2011-first-quarter-results

17 May 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 the first quarter of 2011 ACG spent $140.6 million in operating expenditure and $419 million in capital expenditure. For the full year, we expect to spend about $628 million in operating expenditure and $1.998 million in capital expenditure on ACG activities. 

Production

During the first quarter ACG produced on average 785,500 barrels per day (b/d) (70.74 million barrels or 9.6 million tonnes) from the Chirag, Central Azeri, West Azeri, East Azeri and Deep Water Gunashli platforms. 

At the end of the first quarter: 

Chirag had 10 wells in operation (6 oil producers and 4 water injectors) and during the first quarter it produced on average about 81,800 b/d. 

Central Azeri (CA) had 18 wells (12 oil producers, 5 gas injectors and one water injector) and during the first quarter it produced on average about 216,000 b/d. 

West Azeri (WA) had 19 wells (14 of which are oil producers and 5 water injectors) and during the first quarter it produced on average around 225,300 b/d. 

East Azeri (EA) had 14 wells (10 of which are oil producers and 4 water injectors) and during the first quarter it produced on average around 130,700 b/d. 

Deep Water Gunashli (DWG) had 21 wells (12 oil producers and 9 water injectors) and during the fist quarter it produced on average about 131,800 b/d of oil. 

Associated gas

During the first three months 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 10.6 million cubic metres (about 374 million standard cubic feet) per day of ACG associated gas to SOCAR. In total we delivered 1 billion cubic metres (about 33.7 billion standard cubic feet) of associated gas to SOCAR during the first quarter of 2011. Our plan for the full year is to deliver 2.3 billion cubic metres (over 80 billion standard cubic feet) of associated gas to SOCAR. 

Drilling and completion activity

Chirag: On the Chirag platform we continue the rig maintenance which commenced last November. This is planned to be completed in the first quarter of 2012. 

Central Azeri: In March 2011, we completed B04z oil producer sidetrack. CA is currently performing rig maintenance which will be completed by the end of May 2011. The plan for the remaining part of the year is to deliver B18y oil producer well in the third quarter and start drilling activities in B01y gas injector well, which is expected to be delivered in the first quarter of 2012. 
West Azeri: Following the planned rig maintenance on WA late last year we resumed drilling operations on C25z oil producer well and completed it in the first quarter of 2011. We plan to deliver another oil producer well – C15z in the fourth quarter of 2011. 

East Azeri: During the first quarter of 2011 we completed drilling activities on D-19 producer well which we started in September 2010. We currently have ongoing drilling on another oil producer well – D20 which we plan to deliver in the fourth quarter of 2011. 

Deep Water Gunashli (DWG): On DWG we are currently drilling the E15z oil producer which we plan to deliver in the second quarter of 2011. The next well –E16 is planned to be completed by the first quarter of 2012. 

Chirag Oil Project (COP) pre-drilling: The COP pre-drilling programme which commenced in April 2010 has continued this year. J03, J04 and J06 wells were drilled to 13 3/8’’ casing point and suspended. J08, J09 and J05 wells were drilled to 30’’ conductor point and suspended. The Dada Gorgud rig is currently undergoing upgrade and BOP certification. Drilling activity will re-start at the end of June 2011. We plan to deliver in total six COP wells during 2011 and suspend for future use once the COP platform is installed. 

Shah Deniz: We continue drilling activities on the SDA06 well. The well 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 first quarter of 2012. 

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 SDX06 appraisal well was successfully drilled and completed with the Istiglal rig in March 2011. Upon completion of the well the rig moved on to perform further appraisal drilling on the field. We spudded SDX07 in March 2011 with a planned total depth of 6170m. SDX07 is located in the western part of the field. SDX07 is expected to be completed in the first quarter of 2012. 

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 of 2011 the Sangachal Terminal exported about 78 million barrels of oil (including 68.7 million barrels through Baku-Tbilisi-Ceyhan (BTC), 7.5 million barrels through the western route export pipeline [WREP] and 1.8 million barrels through rail). On average about 16.2 million standard cubic metres (about 571.5 million standard cubic feet) of Shah Deniz gas was exported from the terminal daily during the first quarter. 

Chirag Oil Project (COP)

Since the beginning of 2011 COP construction activities have continued on schedule and according to plan. 

So far the project has made very good progress with the remaining three key marine contracts finalised and awarded in January 2011. These included:
  • 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. 

During the first quarter of 2011 we accomplished the following COP activities: 

At Baku Deepwater Jackets Factory (BDJF): 
  • completed our upgrade programme to the BDJF facility to undertake all jacket fabrication activities in the country
  • continued to hire and re-hire personnel for the fabrication and erection of the jacket awarded and commenced external competency training programme for workforce commenced rolling and fabrication in the workshops, with increased scope being done under cover;
  • prepared site and commenced assembly of launch runners and centre box jacket frames 3 and 5.
  • upgraded and commissioned the facility for blasting and painting and commenced blasting and painting launch runners, legs, bracings and associated items.
At the ATA yard: 
  • completed our upgrade programme to the ATA facility to increase in country fabrication
  • continued to hire and re-hire personnel for the fabrication and erection of the topsides
  • trained in excess of 300 welders, 100 of these were on exotic materials previously performed out of country.
  • commenced fabrication of the COP drilling facilities which was previously undertaken out of country
  • awarded a scaffolding sub-contract
  • completed fabrication of drilling support module- 02 plate girders
  • completed fabrication of cellar deck nodes
  • commenced pipe fabrication
  • completed fabrication of cellar deck panel 5 – 7
COP milestones for the remaining part of the year are: 

At BDJF: 
  • start piles fabrication (2Q)
  • prepare skidway to push centre box to the front (3Q – through next year)
  • start riser support frame fabrication (4Q)
  • roll up frames 3 and 5 into jacket centre box (4Q)
  • commence lay out of outer frames 1 and 7 (4Q)
At ATA:
  • complete erection and installation of the 1st cellar deck panel (2Q)
  • complete drilling support module - 02 steelwork erection (2Q)
  • complete erection and installation of the 3rd cellar deck panel (2Q)
  • complete drilling equipment set - 02 steelwork erection (3Q)
  • complete erection and installation of the 1st weather deck panel (3Q)
  • complete fabrication of topsides plate girders and nodes (3Q)
  • complete drilling support module - 01 steelwork erection (4Q)
  • complete installation of the drilling support module piping (4Q)
  • complete weather deck skid-rails (4Q)
Through our construction contractors COP currently employs over 3200 people and more than 95 per cent of these are Azerbaijani nationals. 

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 of 2011 BTC spent $7.3 million in capital expenditures. The 2011 plan for BTC capital expenditures is $65.9 million. 

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

Since June 4, 2006 up to mid-May, 1525 tankers were loaded at Ceyhan with a total of about 1188 million barrels (159 million tonnes) of crude oil transported via BTC and sent to world markets. 

To date BTC’s highest daily throughput has been 1.044 million barrels per day. 

The total volume of oil exported via BTC during the first quarter of 2011 was about 68.7 million barrels (about 9.2 million tonnes). 

The BTC pipeline currently carries mainly ACG oil and Shah Deniz condensate from Azerbaijan. In addition, crude oil from Turkmenistan has and continues to be transported 

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 the first quarter of 2011 Shah Deniz spent $ 47.9 million in operating expenditure and $125.8 million in capital expenditure. 

For the full year, we are planning to spend $169.9 million in operating expenditure and $791.6 million in capital expenditure on Shah Deniz activities. 

Production

During the first quarter 2011 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 first quarter of 2011 the field produced about 1.84 billion cubic meters (more than 64.8 billion cubic feet) of gas and 0.4 million tonnes (3.1 million barrels) of condensate or about 20.4 million cubic meters of gas per day (725 million standard cubic feet per day) and about 34,400 barrels of condensate per day. 

Since the start of Shah Deniz production in late 2006 till the end of the first quarter of 2011 about 52.9 million barrels (about 6.7 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 increasing gas supply and energy diversity to European markets through a new Southern Corridor. It is expected to add a further 16 billion cubic meters per year (bcma) of gas production to the approximately 9 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 current plans are that the project will include two new bridge-linked production platforms; 26 subsea wells to be drilled with 2 semi-submersible rigs; 500 km of subsea pipelines built at up to 550m of water depth; 16 bcma upgrade for the South Caucasus Pipeline (SCP); expansion of the Sangachal Terminal with compressors for FFD gas and SCP. 

The project has reached final stages with progress to ensure first gas deliveries in 2017: the development well SDX-06 successfully reached the reservoir and was suspended for future development; drilling of the next development well - SDX-07 has commenced; pre-FEED engineering studies on Shah Deniz upstream and midstream projects are ongoing; SOCAR and Shah Deniz partners have signed a 5 year production sharing agreement (PSA) extension from 2031 to 2036 to help long-term sale agreements with customers; Shah Deniz export transit organisation has been established in Ankara to work with BOTAS and the main prospective EU pipeline groups including ITGI (Interconnect Turkey-Greece-Italy) Poseidon, TAP (Trans-Adriatic Pipeline) and Nabucco,; Shah Deniz has requested a firm gas transportation offer by 1 October 2011 from all pipeline groups. The decision on export route selection will be made on the basis of evaluation of the commercial, technical and strategic criteria of the proposals. 

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 of 2011 SCP spent $2.1 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 the first quarter SCP daily average throughput was 15 million cubic meters (about 530.7 million cubic feet) of gas or about 92,000 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

On May 6, the Parliament of the Republic of Azerbaijan ratified the new production sharing agreement (PSA) between BP and SOCAR on joint exploration and development of the Shafag-Asiman structure in the Azerbaijan sector of the Caspian Sea. 

The ratification followed the signing of the PSA in Baku in October, 2010. Under the PSA, which is for 30 years, BP Exploration (Azerbaijan) Limited 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

BP currently employs directly 2,169 Azerbaijani nationals. 87 percent of BP’s permanent professionals in Azerbaijan are nationals and many of them are in very senior leadership positions. 

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 the countries where we operate. 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 2011 BP and co-venturers spent more than $0.87 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. 

The most recent examples of such initiatives have been: 
  • 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 focuses on simultaneous goals of improving immediate project management performance and establishing long term project management capability in the country. •
  • 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) to develop local oil and gas sector companies.
  • 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’ 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.
  • BP and its co-venturers’ 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 young people. The centre functions as a special business and management unit within Ganja vocational training centre.
  • 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” was.
  • 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 “Business Journalism” training programme to help develop national business journalism capacity and bridge local journalists with international journalistic standards
  • BP’s annual bursary awards to a large group of first and second year students of the Azerbaijan State Oil Academy. The bursary awards programme is part of BP’s educational support commitment and is aimed at promoting the best students specializing in petroleum engineering, geosciences, oil mechanical, process automation, energy power 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.

Presentation slides

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