2010 full year results

2 March 2011

Azeri-Chirag-Gunashli (ACG)

ACG participating interests are: BP (operator – 37.4%), Chevron (11.3%), SOCAR (10%), INPEX (11%), Statoil (8.6%), ExxonMobil (8%), TPAO (6.7%), ITOCHU (4.3%), Hess (2.7%).

During 2010 ACG spent $426 million in operating expenditure and $1,648 million in capital expenditure

Production

In 2010 ACG produced on average 823,100 barrels per day (b/d) (300.4 million barrels or 40.6 million tonnes) from the Chirag, Central Azeri, West Azeri, East Azeri and Deep Water Gunashli platforms. At the end of the year: 

Chirag had 15 wells in operation (10 oil producers and 5 water injectors) and during 2010 it produced on average about 93,200 b/d. 

Central Azeri (CA) had 17 wells (12 oil producers 5 gas injectors) and during 2010 it produced on average about 205,300 b/d. 

West Azeri (WA) had 20 wells (15 of which are oil producers and 5 water injectors) and during 2010 it produced on average around 248,200 b/d. 

East Azeri (EA) had 13 wells (9 of which are oil producers and 4 water injectors) and during2010 it produced on average around 140,700 b/d. 

Deep Water Gunashli (DWG) had 23 wells (12 oil producers and 11 water injectors) and during2010 it produced on average about 135,600 b/d of oil. 

Associated gas

During 2010 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 year we delivered around 9.4 million cubic metres (about 332 million standard cubic feet) per day of ACG associated gas to SOCAR. In total we delivered 3.4 billion cubic metres (about 121.2 billion standard cubic feet) of associated gas to SOCAR during 2010. This exceeded our original plan to deliver 1.9 billion cubic meters of ACG associated gas during the full year. 

Drilling and completion activity

Chirag: In March 2010 we completed the oil producer A08x. In April we spudded A22 oil producer, drilled to the 16” casing point and suspended the well to complete previously suspended drilling activity on A07y which was put on production in October. The rig maintenance on Chirag platform commenced in November and is planned to be completed in the fourth quarter of 2011. 

Central Azeri: Following commencement of new well delivery activities on CA in April we completed B10y oil producer sidetrack during the second quarter. We then spudded B22z in July and completed it in October. CA then performed rig maintenance which was completed in early January 2011. The plan for 2011 is to deliver two oil producer wells: B04z – in the first quarter, B18y – in the third quarter and one gas injector well - B01y, which is planned for the fourth quarter of 2011. 

West Azeri: Early this year we completed the C19 producer well and then conducted rig repair activities. In August and in October we completed C 24 producer and C23 water injector wells respectively, then performed planned rig maintenance and resumed operations on C25z oil producer well, which is still in progress and expected to be completed in the first quarter of 2011. Also in the third quarter of 2011 we plan to deliver another oil producer well - C15z. 

East Azeri: During the first quarter of 2010 we finished drilling and completions activities on the D17z water injector well. We then drilled the D18 producer well which was completed in August. Drilling activities on D19 producer well started in September 2010. The well was planned and completed in early January 2011. Our plan for 2011 is to deliver another oil producer well - D20. 

Deep Water Gunashli (DWG): During the first quarter we completed the E13 oil producer. During the second quarter we spudded and completed the E14 oil producer. We then drilled E04z to the reservoir section and the well was suspended in October. Currently we are drilling the E15 oil producer which we plan to deliver in the second quarter of 2011. The next well -E16 is planned to be completed by the fourth quarter of 2011. 
On DWG subsea water injection we also continued drilling and completion operations with the Dada Gorgud and Istiglal rigs. During the first half of 2010 we drilled and completed the H03 and F06 water injectors. We completed activities and started water injection on the G04 well in October. 

Chirag Oil Project (COP) pre-drilling: The COP pre-drilling programme commenced in April 2010 with spudding the J01 pre-drill well by the Istiglal rig. We then continued COP drilling activities by the Dada Gorgud rig which first drilled and completed the J01/J01z pilot hole and sidetrack well and then spudded J02 and J03 wells in the fourth quarter of 2010. These wells were drilled to 13-3/8” casing point and were suspended in November 2010 and January 2011 respectively. We are planning to do the same drilling activity for J10 – in the first quarter, J09 – in the second quarter, J04 and J05 – in the third quarter of 2011. 

Shah Deniz: The SDA-06 well was spudded in February 2010. In addition, we performed surveillance operations on the SDA-04 well during the third quarter of 2010. SDA-06 is planned to be completed and handed over to production during the second quarter of 2011. We are also planning another gas producer well - SDA03z for the fourth quarter of 2011. 

Shah Deniz Full Field Development (FFD) appraisal: Appraisal activities to support plans for the Shah Deniz full field development continue. As part of these activities the SDX-06 appraisal well is being drilled with the Istiglal rig. The well was spudded in July with a planned total depth of 6,272m. SDX-06 is located in the northern part of the field. The well is expected to be completed during the first quarter of 2011. The rig will then move on to further appraisal drilling on the field. 

Chirag Oil Project (COP)

COP construction activities in 2010 and thus far in 2011 continued on schedule and according to plan. 

Since the project sanctioning in March 2010 COP has made very good progress with all major key contracts finalised and awarded for Construction and Marine activities. 

In July 2010 the project announced the award of six key contracts for: 
  • fabrication of the jacket and foundation piles with associated pin piles and a riser support frame for the brownfield work on the Deepwater Gunashli production, compression, water injection and utilities platform (PCWU);
  • fabrication, assembly, hook-up and commissioning of the PDQ integrated deck, including the drilling facilities;
  • transportation and installation of the subsea template and pin piles;
  • engineering, procurement and construction of the living quarters;
  • engineering of the offshore facilities;
  • engineering of the drilling facilities.
Following this in November 2010 the project awarded two more contracts for:
  • installation, hook-up and commissioning of the COP brownfield modifications required on the Deepwater Gunashli production, compression, water injection and utilities platform (PCWU) to the AMEC/Tekfen/Azfen (ATA) Consortium;
  • transportation and installation of the jacket and topsides - to Saipem.
Through the period of December 2010 and January 2011 the project awarded three key marine contracts for: 
  • pipeline coating to Caspian Pipeline Coating (CPC);
  • subsea pipeline installation and diving works to McDermott Caspian Contractors Inc;
  • The STB-1 barge strengthening contract was awarded to Caspian Shipyard Company, a SOCAR joint venture.
These awards maintain AIOC's commitment to optimise the use of Azerbaijan’s local resources. The project is expected to consume around 9 million manhours during construction work with 90% of this work being undertaken in Azerbaijan and of this, around 80% will be carried out by local workforce. Additionally, the contractors are encouraged to make maximum use of local subcontractors and we expect over 30% of the total COP spend to be expended in Azerbaijan. 

Other milestones achieved by the project to date include: 
  • 218 tonne pre-drilling template with 20 drilling slots and 4 pin piles were safely installed offshore on June 21, 2010. The template is an important component of the project infrastructure and will provide the foundation for an extended pre-drilling programme to be undertaken in the period before the jacket is installed in 2012.
  • deck and drilling facility fabrication for the COP topside, which has a target weight of 19,000 tonnes, began at the ATA deck fabrication site in July 2010
  • fabrication of the jacket which will weigh around 18,000 tonnes, started in Baku Deepwater Jackets Factory yard in November 2010
  • the first major equipment packages (well cementer unit and drilling high pressure mud pumps) were delivered to the ATA deck fabrication site in November 2010
  • a new plate rolling machine capable of rolling 150mm thick plate was placed into service at the Baku Deepwater Jacket Factory in November 2010
Through our construction contractors we currently employ over 2700 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 2010 the Sangachal Terminal exported about 324.4 million barrels of oil (including 285.65 million barrels through Baku-Tbilisi-Ceyhan (BTC), 29.6 million barrels through the western route export pipeline [WREP] and 9.3 million barrels through rail). On average about 18.7 million standard cubic metres (about 659 million standard cubic feet) of Shah Deniz gas was exported from the terminal daily during 2010. 

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 year BTC spent $34.3million in capital expenditures. 

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

Since June 4, 2006 up to the end of February 2011, 1447 tankers were loaded at Ceyhan with a total of about 1129 million barrels (151.2 million tonnes) of crude oil transported via BTC and sent to world markets. 

On July 21, 2010 BTC achieved its highest daily throughput (to date) of 1.057 million barrels per day. 

The total volume of oil exported via BTC during 2010 was about 286 million barrels (about 38 million tonnes). 

The BTC pipeline currently carries mainly ACG oil and Shah Deniz condensate from Azerbaijan. Following the signature of a transportation agreement in July 2010, crude oil from Turkmenistan has and continues to be transported. 
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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%).

In 2010 Shah Deniz spent $ 170.4 million in operating expenditure and $389.6 million in capital expenditure. 

Production

During 2010 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. 

During the year the field produced about 6.9 billion cubic meters (more than 243.4 billion cubic feet) of gas and 1.9 million tonnes (14.7 million barrels) of condensate or about 19 million cubic meters of gas per day (67 million standard cubic feet per day) and about 40,200 barrels of condensate per day. 

Since the start of Shah Deniz production in late 2006 till the end of 2010 about 49.7 million barrels (about 6.3 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 approximately 9 billion cubic meters of gas per annum and approximately 50,000 b/d of condensate. 

Shah Deniz Full Field Development (FFD)

Shah Deniz FFD is a giant project that is designed to bring gas from Azerbaijan to Europe and Turkey by opening up a new Southern Corridor. It is expected to add a further 16 billion cubic meters per year (bcma) of gas production to the existing 8 bcma from Shah Deniz Stage 1. It is one of the largest gas development projects anywhere in the world and the new Southern Corridor will substantially increase the security and diversity of European gas imports. 


The Shah Deniz FFD concept includes two new bridge-linked production platforms with 16bcma capacity, up to 30 subsea wells to be drilled with 2 semi-submersible rigs, a 500 km subsea pipeline network in up to 550m water depth and expansion of the Sangachal Terminal. In addition, the South Caucasus Pipeline (SCP) will undergo a 16 bcma upgrade with 400 km of new pipeline and 2 compression stations in Georgia. First Gas is planned for 2017. 

Engineering studies continued in 2010 to advance the Shah Deniz FFD and South Caucasus Pipeline expansion projects. These works will continue during the first half of 2011 to enable the project to move into the next stage of project development. 

In addition to the ongoing engineering work, offshore appraisal activities are being conducted to build further understanding of the Shah Deniz reservoir. As part of these activities the SDX-06 appraisal well has been successfully drilled with the Istiglal rig. Upon completion of the well the rig will move on to further appraisal drilling on the field. 

Project progress in 2010 was underpinned by the Memorandum of Understanding (MOU) signed in Istanbul in June by the Government of Azerbaijan and the Government of Turkey. This sets out the framework for the sale of gas to Turkey and transit terms to European markets through the territory of Turkey. A five year extension to the production sharing agreement (PSA) from 2031 to 2036 was signed in December 2010 by SOCAR and Shah Deniz partners. This supports Shah Deniz in providing long-term sale agreements to customers. These two agreements mark major milestones towards conclusion of all required steps towards a final investment decision by the Shah Deniz partnership. 

Transportation of gas through Turkey to the European markets will either use existing Turkish infrastructure or new pipeline infrastructure. The project is currently working to assess all options and define the route which best meets the needs of all parties involved. An export negotiation team has been formed by representatives from BP, Statoil, SOCAR and Total to negotiate gas sales with Turkish and European buyers. 

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 2010 SCP spent $10 million in 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 2010 SCP daily average throughput was 14 million cubic meters (about 490 million cubic feet) of gas or about 87,000 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

BP and SOCAR (the State Oil Company of the Republic of Azerbaijan) signed on October 7 a new production sharing agreement (PSA) on joint exploration and development of the Shafag-Asiman structure in the Azerbaijan sector of the Caspian Sea. This marked the beginning of BP’s bilateral cooperation with SOCAR in exploration and development of a new offshore block. 

The signing of the PSA followed the earlier concluded Heads of Agreement (HOA) which defined the basic commercial principles of the contract. Under the PSA BP will be the operator with 50 per cent interest while SOCAR will hold the remaining 50 per cent equity. 

The block lies some 125 kilometers (78 miles) to the South-East of Baku. It covers an area of some 1100 square kilometers and has never been explored before. It is located in a deepwater section of about 650-800 meters with reservoir depth of about 7000 meters. 

People

At the end of 2010, BP directly employed 2,179 Azerbaijani nationals. 87 percent of BP’s permanent professionals in Azerbaijan are nationals and many of them are in very senior leadership positions. A recent example of national staff development through BP opportunities is the successful completion by six procurement and supply chain management specialists and team leaders the Supply Chain Management MBA programme provided by Arizona State University. The knowledge they gained through this programme will contribute not only to BP’s business management in the region but also is a significant development achievement by Azerbaijan’s young national experts. 

In 2010 we continued our staff nationalization programme with a focus on recruiting local technicians and developing national managers. By the end of the year BP had recruited 92 technicians and 38 Azerbaijani national challengers.

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 2010 BP and co-venturers spent around $4.77 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 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 such as successful apprentice methodology.
  • BP and its co-venturers’ new 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. The centre will function as a special business and management unit within Ganja vocational training centre reinforcing the facility’s efforts to foster youth entrepreneurship.
  • A new School of Project Management (SPM) established by BP and its co-venturers in Azerbaijan. The school is designed for the private and public sectors, providing access to a globally-recognized, comprehensive project management programme. It will focus on simultaneous goals of improving immediate project management performance and establishing long term project management capability in the country.
  • BP’s support for the publication of a fundamental research book about Haji Zeynalabdin Taghiyev
  • BP’s support for the publication of major research on who the author of the famous Azerbaijani novel “Ali and Nino” is.
  • 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.
  • BP’s annual bursary awards to 58 first and second year students of the Azerbaijan State Oil Academy. The bursary awards programme is part of BP’s major educational support commitment and is aimed at promoting the best students specializing in petroleum engineering and geosciences at the State Oil Academy.
  • 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 and its co-venturers’ new community project aimed at setting up greenhouse agriculture in the Goranboy district of Azerbaijan.
  • Completion of all community infrastructure projects out of planned 39 during 2010 as part of the “Management of Community Micro-projects” programme along BTC/SCP in Azerbaijan.
  • 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.

Presentation slides

For further information please contact:
Tamam Bayatly, BP Baku Press office, telephone:      994 (0) 12 437 7573