2011 third quarter results

23 November 2011

Azeri-Chirag-Gunashli (ACG)

ACG participating interests are: BP (operator – 35.8%), Chevron (11.3%), SOCAR (11.6%), INPEX (11%), Statoil (8.6%), ExxonMobil (8%), TPAO (6.8%), ITOCHU (4.3%), Hess (2.7%).

During the first nine months of 2011, ACG spent $501million in operating expenditure and $1.352 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 three quarters of 2011, ACG produced on average 757,500 barrels per day (b/d) (206.8 million barrels or 27.9 million tonnes in total) from the Chirag, Central Azeri, West Azeri, East Azeri and Deepwater Gunashli platforms.

At the end of the third quarter of 2011, a total of 57 oil wells were producing, while 27 wells were used for injection in the ACG field, as follows: 

Chirag had 12 wells (8 oil producers and 4 water injectors), producing on average of 73,300 b/d.

Central Azeri (CA) had 19 wells (13 oil producers, 5 gas injectors and one water injector), producing on average 209,200 b/d. 

West Azeri (WA) had 19 wells (13 oil producers and 6 water injectors), producing on average 213,800 b/d. 

East Azeri (EA) had 14 wells (11 oil producers and 3 water injectors), producing on average 134,300 b/d.

Deep Water Gunashli (DWG) had 21 wells (12 oil producers and 9 water injectors), producing on average 126,900 b/d of oil. 

Associated gas

During the first nine months of 2011, 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 three quarters we delivered around 10.4 million cubic metres (about 368 million standard cubic feet) per day of ACG associated gas to SOCAR. In total we delivered about 2.8 billion cubic metres (more than 100 billion standard cubic feet) of associated gas to SOCAR during the first nine months of 2011 which already exceeds our plan of 2.3 billion cubic metres (over 80 billion standard cubic feet) of associated gas for the full year. 

Drilling and Completion Activity

Three oil and one gas producer wells were delivered during the first nine months of 2011. Three Chirag Oil Project (COP) pre-drill wells were drilled and suspended at the 13 3/8’’ casing shoe. New wells delivery activities have continued on Istiglal, WA, CA and DWG on wells SDX7A, C15z, B18y and E15z. East Azeri D20z well drilling activities will resume in November. One oil producer and four COP pre-drill wells are planned to be delivered by the end of 2011. Planned rig maintenance is on progress on the Chirag platform. 
Chirag: Rig maintenance will continue until the first quarter of 2012. Intervention activities have been performed in five wells adding 5,000 barrels of oil equivalent per day (boed) annualized production rate. 

Central Azeri: The B04z oil producer well completed in March 2011. Rig maintenance was completed in July 2011 followed by drilling activities in B18y well which was successfully drilled to planned depth, handed over to completion phase and was put on production at the end of October. 

West Azeri: C25z oil producer was completed in April 2011. The C15z oil producer well was then successfully sidetracked and drilled to planned depth, handed over to completion phase and was put on production at the end of October. Planned well intervention activities were also performed on 3 West Azeri wells adding 8,000 boed annualized production rate. 

East Azeri: The D19 producer well was completed in January 2011. The D20 pilot well was drilled and geosteered through the reservoir section to define the oil- water contact. The well’s pilot hole was then plugged and abandoned. The D20z sidetrack well was drilled and suspended at the 9 5/8’’ casing shoe. Drilling activities in this will resume in November with delivery planned for December 2011. Five yearly Rig Maintenance and Drilling Control Monitoring Systems Upgrade were completed in September 2011. Intervention activities are ongoing. Four well Intervention works have resulted in gaining of 7,800 boed gross annualized production rate. 
Deepwater Gunashli (DWG) The E15z oil producer was drilled, handed over to completion operations and was put on operation in October 2011. This was followed by conductor driving campaign. The drilling activities in E16 oil producer will start in December 2011with delivery planned for the second quarter of 2012. 

Chirag Oil Project (COP) pre-drilling: The COP pre-drill campaign started in April 2010 and has continued in 2011. Three pre-drill wells were drilled to 13 3/8’’ casing point and suspended, six wells were drilled to 20’’ casing point and suspended and three wells were drilled and suspended at the 30’’ conductor shoe point. The Dada Gorgud semi-submersible rig completed five yearly certification and upgrade as planned. Drilling activities resumed in July 2011 and continued batch tophole drilling activities within COP pre-drill campaign. The Dada Gorgud rig is currently drilling J02 well performing drilling activities as per plan. 

Shah Deniz The SDA06 gas producer was completed and handed over to production in May of 2011. Five yearly Rig Certification and BOP change out activities are being performed in Shah Deniz platform. Drilling activities in SDA03y will be started in the fourth quarter, with delivery planned for the first quarter of 2012. 

Shah Deniz Full Field Development (FFD) appraisal The SDX6 well was successfully drilled and completed with the Istiglal rig in March 2011. Afterwards, the SDX7A was spud in March 2011 and is expected to be completed in the first quarter of 2012.

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 at all of fabrication sites with 47.6 per cent of overall work scope already completed. 

During the first nine months of 2011 COP accomplished the following activities: 

At the ATA (AMEC-Tekfen-Azfen) yard: 
  • Achieved 5 million man hours without DAFWC (day away from work case)
  • completed our upgrade programme to the ATA facilities to increase in country fabrication
  • continued to hire and re-hire personnel for the fabrication and erection of the topsides. Currently there are up to 3,308 personnel at site including client, contractor and sub contractors
  • trained in excess of 400 welders, 100 of these were on stainless steel and duplex materials previously performed out of country
  • COP Drilling facilities fabrication and construction which was previously undertaken out of country progressing well, now 47.6% complete
  • awarded a scaffolding sub-contract to the local company
  • completed fabrication of drilling support module - 02 plate girders
  • completed fabrication of cellar deck nodes
  • completed skidway erection of all cellar deck sections
  • commenced switch room installation
  • completed fabrication of topsides plate girders and nodes
  • commenced build of weather deck sections
  • completed erection and installation of the 1st weather deck panel
  • completed lifting and stacking of all derrick support modules 01 for fitout prior to lifting onto weather deck
  • completed erection of first mechanical equipment onto Cellar Deck
  • commenced pipe fabrication & installation of carbon steel, stainless steel and duplex pipes and currently on target
  • commenced installation of major mechanical equipment on Drilling modules
  • ommenced architectural works on Topside & Drilling modules
  • commenced assembly of the Derrick module
  • derrick trial assembly completed in Poland
  • commenced installation of pipe racks on cellar deck
At CPC:
  • coating plant reactivation (3Q)
  • coating pre-qualifications (3Q)
  • receipt of coated bends from Europe (3Q)
COP milestones for the remaining part of the year are: 

At ATA: 
  • complete drilling support module - 01 steelwork erection (4Q)
  • complete drilling support module - 02 steelwork erection (4Q)
  • complete drilling equipment set (4Q)
  • complete installation of the drilling support module piping (4Q)
  • complete lifting of first drilling module onto the weather deck (4Q)
  • complete additional upgrades planned at the site (4Q)
At BDJF: 
  • start jacket level 1-3 assembly (4Q)
  • start jacket level 5-7 assembly (4Q)
  • start jacket tower frame assembly (4Q)
  • complete roll up frame 3 into centre box (4Q)
  • complete roll up frame 5 into centre box (4Q)
  • first Pile Sleeve (A1) ready for coating (4Q)
Marine and Subsea activities: 
  • STB-1 dry docking (4Q)
  • STB-1 inclining tests (4Q)
  • STB-1 mounting of sponsors and second inclination test (4Q)
  • STB-1 handover to SOCAR (4Q)
At CPC:
  • pipe coating production (4Q)
  • partial pipe load in 18" spool / line pipe (4Q)
  • pipe coating 30”/ 18" spool pipe/ Linepipe (4Q)
Through our construction contractors COP currently employs over 4500 people and more than 90 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 nine months of 2011 the Sangachal Terminal exported about 228.6 million barrels of oil (including 201 million barrels through Baku-Tbilisi-Ceyhan (BTC), 21.7 million barrels through the western route export pipeline (WREP) and 4.7 million barrels through rail). By the end of October these numbers were 252.4 million barrels of oil (including 222 million barrels through BTC, 24 million barrels through the WREP and 5 million barrels through rail). 

On average about 16.6 million standard cubic meters (about 586 million standard cubic feet) of Shah Deniz gas was exported from the terminal daily during the first three quarters of the year. By the end of October, 2011 these numbers were about 17 million standard cubic meters (about 600 million standard cubic feet) per day. 

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 nine months of 2011, BTC spent $17.5 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 end of the third quarter, 1,660 tankers were loaded at Ceyhan with a total of about 1287 million barrels (172 million tonnes) of crude oil transported via BTC and sent to world markets. Up to end of October, 2011 these numbers were 1689 tankers with a total of about 1308 million barrels (175 million tonnes) of crude oil. 

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 nine months of the year was about 201 million barrels (about 27 million tonnes). The total volume of oil exported via BTC during this year (end of October 2011) was about 222 million barrels (about 29.7 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%).

During the first nine months of 2011, Shah Deniz spent $139.1 million in operating expenditure and $467 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 nine months of 2011, the field continued to produce from three 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 three quarters of 2011, the field produced about 4.53 billion cubic meters (more than 160 billion cubic feet) of gas and 1.2 million tonnes (9.6 million barrels) of condensate or 16.6 million cubic meters of gas per day (586.4 million standard cubic feet per day) and about 35,000 barrels of condensate per day. 

Since the start of Shah Deniz production in late 2006 till the end of the third quarter of 2011 about 59.3 million barrels (7.49 million tonnes) of Shah Deniz condensate was exported to world markets. {Since the start of Shah Deniz production in late 2006 till the end of October 2011 these numbers were about 60.65 million barrels (7.67 million tonnes). 

Production is expected to increase as new platform-drilled wells are brought on stream over the next few years. Plateau production from Stage 1 is currently 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 Stage 2, or Full Field Development (FFD), is a giant project that will bring gas from Azerbaijan to Europe and Turkey. This will increase gas supply and energy security to European markets through the opening of the new southern gas corridor. 

The project 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. 

Plans for the project include two new bridge-linked offshore platforms; 26 subsea wells to be drilled with 2 semi-submersible rigs; 500 km of subsea pipelines built at up to 550m water depth; additional export capacity in Azerbaijan and Georgia; expansion of the Sangachal Terminal. 

Proposals for the transportation of gas from the Caspian Sea to Europe are now being evaluated by the Shah Deniz consortium with an award expected around the end of the year. Bids were submitted by October 1 from Nabucco, Trans-Adriatic Pipeline and IGI-Poseidon. In addition, the Shah Deniz project team are also evaluating a fourth potential export option which would transport gas to markets in South-Eastern Europe through a system of regional existing and future interconnector infrastructure. 

October 25, 2011 marked an important milestone which will support the continued development of Shah Deniz 2 project towards a final investment decision. Azerbaijan and Turkey signed a number of key gas export related agreements to enable Turkey to buy gas from Azerbaijan and to transit Azerbaijan gas through Turkey to Europe. These agreements will allow Shah Deniz to proceed with its European pipeline selection process, and to confirm gas sales agreements with potential customers 

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 nine months of 2011, SCP spent $5.9 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 three quarters, SCP’s daily average throughput was 12.4 million cubic meters (about 439 million cubic feet) of gas or about 76,000 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. 

In May, the project also awarded a contract for acquisition of the Shafag-Asiman 3D seismic survey to Caspian Geophysical, a joint venture between WesternGeco (Schlumberger) and SOCAR. Seismic acquisition has begun with the seismic vessel ‘Gilavar’ which returned to the Caspian on August 1 to begin this new exploration era of Azerbaijan. 

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 2,297 Azerbaijani nationals. 87% 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 nine months of 2011, BP and co-venturers spent about $3 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 sustainable development initiative in support of the community members involved in the agricultural sector along BTC/SCP pipelines. The project is designed to provide sustainable income generation and capacity- building opportunities through setting-up new businesses and agricultural facilities.
  • “Meet the Buyer” exhibition hosted by BP and its co-venturers. The event was part of BP’s and its co-venturers’ commitment to helping local companies increase their participation in BP-operated projects through enhancing their capabilities, developing their business and building relationship with their potential clients. More than 80 local SME’s that completed our Enterprise Development and Training Programme over the last few years exhibited their products and services to more than 150 local and international buyers. It is planned that the event will become annual.
  • A new School of Project Management 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 and its co-venturers’ project to develop greenhouse agriculture in Goranboy communities. It commenced in June, 2010, with the establishment of ‘greenhouse agriculture’ in Azizbayov, Yolpag, Nadirkend and Jinli Boluslu villages.
  • BP and its co-venturers’ project to provide community-based support to dairy producers to help increase dairy production by small and medium-sized farmers.
  • 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 three engineering disciplines, including chemical, and mechanical engineering.
  • BP’s “Business Journalism” training programme to help develop national business journalism capacity and bridge local journalists with international journalistic standards. The latest part of this training was conducted in September – October, 2011 and it included multimedia and video editing sessions.
  • 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) 12 599 4557