3rd quarter 2018 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), Statoil (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 2018, we spent about $367 million in operating expenditure and $825 million in capital expenditure on ACG activities.

Production

During the first three quarters of 2018, ACG continued to safely and reliably deliver stable production. Total ACG production for the nine months was on average 588,000 barrels per day (b/d) (about 161 million barrels or 22 million tonnes in total) from the Chirag (47,000 b/d), Central Azeri (156,000 b/d), West Azeri (126,000 b/d), East Azeri (97,000 b/d), Deepwater Gunashli (105,000 b/d) and West Chirag (57,000 b/d) platforms.

At the end of September, 112 oil wells were producing, while 53 wells were used for water and gas injection.

Drilling and completion

ACG completed 8 oil producer wells and 3 water injectors by the end of the third quarter of 2018.

Associated gas

In the first three quarters, ACG delivered an average of about 6.6 million cubic metres per day of ACG associated gas to SOCAR (1.8 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.

In the first three quarters of 2018, 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 55 million standard cubic metres of Shah Deniz gas, while overall processing and export capacity for gas, including ACG associated gas is around 75 million standard cubic metres per day.

During the three quarters, the Sangachal terminal exported more than 211 million barrels of oil. This included over 189 million barrels through Baku-Tbilisi-Ceyhan (BTC), about 21 million barrels through the Western Route Export Pipeline (WREP), and about 1.2 million barrels via a separate condensate export line.

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

On average, about 28.4 million standard cubic metres (more than 1003 million standard cubic feet) of Shah Deniz gas was exported from the Terminal daily during the first nine months of 2018.

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), ExxonMobil (2.50 per cent) and ONGC (BTC) Limited (2.36 per cent).

In the first three quarters of 2018, BTC spent approximately $87 million in operating expenditure and about $21 million in capital expenditure.

Since the 1,768km BTC pipeline became operational in June 2006 till the end of the third quarter of 2018, it carried a total of about 3.1 billion barrels (around 408 million tonnes) of crude oil loaded on 4,001 tankers and sent to world markets.

During the three quarters, BTC exported about 189 million barrels (more than 25 million tonnes) of crude oil loaded on 243 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 2018, Shah Deniz spent more than $418 million in operating expenditure and about $1.14 billion 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 nine months, the field produced 8 billion standard cubic metres (bcm) of gas and about 1.8 million tonnes (14.3 million barrels) of condensate.

The existing Shah Deniz facilities’ production capacity is currently 43.0 million standard cubic metres of gas per day or around 16bcma.

Drilling

During the third quarter of 2018, Shah Deniz Alpha platform installed upper completion on SDA11 and suspended the well. Integrity jobs were conducted on SDA04 and SDA05 wells.

The Istiglal drilling rig completed the SDG04 and SDG02Z wells on the East South Flank. The Maersk Explorer rig continues drilling operations on the SDH02 well on the East North Flank.

The above two rigs have already completed four wells on the North Flank, four wells on the West Flank and two wells on the East South Flank and drilled 14 wells 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.

After achieving significant commissioning and completion milestones across the whole gas value chain during the first half of the year, the Shah Deniz 2 and South Caucasus Pipeline Expansion (SCPX) system entered the start-up phase with the official inauguration event held at the Sangachal Terminal on 29 May. This was followed by the commencement of commercial gas deliveries to Turkey from the Shah Deniz 2 development project as planned on 30 June 2018. The Shah Deniz 2 project is being delivered safely, on schedule and within budget.

On 30 July, the wing valve on the North Flank subsea well SDC-03Z was opened, marking the first production from the Shah Deniz Bravo platform. This milestone marks the very first production from a subsea well in the Caspian, a significant achievement, which has been delivered safely, below budget and ahead of schedule. The Bravo facility is now exporting gas and condensate to the onshore terminal at Sangachal.

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 2018, SCP spent about $27 million in operating expenditure and more than $308 million in capital expenditure.

The pipeline has been operational since late 2006, transporting Shah Deniz gas to Azerbaijan, Georgia and Turkey.

SCP’s daily average throughput was about 22 million cubic metres of gas per day during the first three quarters of 2018.

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

In the first three quarters of 2018, SCP spent about $27 million in operating expenditure and more than $308 million in capital expenditure.

The pipeline has been operational since late 2006, transporting Shah Deniz gas to Azerbaijan, Georgia and Turkey.

SCP’s daily average throughput was about 22 million cubic metres of gas per day during the first three quarters of 2018.

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

At the end of 2017 the processing and interpretation of the 3D data acquired from the Shallow Water Absheron Peninsula (SWAP) contract area was finalized. A Notice of Prospectivity was signed with SOCAR, signifying BP’s commitment to drill exploration wells in three prospective areas in shallow water Absheron. Planning for the exploration wells drilling in the selected prospective areas is now ongoing.

Following signature of the new production sharing agreement (PSA) for the joint exploration and development of Block D230 in April 2018, plans are being developed for a seismic acquisition programme. Subject to PSA ratification by the Parliament of Azerbaijan, the survey will be conducted in the contract area during 2019.

We are also continuing to plan the first exploration well on the Shafag-Asiman block.

Recently, BP was assigned 61% participating interest in the existing onshore Gobustan PSA in Azerbaijan. As part of the assignment, BP, as operator, will drill one exploration well to assess the potential of the deeper reservoirs in the block. It is expected that the exploration well will be drilled in the second half of 2019.

At the end of the third quarter of 2018, the number of BP’s Azerbaijani national employees was 2,557 including fixed-term employees. This makes 90 percent of BP’s professional employees in Azerbaijan, with many of them in senior positions.

BP had a commitment made in 2014 to achieve a nationalization target of 90 per cent professional staff by the end of this year. BP is proud to have already achieved that goal primarily through development of its national staff which has resulted in nationalizing the majority of professional roles initially occupied by expatriate employees. Non-professional staff of BP in Azerbaijan is 100 percent 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.

At the end of the third quarter of 2018,, BP and the co-venturers in BP-operated joint ventures spent more than $3.3 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 and its coventurers 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” targets  to develop skills and capabilities of up to 100 selected people through trainings and other specialised activities.

• Partnership with the Ministry of Education which BP (on behalf of the co-venturers in the joint ventures that it operates) launched in September 2016 to support the enhancement of the agricultural vocational education in Azerbaijan. Under this partnership, BP and its co-venturers have committed to upgrading agricultural vocational education framework in Azerbaijan. As part of the  project, 19 modules have been developed for four new agricultural occupations (crop production, agriculture machinery, fruit growing, vegetable specialist) and trades which will contribute to the country’s plans to raise the efficiency of the agricultural sector. The project also includes development of textbooks and teaching materials in all of the newly-created occupations.

• 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) are supporting secondary schools in enhancing IT skills training. 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 are being 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) launched in September 2016 the “Build your Future” project to support a large group of 11th grade students selected from disadvantaged families in their preparation for university admission exams. The project activities include two components – academic knowledge and social integration. To date the project has had 2 successful phases with approximately 85 per cent of participants admitted to local universities. Based on this success the project has now stepped into phase 3.

• BP (on behalf of the co-venturers in the South Caucasus Pipeline Company) launched a pilot project in 2016 for capacity-building in the communities along the pipeline route in Goranboy, Samukh, Shamkir, Tovuz and Agstafa districts. The project was designed to enhance the quality of English language teaching in the communities. Building on the success of the pilot phase, the project has been extended to cover up to 165 teachers and 480 community members from 11 rural districts along the pipeline route.

• BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) have partnered with the International Organization for Migration (IOM) to support the transition of international best practices in facilitating efficient implementation of migration strategies, policies and legislation through capacity-building and technical assistance. The beneficiaries of the project are the state agencies dealing with the visa matters. As part of the project, the first e-service and Consular Reference Manual for the Ministry of Foreign Affairs has been developed and launched. In addition, capacity-building trainings have been conducted for a large group of Consular officers.

• BP (on behalf of the co-venturers in the South Caucasus Pipeline Company) is implementing a project to build 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 aim of the project is to raise both community and health sector awareness of the importance of early intervention in the process of children’s development through the establishment of Early Intervention Centres at the target districts.

• BP (on behalf of the co-venturers in the South Caucasus Pipeline Company) are supporting two livelihood generation projects which initially covered 200 community members from the Ujar, Yevlakh, Samukh and Shamkir districts by providing equipment, training and continuous consultancy in beekeeping and small farming. In December 2017, it was decided to expand the beekeeping project called “Sweet Gold” to cover additional 600 community members in other districts along the BP-operated pipelines.

• BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) is supporting a new environmental project - “Green Sangachal”, which aims to help improve the environmental conditions in neighbouring  communities.  As part of the project, it is planned to establish a green yard with recreation facilities in 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) is supporting the establishment of the Caspian Environmental Educational Centre (CEIC) to help enhance cooperation among the Caspian littoral states in sharing information and creating database on environmental protection of the Caspian basin. An online portal has been created to improve environmental data collection, share best practices on environmental management, provide broader access to updated regional environmental data, ensure transparency and communication with the main stakeholders and encourage public participation in regional environmental activities.

• BP’s business lectures at Baku Higher Oil School (BHOS) 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 presentations at BHOS, sharing their knowledge and experience and providing information about BP’s activities, technology, operations processes and mechanisms. In addition, BP is funding an innovative educational project at BHOS - the “Business education for engineers”, to help national engineers smoothly step from university to business career. The programme is designed for the 5th year undergraduate students and aims to provide extensive knowledge in management and business.

• 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 and capacity building 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.