2010 first quarter results

6 May 2010

Azeri-Chirag-Gunashli (ACG)

ACG participating interests are: BP (operator – 34.1%), Chevron (10.2%), SOCAR (10%), INPEX (10%), Statoil (8.6%), ExxonMobil (8%), TPAO (6.8%), Devon (5.6%), ITOCHU (3.9%), Hess (2.7%).

During the first quarter ACG spent about $155.3 million in operating expenditure and $341 million in capital expenditure. For the full year we expect to spend about $ 587 million in operating expenditure and $1,584 million in capital expenditure on ACG activities.

Production

During the first quarter we produced an average 797.300 barrels per day (b/d) (more than 72 million barrels or 9.7 million tonnes) from the Chirag, Central Azeri, West Azeri, East Azeri and Deep Water Gunashli platforms.

Our full year plan remains to be an average of 854,000 b/d (about 42.1 million tonnes pa) production from the five ACG platforms. Of this, about 90,900 b/d is expected from Chirag, 184,200 b/d from Central Azeri, 285,700 b/d from West Azeri, 158,100 b/d from East Azeri and 135,100 b/d from Deep Water Gunashli.

Chirag has 19 wells in operation (13 oil producers and 6 water injectors) and during the first quarter of 2010 it produced on average about 106,700  b/d.

Central Azeri (CA) has 20 wells (13 oil producers, 2 water injectors and 5 gas injectors) and during the first quarter it produced on average about 190.400 b/d.

West Azeri (WA) has 21 wells (15 of which are oil producers and 6 water injectors) and during the first quarter it produced on average around 253.700 b/d.

East Azeri (EA) has 14 wells (10 of which are producers and 4 water injectors) and during the first quarter it produced on average around 127.900 b/d.

Deep Water Gunashli (DWG) has 21 wells (11 producers and 10 water injectors) and during the first quarter it produced on average about 118.600 b/d of oil.

Associated gas

During the first quarter 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.

During the first quarter we delivered around 9.4 million cubic metres ( about 330.4 million standard cubic feet) per day of ACG associated gas to SOCAR. In total we delivered 0.8 billion cubic metres (about 30 billion standard cubic feet) of associated gas to SOCAR during the first quarter.

For the full year we plan to deliver 1.9 billion cubic meters of ACG associated gas to SOCAR.

Drilling

Chirag: In March 2010 we completed the oil producer A08x. Our current activities on Chirag are focused on finishing well intervention operations, followed by plans to spud the A22 oil producer. We also plan to drill an additional sidetrack, A-07y as an oil producer in 2010.

Central Azeri: Recovery activities were completed in March 2010 and on April 7th we commenced new well delivery activity on CA. During the first quarter we also finished recompletion of B17 and B16 wells. During the remaining part of the year we will continue drilling activities. The current plan is to drill and complete the B10z oil producer sidetrack well and during the second half of 2010 we plan to deliver the B22z injector well.

West Azeri: Early this year we completed the C19 producer well and conducted rig repair activities. In addition, we spudded the C23 injector in February. The remaining plan for 2010 is to continue delivering new development wells and conduct planned rig maintenance scheduled for the second half of the year.

East Azeri: During the first quarter of 2010 we continued drilling and completions activities in the D17z well. Our plan for 2010 is to drill and complete two more oil producers - D18 and D19.

Deep Water Gunashli (DWG): During the first quarter we completed the E13 oil producer. By the end of 2010 one more oil producer will be drilled and two more sidetracks are also planned to be delivered. Additionally, we will conduct well intervention operations during the second quarter of the year.

In addition, the Dada Gorgud has continued drilling and completion operations on the DWG subsea water injection drilling programme. During the first quarter we drilled and completed the H03 water injector. The DWG subsea water injection drilling programme will continue during the second and third quarters of 2010.

ACG major projects construction activities

Our construction activities in the first quarter 2010 continued on schedule and according to plan.

During the first quarter we commissioned another water injection well on the DWG East manifold. The installation and commissioning of the systems for a further well is currently scheduled to be completed by the third quarter of 2010.  Additionally another well on the South manifold will also be installed and commissioned during the third quarter. Altogether, this will allow us to inject approximately 400,000 b/d of water into the DWG reservoir through 13 subsea wells drilled from three subsea drilling centres which are located between 3.2 kilometers and 5.2 kilometers from the DWG platform.

Development of these subsea facilities marks the first significant subsea development in the Caspian Sea and paves the way for future Caspian subsea developments in ACG, Shah Deniz and elsewhere.

Chirag Oil Project (COP)

We moved the Chirag Oil Project (COP) into execute phase through sanctioning this $6 billion development on March 9.  COP is planned to increase oil production and recovery of an additional 360 million barrels of oil from the ACG field through a new offshore facility to be installed between Deepwater Gunashli and Chirag platforms. For the first time in the history of ACG development COP will utilise local resources to the greatest possible extent, and all fabrication works will be done in Azerbaijan.

Work is currently underway to finalise some of the major construction awards. In the meantime activities started in some areas in preparation for commencement of fabrication works. Fabrication of the COP pre-drill template, which started at Baku’s Deepwater Jackets factory (BDJF) last December, is progressing on schedule and is currently nearing completion. Both pin piles and installation piles are also complete. Following onshore commissioning the template and piles will be ready for offshore installation during the third quarter of this year.

Preparations are underway to start site upgrades and associated engineering work. Upgrades to the BDJF factory, which will allow to complete fabrication of the jacket within the country, has been agreed and procurement of the items such as the new steel rollers, and plate cutting beds are under way. These are expected to be delivered for fitting into the fabrication halls during the second quarter. Deliveries of steel at the jacket and topsides fabrication yards are also expected to start in May.

COP pre-drilling plans

We are planning to commence the COP pre-drill programme with the Istiglal rig during the second quarter of 2010. The Istiglal will drill one pre-drill well and one geotechnical borehole for the COP programme. Following the template installation the Dada  Gorgud will move from Deepwater Gunashli to drill the second COP pre-drill well and all subsequent pre-drill wells starting the third quarter of 2010.
COP milestones for the remaining part of the year:
  • Announce main construction contract awards - 2Q
  • Award jacket fabrication contract - 2Q
  • Begin the COP pre-drill program - 2Q
  • Delivery of first plate steel to jacket and deck fabrication yards - 2Q
  • Start deck and drilling facilities fabrication - 3Q
  • Install template and jacket pin piles at the offshore location - 3Q
  • Resume pre-drill program following template installation - 3Q
  • Award main transportation and installation contract - 3Q
  • Award pipeline coating contract - 3Q
  • Award pipeline installation and diving contract - 3Q
  • Start jacket fabrication - 4Q
  • Deliver 1st major equipment package to Baku - 4Q
Through our construction contractors we currently employ over 800 people and more than 95% per cent of these are Azerbaijani nationals.

Export operations

Oil and gas from ACG and Shah Deniz continue to flow via subsea pipelines to the Sangachal terminal.

The capacity of the terminal’s overall processing systems is currently 1.2 million barrels of oil and 25.5 million cubic metres of Shah Deniz gas per day (about 39.5 million cubic metres in total) 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.

During the first quarter 2010 the Sangachal Terminal exported about 76 million barrels of oil (including about 66 million barrels through Baku-Tbilisi-Ceyhan (BTC), about 8 million barrels through the western route export pipeline [WREP] and about 2 million barrels through rail). On average about 22 million standard cubic metres (about 780 million standard cubic feet) of Shah Deniz gas was exported from the terminal daily during the first quarter.

Baku-Tbilisi-Ceyhan (BTC)

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%).

During the first quarter BTC spent $3.5 million in capital expenditures and the full year plan is $69 million.

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

Since June 4, 2006 up to the end of April 1128 tankers were loaded at Ceyhan with a total of more than 887 million barrels (about 118.8 million tonnes) of crude oil transported via BTC and sent to world markets.

The total volume of oil exported via BTC during the first quarter of 2010 was 65.7 million barrels (around 8.8 million tonnes).

The BTC pipeline currently carries mainly ACG oil and Shah Deniz condensate from Azerbaijan. BTC also has ongoing agreements to carry oil from the Tengiz field in Kazakhstan.

Shah Deniz

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

During the first quarter Shah Deniz spent $ 42.8 million in operating expenditure and $75 million in capital expenditure.

For the full year we are planning to spend $177.8 million in operating expenditure and $604.8 million in capital expenditure on Shah Deniz activities

Production

During the first quarter the field continued to produce from four wells to off-take points in Azerbaijan, Georgia and the Turkish border. The gas from Shah Deniz Stage 1 continues to be sold to Azerbaijan, GOGC (Georgia), BOTAS and the BTC Company.

During the first three months of 2010 the field produced about 2 billion billion cubic meters (more than 70 billion cubic feet) of gas  and 0.54 million tonnes (around 4.3 million barrels) of condensate or about 22 million cubic meters of gas per day (around 780 million standard cubic feet per day) and about 47.500 barrels of condensate per day.

For the full year we plan to produce 7.6 billion cubic meters (around 269 billion cubic feet) of gas and 2.01 million tonnes (around 16 million barrels) of condensate.

Since the start of Shah Deniz production in late 2006 till the end of the first quarter of 2010 about 39.34 million barrels (about 4.98 million tonnes) of Shah Deniz condensate was exported to world markets.

Production will increase as new platform-drilled wells are brought on stream over the next few years. Plateau production from Stage 1 is expected to be 8.6 billion cubic meters of gas per annum and approximately 45,000 b/d of condensate.

Drilling

Early this year we completed commissioning the new wells system and in February we spudded the sixth production well, SDA-06 from the platform. In addition, we will conduct surveillance operations on SDA-04 during the third quarter of 2010.

Shah Deniz Stage 2

Early this year we completed commissioning the new wells system and in February we spudded the sixth production well, SDA-06 from the platform. In addition, we will conduct surveillance operations on SDA-04 during the third quarter of 2010.

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%).

During the first quarter SCP spent $3.2 million in capital expenditures. For the full year we expect to spend $12.7 million in SCP 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 the first quarter SCP daily average throughput was about 15.35 million cubic meters (around 542 million cubic feet) of gas or more than 97,000 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 development and administration.

Exploration

On July 13 2009, BP and SOCAR signed a memorandum of understanding (MOU) to jointly explore and develop the Shafag and Asiman structures in the Azerbaijan sector of the Caspian Sea. These structures, located in a deepwater section of about 650-800 meters with reservoir depth of about 7,000 meters, cover an area of some 1100 square kilometers and have never been explored before. The MOU, grants BP the exclusive right to negotiate a production sharing agreement to explore and develop these two structures

People

At the end of the first quarter of 2010, BP Azerbaijan directly employed 1,993 Azerbaijani nationals. 85 per cent of BP’s permanent professionals in Azerbaijan are nationals and many of them are in very senior leadership positions.

In 2010 we will continue our staff nationalization programme with a focus on recruiting local technicians and developing national managers - 120 technicians and 50 Azerbaijani national challengers to be recruited in 2010. To that end we will continue our extensive training programmes through CTTC and other existing training courses.

Major 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 Azerbaijan. 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.

During the first quarter of 2010 BP and co-venturers spent around $1.36 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 co-venturers’ award of a grant to enhance economic development through strengthening the agricultural sector in the Garadaghly community along the BTC and SCP pipelines.
  • Completion of six community infrastructure projects during the first quarter as part of the “Management of Community Micro-projects” programme including rehabilitation of village roads and construction of community potable water systems.
  • BP and BTC/SCP co-venturers’ support of cultural heritage capacity-building training for some 43 representatives of the Gobustan State Historical-Artistic Reserve, the Azerbaijan Institute of Archaeology and the Georgian National Museum.
  • BP and co-venturers’ award of a grant to support youth development in 10 communities in the Shamkir, Samukh, Agstafa, Tovuz and Goranboy regions along the BTC and SCP pipelines.
  • 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) initiated in 2007 to develop local oil and gas sector companies. The project war earlier implemented by an international company.
  • BP’s ongoing Geosciences and Engineering Speaker Series (BPGESS) initiative which is designed to enhance commitment by future generations of engineers to promoting geosciences in Azerbaijan.
  • BP’s support for the publication of a fundamental research book about Haji Zeynalabdin Taghiyev
  • BP's ongoing support for the Baku-based Qafqaz University to broaden its scope to cover undergraduate education in chemical, petroleum, and mechanical engineering disciplines.

Presentation slides