbaijan and Georgia. Shipments of pipe sections started in 2014 and will continue throughout 2015 and into early-2016. In total, over 40,000 sections of pipe will be delivered in 19 shipments.  The key achievements made to date include:

• Land for the first 200 km in Azerbaijan right of way acquired.
• Construction of Compressor Station 1 in Georgia commenced

Activity on the SCPX project will continue during 2015 including the commencement of pipe-laying activity in Azerbaijan and Georgia.

In 2014, we completed the Shafag-Asiman data processing and started interpretation of the seismic dataset, which will require some 18 months to complete. This will be followed by another year required for planning of the first exploration well.

In 2014, we also signed a new exploration contract with SOCAR to jointly explore for and develop potential prospects in the shallow water area around the Absheron Peninsula in the Azerbaijan sector of the Caspian Sea.

At the end of 2014 BP employed directly 2,992 Azerbaijani nationals. Some 86% of BP’s permanent professionals in Azerbaijan are nationals and many of them are in senior leadership positions.

In 2014 BP continued to focus on the training of nationals including technicians who are trained in the Caspian Technicians Training Centre (CTTC) at Sangachal. Over the 10 years of its existence CTTC has successfully trained about 900 national technicians for BP-operated facilities. The role of these highly qualified technicians is critical to running all of BP-operated facilities both onshore and offshore safely and reliably.

BP also successfully manages a world-class training initiative called “Petro-technical Resource Entry Programme” (PREP) for national engineers. It is a multi-million dollar learning programme designed for petro-technical graduates and is aimed at supporting capability development of young engineers joining BP.

In addition, BP remains committed to achieving a target to reach 90% professional staff nationalization rate by the end of 2018. This envisages nationalizing some of the professional roles that are currently occupied by the expatriate staff. Non-professional staff is already 100% nationalized. The nationalization agenda also includes further optimization of BP’s learning and development programmes, close participation in the public and private sector initiatives in order to further improve the local talent market and enhancing the rigorous internal performance management process.

The success of BP-operated projects in the Caspian, in part, depends on the operator’s ability to create tangible benefits from these projects for the people of the regional countries. To achieve this, BP continues to implement 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 2014 BP and co-venturers spent over $5.87 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.

Some examples of such initiatives are:

• BP and co-venturers’ ongoing Azerbaijan Oil and Gas Scholarship Programme, which aims to support the education of Azerbaijani students pursuing Bachelor’s and Master’s degrees in engineering and mathematics at the Middle East Technical University in Turkey and Istanbul Technical University, as well as Khazar and Qafqaz Universities in Azerbaijan.
• BP and co-ventures’ two-year Youth Business Leadership Project in partnership with the United States Agency for International Development (USAID) and the American Chamber of Commerce (AmCham). The project is designed to empower young students to become entrepreneurs and future business leaders. This is being achieved by providing them with opportunities to gain real world employment experience through internships at various private companies where they are able to develop their business management knowledge beyond the classroom.
• BP and co-venturers’ project aimed at improving community-based pre-school education, primary education and women’s entrepreneurship. The project is designed to provide access to improved school preparation programmes, quality services by rural public kindergartens, improved implementation of new national primary education curriculum and support for development of women’s entrepreneurship.
• BP and co-venturers` environmental project designed in the framework of the Caspian Environmental Programme to establish an online environmental database - a web based Caspian Environmental Information Centre. The site is available at www.kaspinfo.net and is used as a centralized hub for information on the Caspian environment and as a promotional tool for sustainable development and environmental activities in the region.
• BP and co-venturers’ grant agreement with Eurasia Partnership Foundation to jointly support local governance, youth capacity building and environmental initiatives along the BTC/SCP pipelines in Azerbaijan. The project aims at enhancing effective governance capacity of municipalities in addressing local sustainable development challenges. The project also focuses on the role of young people in addressing local development and environmental challenges in communities.
• BP and co-venturers’ project to create a new small and medium-size enterprise (SME) portal in Azerbaijan in collaboration with the International Finance Corporation (IFC). The portal - www.biznesinfo.az – is designed to provide local businesses with relevant information in support of their capacity growth and enhance their understanding of regulatory requirements including registering and operating business in Azerbaijan, obtaining permits, registering property, inspections, competing for government tenders, accessing local sources of finance and complying with national accounting standards. The site also includes development and training components.
• ‘Meet the Buyer’ events hosted by BP on behalf of its co-venturers. These events are 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. The 3rd ‘Meet the Buyer’ event was held during the 21st Caspian International Oil Exhibition in Baku in June 2014.
• The School of Project Management (SPM) established by BP and its co-venturers in Azerbaijan. The school is designed to develop project management capabilities of individuals representing the private and public sectors. To date SPM has had two highly successful graduations with a total number of 300 representatives of some 98 private and public sector organizations trained using globally-recognized project management training curriculum. In March 2014, BP and its co-venturers extended their support for the SPM until November 2015 by signing a new Memorandum of Understanding on extension of the initiative.
• 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’ project aimed at creating 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’ projects to provide community-based support to dairy producers to help increase dairy production by small and medium-sized farmers.
• In June 2014 BP on behalf of its co-venturers and UNICEF signed a memorandum of understanding (MOU) in Baku to confirm their intention to cooperate within a planned major educational initiative. The project called “Partners in Education” is designed to support the country in initiating and implementing projects aimed at creating new educational models. The MOU enables the two parties to work together with other stakeholders, which include the Ministry of Education and the Ministry of Emergency Situations, to develop new effective school models. The scope of the project specifically focuses on the establishment of new comprehensive child-seeking school models in the Kurdamir, Ujar, Agdash, Yevlakh, Samux, Goranboy, Shamkir and Tovuz districts along the BP-operated BTC and SCP pipelines.
• BP's ongoing support for the Baku-based Qafqaz University to broaden its scope to cover undergraduate education in three engineering disciplines, including chemical, mechanical and civil engineering. 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. In 2011, the mechanical engineering department was opened at the university and in December 2013, BP presented eleven world-class laboratories to this department.
• BP’s ‘Business Journalism’ training programme to help develop national business journalism capacity and link local journalists with international journalistic standards. The training helped some 12 journalists gain international practice and become leading business writers in the region. They have created a trend in national business journalism, which has many followers. The latest training session for this group of leading journalists was arranged on social media in November 2013.
• BP’s bursary awards programme was launched in 2007 as part of the company’s educational support commitment. The programme is aimed at supporting the best students specializing in petro-technical disciplines. Overall to date BP has presented its bursary awards to about 400 top students.
• BP’s business lectures at Baku Higher Oil School, which are designed to support national petroleum engineers development in Azerbaijan. In addition to a series of lectures presented by BP experts and senior executives, Gordon Birrell, BP’s Regional President for Azerbaijan, Georgia and Turkey, met with the teaching staff and students of Baku Higher Oil School in December 2014 sharing his own experience in the industry and information about BP operations and plans.
• BP is an Official Partner of the Baku 2015 European Games. This will allow BP to assist elite athlete development in Azerbaijan. As part of this partnership BP will help fund the development of aspiring medal hopes for Azerbaijan as the host nation ahead of the European Games. In addition, as part of this project, BP is the exclusive Official Partner of the Baku 2015 Games Academy initiative, an innovative learning programme which supports the creation of a capability legacy in Azerbaijan. It specifically aims to develop national staff members including university graduates from Azerbaijan and Europe, preparing them for the efficient delivery of a major multi-sport event, as well as developing skills which will assist them in their future career.
• BP is also cooperating with SOCAR in the training and development of national workforce and in the human resources area. The two companies continue to work together to create training and development opportunities for Azerbaijani nationals specializing in the oil and gas industry related disciplines. As part of this commitment BP is supporting vocational and technical discipline training for about 90 representatives of the local communities residing in the neighbourhood of the Sangachal Terminal - Sangachal, Umid, Azimkend and Gobustan settlements.