2012 first half results

15 August 2012

Azeri-Chirag-Deepwater 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 half of 2012, ACG spent $346.4 million in operating expenditure and $1,209 million in capital expenditure. For the full year, we expect to spend about $708 million in operating expenditure and $2,516 million in capital expenditure on ACG activities. 

Production

In the first half of 2012, ACG produced on average 684,000 barrels per day (b/d) (124.5 million barrels or 16.8 million tonnes in total) from the Chirag, Central Azeri, West Azeri, East Azeri and Deepwater Gunashli platforms. 

At the end of the first half of the year, a total of 56 oil wells were producing, while 30 wells were used for injection in the ACG field, as follows: 

Chirag had 15 wells (10 oil producers and 5 water injectors, producing on average of 77,000 b/d. 

Central Azeri (CA) had 16 wells (11 oil producers, 1 water injector and 4 gas injectors, producing on average 161,000 b/d. 

West Azeri (WA) had 16 wells (13 oil producers and 3 water injectors), producing on average 186,000 b/d. 

East Azeri (EA) had 15 wells (11 oil producers and 4 water injectors), producing on average 144,000 b/d. 

Deepwater Gunashli (DWG) had 24 wells (11 oil producers and 13 water injectors), producing on average 116,000 b/d. 

Associated gas

During the first half, 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 four wells on CA. 

During the first half of 2012, we delivered around 11.5 million cubic metres (about 405 million standard cubic feet) per day of ACG associated gas to SOCAR. For the full year we expect to deliver about 3 billion cubic metres (about 106 billion standard cubic feet) of associated gas to SOCAR. 

Drilling and completion activity

Chirag: Rig maintenance will continue through August 2012. When this is completed we will perform some planned intervention activities followed by A16 well drilling and completion operations. 

Central Azeri: B01y gas injector well was drilled, completed and handed over to operation on 19 February, 2012. Following this B24 pilot hole was successfully drilled to its total depth, was plugged and abandoned on 8 April. Intervention activities were performed as per plan. New well delivery started by drilling the producer well B25 which was drilled and suspended at 20’’ casing shoe for intervention activity on well B03. In the meantime the gas injector well B26 was also drilled and suspended at 20’’ casing shoe. 
The remaining plan is to deliver well B25 in the fourth quarter and commence drilling the gas injector B26, which is planned to be delivered in the first quarter of 2013. 

West Azeri: At the beginning of 2012, gas lift retrofit operations were performed on C07 well. This was continued by recompletion operations on C04 well, which were completed in February 2012, and re-completion operations on C16 well which were completed in April. New well delivery started by drilling well C26. The well has been suspended at 16’’ liner shoe to perform intervention activity on well C03z. The plan is to deliver well C26 in the fourth quarter of 2012. 

East Azeri: In the first half of 2012, re-completion activities were performed on D04 well. Following this we commenced drilling and completion operations on producer well – D16, which we plan to deliver in the third quarter. This will be followed by another oil producer well - D21 with delivery planned for the fourth quarter of 2012. 

Deepwater Gunashli (DWG): We commenced drilling activities on E16 producer well on 29 December, 2011 and are planning to deliver it during the third quarter of 2012. We suspended E16y well operations in order to perform intervention activity on E05 and E09 wells. Drilling operations have resumed on E16y and the plan is to deliver this well in the fourth quarter of 2012. Drilling activities on E17 have slipped into 2013, with delivery planned for the third quarter of 2013. 

In the third quarter of 2012, the Dada Gorgud rig will start DWG subsea wells drilling activities with H05 and H06 wells. Plans are to drill these wells and suspend them in the third quarter of 2012. After that the rig will move to the Chirag Oil Project (COP) area to resume COP pre-drill programme. 

Chirag Oil Project pre-drilling: J02z well was drilled and suspended at 9 5/8” casing point on 27 January 2012. Following the planned blow out preventer (BOP) maintenance programme, the COP pre-drill programme resumed and delivered another three top set wells on COP - J05, J07, and J11. We are planning to drill and set 9-5/8” casing on J10, J14, J08 and J13 in the fourth quarter of 2012.

Chirag Oil Project (COP)

During the first half of 2012, COP construction activities continued on schedule and according to plan. 

Overall the project has made very good progress at all fabrication sites with 73.1 % of work scope already completed with very high safety achievements. In particular, jacket fabrication progress is on schedule (about 90.0% complete) with commissioning activities already commenced and sale-away planned for the fourth quarter of this year. Topsides fabrication is about 81.0% complete with sail-away planned for the second quarter of 2013. 

For the first time in the history of Azerbaijan’s world-class construction sites, COP platform fabrication work is being undertaken 100% in the country. 

Through construction contractors COP currently employs more than 5,500 people in total at all construction sites and 90% of these are Azerbaijani nationals. 

During the first half of 2012, COP accomplished the following activities: 

At the ATA (AMEC-Tekfen-Azfen) yard: 
  • Completed weather deck skid-rails Q 1
  • Completed derrick support module installation on weather deck Q 1
  • Completed assembly of separator module Q 1
  • First system mechanically complete Q 1
  • Achieved 12 million man hours without DAFWC Q 2
  • Completed derrick installation Q 2
  • First main generator mechanically completed Q 2
  • Completed lifting of all living quarter modules Q 2
At Baku Deepwater Jackets Factory (BDJF): 
  • Completed strand jack fitting and testing ready for roll up Q 1
  • Completed frame 1 assembly ready for roll up Q 1
  • Completed rolling of pile cans (original scope) Q 1
  • Frame 1 roll-up carried out Q2
  • Frame 7 roll-up carried out Q2
  • Tower frame 1-2 erected Q2
  • Tower frame 6-7 erected Q2
  • Flotation tank on frame 1 installed Q2
Marine and subsea activities: 
  • Completed STB-1 mounting of sponsons and second inclination test Q1
  • Handed over STB-1 to SOCAR Q1
  • Commenced reactivation of pipelay barge ‘Israfil Huseynov’ Q1
  • Handover of DSV from BP Operations to GPO and Saipem to MCCI Q2
AT CPC: 
  • Completed load in of 18” linepipe Q1
  • Completed load out of 18”and 30” spool pipe and bends Q1
  • Completed 16”and 18”CC coating Q1<> Completed 14”and 16”CWC coating Q1
  • Completed 16”spool pipe internal blasting Q2
  • Complete load out of 14”and 16”spool pipe and bends Q2
  • Complete dredging of harbour channel approach Q2
  • Complete post dredging survey and verification Q2
  • Linepipe readiness for load out to pipelay barge ‘Israfil Huseynov’ Q2
  • Pipe load out Q2
COP milestones for the remaining part of 2012 are: 

At ATA: 
  • Complete commissioning of first main generator Q 3
  • Complete commissioning of export compressors Q 3
  • Mechanical Completion of Topside and Drilling facilities Q 4
  • Commissioning complete of Flash Gas compressors Q 4
At BDJF:
  • Install flotation tank on frame 7 Q3
  • Barge STB-1 available on site Q3
  • Jacket ready for sail away Q3
  • Piles ready for sail away Q3
Marine and subsea activities:
  • Install COP pipelines and spools Q3
  • Reactivation of pipelay barge ‘Israfil Huseynov’ complete Q3
  • Reactivation of derrick barge ‘Azerbaijan’ Q4
  • Install COP jacket Q4
  • Install clamps for retrofit risers on PCWU jacket Q4
AT CPC: 
  • Contingency pipe and bends preservation and storage Q3
  • Commence pipe loadouts Q3

Export operations

Oil and gas from ACG and Shah Deniz have continued 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 half of 2012, the Sangachal terminal exported over 147 million barrels of oil (including over 130 million barrels through Baku-Tbilisi-Ceyhan (BTC), over 13 million barrels through the Western Route Export Pipeline (WREP) and over 3 million barrels by rail). 

On average about 20.3 million standard cubic metres (about 715 million standard cubic feet) of Shah Deniz gas was exported from the terminal daily during the first half of 2012. 

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%).

In the first half of 2012, BTC spent $18.9 million in capital expenditures. The 2012 plan for BTC capital expenditures is $61.7 million. 

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

Since June 4, 2006 up to the end of the first half of 2012, 1,909 tankers were loaded at Ceyhan with a total of about 1,472 million barrels (197 million tonnes) of crude oil transported via BTC and sent to world markets. 

During the first half of this year BTC exported 129 million barrels (17 million tonnes) of crude oil loaded on 168 tankers at Ceyhan. 

The total volume of oil exported via BTC to date (mid-August) is 1,474 million barrels (about197.3 million tonnes) loaded on 1,946 tankers. 

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

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 half of 2012, Shah Deniz spent $154.6 million in operating expenditure and $471.7 million in capital expenditure. 

For the full year, we are planning to spend $211.5 million in operating expenditure and $1,340 million in capital expenditure on Shah Deniz activities

Production

In the first half of 2012, for the first time the field started production from five wells delivering 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 half of 2012, the field produced 3.36 billion cubic metres (about 119 billion cubic feet) of gas and 0.9 million tonnes (7.1 million barrels) of condensate or about 18.5 million cubic metres of gas per day (about 653 million standard cubic feet per day) and about 39,100 barrels of condensate per day. 

Since the start of Shah Deniz production in late 2006 till the end of the first half of 2012, about 34,000 million standard cubic metres (about 1,186 billion standard cubic feet) of Shah Deniz gas, and over 71 million barrels (9 million tonnes) of Shah Deniz condensate was exported to the markets. 

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 metres of gas per annum and approximately 50,000 b/d of condensate. 

Drilling

Shah Deniz (Stage 1)

Intervention activities on SDA05x started on 26 December 2011 and were completed on 25 February, 2012. This was followed by SDA06 well recompletion which was completed in the second quarter of this year. The five-yearly rig maintenance is ongoing and this will be followed by drilling of the side-track well SDA03Y during the fourth quarter of 2012. 

Shah Deniz Full Field Development (Stage 2)

SDX07A was spudded in March 2011 and is expected to be completed in the first half of 2013. The extension of the drilling period is due to BOP certification on Istiglal. Following this, four wells will be drilled and suspended at 22’’ casing shoe. The next well is planned to commence during the first half of 2013 with drilling expected to complete in the third quarter of 2013. 

Shah Deniz Full Field Development

Shah Deniz (SD) 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 estimated $25 billion Shah Deniz Stage 2 project is expected to add a further 16 billion cubic metres 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. 

This Stage 2 development of the Shah Deniz field, which lies some 70 kilometres offshore in the Caspian, is expected to 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; a 16 bcma upgrade for the South Caucasus Pipeline (SCP); and expansion of the Sangachal terminal. Further pipelines will be built and expanded to transport Shah Deniz gas through Turkey and Europe. 

In April 2012, the Shah Deniz consortium reached an important milestone and approved the decision to commence Front End Engineering and Design (FEED) on the Stage 2 project. 

The entry into FEED represents the start of a key phase in the project during which engineering studies will be refined, further wells will be drilled, commercial agreements will be finalised and key construction contracts will commence. During the FEED phase of the project, the Shah Deniz consortium will also finalise its selection of export routes across Turkey and into Europe. 

Transit of gas through Azerbaijan and Georgia will be via the South Caucasus Pipeline (SCP) which will be expanded and upgraded to be able to carry the 16 bcma of Stage 2 gas. 

Gas sales and transit agreements were signed in October 2011 with BOTAS, the Turkish pipeline company, and the Turkish Government – all within an Inter-Governmental Agreement (IGA) signed by the Republic of Azerbaijan and the Republic of Turkey. These agreements set out the terms for sales of 6 bcma of gas to BOTAS, building on the existing Shah Deniz Stage 1 sales. They also include the terms for transporting the remaining 10bcma of Shah Deniz Stage 2 gas through Turkey to Europe. 

In June 2012, the Governments of Azerbaijan and Turkey signed an Inter-Governmental Agreement and a Host Government Agreement to build a new, standalone pipeline called Trans-Anatolian Pipeline (TANAP) across Turkey. These agreements are another important step towards opening the southern gas corridor to carry Shah Deniz gas to Europe. 

In February this year, based on the publicly communicated selection criteria announced in 2011, the consortium selected the Trans-Adriatic Pipeline (TAP) as the potential route for export of Stage 2 gas to Italy. Since that decision the Shah Deniz consortium has closely worked with TAP, recently concluding a Co-operation Agreement with this project. 

In June 2012, the Shah Deniz consortium selected the Nabucco West project with a route running from the Turkish-Bulgarian border to Baumgarten as the single pipeline option for the potential export of Shah Deniz Stage 2 gas to Central Europe. This decision was made on the basis of the same criteria as TAP. This means that the consortium will cooperate with the Nabucco West project to optimise its scope, its technical studies and its commercial offer. 
The Shah Deniz consortium will now continue to work with the owners of the two selected pipeline options. Shah Deniz will make a final decision between these projects, and will conclude related gas sales agreements ahead of the Shah Deniz Final Investment Decision planned for mid 2013. 

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%).

In the first half of 2012, SCP spent $6.0 million in capital expenditures. The plan for 2012 is to spend $13.1 million in SCP capital expenditures. 

The pipeline has been operational since late 2006 transporting gas to Azerbaijan and Georgia, and starting July 2007 to Turkey from SD Stage 1. 

During the first half of 2012, SCP’s daily average throughput was 12.3 million cubic metres (434 million cubic feet) of gas or about 75,000 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 4 January, 2012 the Gilavar seismic vessel completed the planned 3D seismic acquisition on the Shafag-Asiman structure. The seismic survey, which commenced in November 2011, was conducted in accordance with the exploration plans under 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. 
This was the first 3D seismic ever conducted on the contract area. It is followed by data processing which will continue into 2013. This processing will be the largest 3D survey ever processed in-country. Then some 18 months will be required for data interpretation and another year for planning of the first exploration well. 

The block lies some 125 kilometres (78 miles) to the South-East of Baku. It covers an area of some 1,100 square kilometres and has never been explored before. It is located in a deepwater section of about 650-800 metres with reservoir depth of about 7,000 metres. 

People

BP currently employs directly 2,480 Azerbaijani nationals. In total, 85% 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 half of 2012, BP and co-venturers spent about $2.3 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 co-venturers` new environmental project aimed at establishing a web based Caspian Environmental Information Centre (CEIC). The project has been designed in the framework of the Caspian Environmental Programme and is expected to result in establishing an online environmental database to be used as a centralized hub for information on the Caspian environment. The CEIC will also be used as a promotional tool for sustainable development and environmental activities in the region.
  • BP and co-venturers’ grant agreement with Eurasia Partnership Foundation (EPF) to jointly support local governance, youth capacity building and environmental initiatives along BTC/SCP pipelines in Azerbaijan. The project aims to enhance effective governance capacity of municipalities in addressing local sustainable development challenges. The project will also focus on the role of young people in addressing local development and environmental challenges in communities.
  • BP and co-venturers’ project to create a new small and medium-size enterprise (SME) portal in Azerbaijan in collaboration with the International Finance Corporation (IFC). The new portal - www.biznesinfo.az – is designed to provide local businesses with relevant information in support of their capacity growth and enhance their understanding of regulatory requirements including registering and operating business in Azerbaijan, obtaining permits, registering property, inspections, competing for government tenders, accessing local sources of finance and complying with national accounting standards. The site also includes development and training components.
  • BP and its co-venturers’ new major sustainable development initiative in support of the communities neighbouring BTC/SCP pipelines. The project is designed to provide sustainable income generation and capacity-building opportunities for community members involved in the agricultural sector. The programme scope includes construction of 132 greenhouses, a community bakery and 96 bee keeping set-ups and equipment in addition to transference of skills and knowledge required to sustainably manage these businesses and 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 small and medium enterprises (SME’s) that completed BP and co-venturers’ 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.
  • The School of Project Management (SPM) established by BP and its co-venturers in Azerbaijan. The school is designed to develop project management capabilities of individuals representing the private and public sectors. SPM provides access to a globally-recognized, comprehensive project management programme by the industry leader, ESI International. It focuses on simultaneous goals of improving immediate project management performance and establishing long-term project management capability in the country. SPM has just completed a highly successful first year of operation. In its first year, SPM has successfully trained about 150 representatives of some 62 private and public sector organizations, using globally-recognized project management training curriculum. Of these 51 were qualified for Masters and 92 for Associates Certificates from the George Washington University.
  • 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 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 provide community-based support to dairy producers to help increase dairy production by small and medium-sized farmers.
  • 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. As part of this project the chemical engineering department was established in 2009 and in 2011, BP opened five fully equipped modern laboratories for this department. The laboratories specialize in general chemistry, analytical chemistry, organic chemistry, chemical engineering and physical chemistry. The chemical engineering department currently has 51 students. In 2011, the mechanical engineering department was opened at the university with 16 students admitted for the first year. The plans are to open fully equipped mechanical engineering laboratories for this department in 2012.
  • BP’s ‘Business Journalism’ training programme to help develop national business journalism capacity and bridge local journalists with international journalistic standards. The training helped some 12 journalists gain international practice and become leading business writers in the region. They have created a trend in national business journalism which has many followers.
  • 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 2012 bursary awards were presented in June to 30 furst year and 30 second year students.
  • BP’s ongoing Geosciences and Engineering Speaker Series 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