Third 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 three quarters of 2019, we spent more than $418 million in operating expenditure and about $1,034 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 incremental up to 300 million barrels of oil over its lifetime.

The project has already awarded the main fabrication, marine and subsea contracts and has started construction activities (started in July). These activities continued to ramp up through the third quarter of the year.

Production

During the first three quarters of the year, ACG continued to safely and reliably deliver stable production. Total ACG production for the first nine months of 2019 was on average about 541,000 barrels per day (b/d) (about 148 million barrels or 20 million tonnes in total) from the Chirag (41,000 b/d), Central Azeri (133,000 b/d), West Azeri (121,000 b/d), East Azeri (92,000 b/d), Deepwater Gunashli (95,000 b/d) and West Chirag (59,000 b/d) platforms.

At the end of the third quarter, 124 oil wells were producing, while 42 wells were used for water and seven for gas injection.

Drilling and completion

By the end of the third quarter, ACG completed nine oil producer wells.

Associated gas

During the first three quarters, ACG delivered an average of 5.7 million cubic metres per day of ACG associated gas to SOCAR (1.6 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 quarters 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.

In the three quarters of 2019, the Sangachal terminal exported more than 198 million barrels of oil. This included over 178 million barrels through Baku-Tbilisi-Ceyhan (BTC) and over 20 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 44 million standard cubic metres (about 1,548 million standard cubic feet) of Shah Deniz gas was exported from the terminal daily during the three quarters 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 three quarters, BTC spent approximately $95 million in operating expenditure and about $25 million in capital expenditure.
Since the 1,768 km BTC pipeline became operational in June 2006 till the end of the third quarter of 2019, it carried a total of 3.3 billion barrels (around 440 million tonnes) of crude oil loaded on 4,307 tankers and sent to world markets.

During the three quarters of the year, BTC exported more than 177 million barrels (about 24 million tonnes) of crude oil loaded on 222 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 three quarters of 2019, Shah Deniz spent around $481 million in operating expenditure and $818 million in capital expenditure, the majority of which was associated with the Shah Deniz 2 project.

Production

During the first three quarters 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 three quarters, the field produced around 12.2 billion standard cubic metres (bscm) of gas and 2.6 million tonnes (about 21 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 over 56 million standard cubic metres of gas per day or more than 20 bcma.

Drilling

Shah Deniz Alpha platform rig was on warm stack in the first half of the year and then commenced rig maintenance.

The Istiglal rig delivered several subsea well completions - one on the East South flank, two on the West South flank, one on the East North flank and continues delivering the second one on the East North flank. The Maersk Explorer rig drilled one well to its final depth, one top hole on the North flank and two top holes on the West South flank. Currently the rig is drilling the lower section of one well on the West South flank.

The above two rigs have already drilled and completed 16 wells in total (four on the North Flank, four on the West Flank, four on the East South Flank, two on the West South Flank and two on the East North flank) 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 three quarters of 2019, SCP spent about $33 million in operating expenditure and more than $28 million in capital expenditure in total.

The SCP has been operational since late 2006, transporting Shah Deniz gas to Azerbaijan, Georgia and Turkey. The expanded section of the pipeline commenced commercial deliveries to Turkey in June 2018.

The daily average throughput of SCP was about 28 million cubic metres of gas per day during the first three quarters of 2019.

The SCP has 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 in December 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 drilling activities in the first half of 2020.

On Block D230, we are planning to commence a 3D seismic acquisition programme in November 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 third quarter of 2019, the number of BP’s Azerbaijani national employees was 2,524 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 per cent nationalized.

BP will continue its efforts to optimize its learning and development programmes and will actively participate 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 three quarters of 2019, BP and the co-venturers in BP-operated joint ventures spent $2.2 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) is 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 and it moved to Phase 2 in July. This new phase of the project involves up to 100 new people with disabilities and is designed to expand the training programme in order to further enhance employment opportunities for the participants. 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.

• BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) is 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) is 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. In total, some 188 young people out of 207 participants in the past three academic years (91%) have been successful meeting the requirements of the higher school entrance exams and becoming students. The project is currently ongoing with a new group of participants targeting next year’s university exams.

• BP (on behalf of the co-venturers in the South Caucasus Pipeline Company) is 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 three 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) is 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. To date 10000 nectar trees have already been planted and 400 project beneficiaries selected. 

• BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) is supporting Baku Engineering University by purchasing materials for chemical experiments and installing new equipment in the 11 laboratories earlier established at that university by BP and co-venturers. In addition, the project scope includes the translation from English into Azerbaijani of learning materials for the Chemical Engineering Department. The project is expected to benefit more than 400 students every year. 

• BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) is funding a project that aims to bring to the country an internationally-practiced approach for treatment of people with Autism Spectrum Disorder (ASD). The project intends to help people with ASD integrate into society, adapt to mainstream education, engage in professional work environment and prepare for family life. The activities already undertaken include 100-hour trainings provided to 54 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) is 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. A new training programme certified by Georgetown University (USA) has been developed for that purpose. The first training course, which was attended by 15 participants, was held in April-July. 

• BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) is supporting the “School Support Project” to help enhance the quality of school education. The project includes the publication of learning materials on teaching methodology including a book with a vocabulary for in-service and pre-service school teachers. 

• BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) is supporting a project to improve the capability of up to 60 child development specialists through provision of trainings in physiotherapy. These specialists are expected to work in total with up to 300 children with disabilities. With another project BP and co-venturers are enhancing the skills of 30 child care specialists to help improve the quality of services of a community-based child care centre.

• BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) is supporting “English for Engineers Project” which intends to enhance English language knowledge of teachers and students of the Azerbaijan State Oil and Industry University. The project helps educational capacity-building, as well as improves the university’s international co-operation. 

• BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) is supporting the transfer of international business education expertise to the country through bringing the internationally-recognised Adaptive Strategic Execution Programme to Azerbaijan, basing it at Baku’s ADA University. Overall six streams are planned within the duration of the project covering a total of up to 108 students. The first two streams started in September this year. The training programme of the project is certified by the Fuqua School of Business at Duke University (USA) and is based on a world-class business education curriculum developed by Duke Corporate Education (Duke CE), a leader in providing executive education globally. The project is designed to help meet the current market demand in executive education and challenges faced by local organizations in this area.

In addition, in the first three quarters of 2019, BP alone spent $0.7 million on sponsorship projects in Azerbaijan. These included: 

• 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. 

• Support for the 1st Congress for Kids with Special Needs which aimed to raise public awareness of the importance of the care for children with mental disorders. 

• BP supported the Falcons Summit Baku 2019 which brought together investors, start-ups, entrepreneurs, corporation executives, representatives of small and medium-size businesses in a three-day event. It provided an opportunity to demonstrate innovative start-ups, discuss funding channels and showcase investment potential in Azerbaijan. More than 120 countries participated in the event.

• BP also supported the 4th SOCAR International Caspian and Central Asia Downstream Forum which is an arena to gain insights into the prospects of the oil and gas industry development in Azerbaijan, oil and gas markets in the Caspian region and Central Asia, hydrocarbon logistics and transit potential, major export routes, crude and products trade flows, modernization of the refineries and petrochemical plants, innovative technologies in the oil and gas industry. 

• BP supported the “Yeni Fikir” (New Ideas) project to help enhance innovative ecosystem in Azerbaijan through promoting successful business concepts and start-ups in a well-attended competition. As part of the project, a set of pre- and post-competition activities such as mentorships, workshops and trainings were offered and an incubation and acceleration centre equipped with digital hardware and software was established. The competition covered up to 150 start-up projects submitted by over 400 young people. The best 14 projects were selected for further support from BP through specifically designed incubation and acceleration programmes for them to develop and commercialise their start-ups and start successful entrepreneurship activities. 

• BP sponsored the publication of a new fundamental research book in English about Imadeddin Nesimi - one of Azerbaijan’s and the world’s great literary names. The book is a contribution to the 650th anniversary celebrations of Azerbaijan’s immortal poet, and it is believed to be the most extensive scientific publication about Nesimi in a Western language since 1972. The author of the research and the book is the well-known literary scholar Michael Reinhard Hess. The book, which was published in Germany by the publishing company Gulandot, is a 260-page monograph containing over 1000 footnotes, a list of references, quotations from and interpretations of sources in many languages and presenting all essential aspects of Imadeddin Nesimi´s life, the historical and intellectual background of his times, and the impact he has left behind through his work. The book will be available in the leading libraries and universities in Europe.