2012 third quarter results

25 November 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 nine months of 2012, ACG spent $539.7 million in operating expenditure and $1,807 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

During the first three quarters of 2012, ACG produced on average 684,000 barrels per day (b/d) (187.4 million barrels or 25.3 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 2012, a total of 62 oil wells were producing, while 32 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 76,000 b/d. 

Central Azeri (CA) had 19 wells (13 oil producers, 1 water injector and 5 gas injectors, producing on average 163,000 b/d. 

West Azeri (WA) had 22 wells (16 oil producers and 6 water injectors), producing on average 192,000 b/d. 

East Azeri (EA) had 16 wells (12 oil producers and 4 water injectors), producing on average 139,000 b/d. 

Deepwater Gunashli (DWG) had 22 wells (11 oil producers and 11 water injectors) producing on average 114,000 b/d. 

Associated gas

During the first nine months of 2012, 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 of 2012, we delivered around 10.2 million cubic metres (359 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

For 2012, the plan is to deliver six oil producer wells and one gas injector well. By the end of the third quarter we had delivered the gas injector well on Central Azeri CA - B01y, and one oil producer - D16 on East Azeri. 

Chirag oil project (COP) pre-drill campaign is planned to complete in December 2012 with seven wells pre-drilled. 

Chirag: Rig upgrade including rig acceptance will be completed in November. Intervention works have been performed on wells A17 and A13. A16 well drilling and completion operations are scheduled to be completed in January 2013. 

Central Azeri: B01y gas injector well was drilled, completed and handed over to operation in February, 2012. Following this, B24 pilot hole was successfully drilled, plugged and abandoned in April. Intervention activities on wells B07 and B16 were performed as per plan. The producer well B25 was drilled and suspended at 20’’ casing shoe. B03 intervention activity was completed prior to returning to drilling B25. 
The remaining plan in the fourth quarter is to complete B25 producer well, perform intervention activities on wells B02 and B18 and drill the gas injector B26, which is planned to be delivered in 2013. 

West Azeri: At the beginning of 2012, gas lift retrofit operations were performed on the well C07. This was followed by re-completion operations on the well C04, which were completed in February 2012, and re-completion operations on C16 well which were completed in April. Drilling activities on the producer well C26 were initiated but the well was subsequently plugged and suspended due to technical reasons. Intervention activities were performed on C03, C18, C24 and C08. 

Drilling has begun on C27 to intercept C26 targets. This well will be delivered in early 2013. 

East Azeri: At the beginning of 2012, re-completion activities were performed on the well D04. Following this, the producer well D16 was drilled and completed. This well was delivered during the third quarter. This was followed by intervention activities performed on D18 and D07. 

Drilling has begun on the producer well D21 with delivery planned for early 2013. 

Deepwater Gunashli (DWG): Drilling activities commenced on E16 producer well in December 2011. During E16y well operations, the well was temporarily suspended in order to perform intervention activities on E05 and E09. Currently E16 is suspended in order to perform five-yearly rig maintenance. Drilling on E16 will resume during the fourth quarter of 2012 and the well will be delivered in 2013. 
In addition, in the third quarter the Dada Gorgud rig commenced DWG subsea wells drilling activities with wells H05 and H06. These wells were drilled and suspended during the third quarter and the rig then moved to the Chirag Oil Project (COP) area to resume COP pre-drill programme. 

Chirag Oil Project (COP) pre-drilling: The Dada Gorgud completed pre-drill and suspension activities on the well J02z in January 2012. Following the planned blow out preventer (BOP) maintenance programme, the COP pre-drill resumed and another three pre-drill wells on COP - J05, J07, and J11 - were delivered. Pre-drill well J14 also commenced and was suspended at 13 3/8” casing shoe prior to performing DWG activities. Following DWG subsea wells drilling, J14 has resumed and will be suspended at 9 5/8” casing shoe. The fourth quarter plan is to continue with the COP pre-drill programme wells J10, J13 and J08

Chirag Oil Project (COP)

During the first nine months 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 81.6 % of work scope already completed with very high safety achievements. 

In particular, we have already announced that the construction of the jacket for the COP platform was fully complete. The heaviest jacket ever built in the Caspian was safely loaded out onto the transportation barge STB-1 at the quayside of the Heydar Aliyev Baku Deepwater Jackets Factory (BDJF) on October 20th. The jacket will remain there through the remaining months of this year to allow the Dada Gorgud to complete the pre-drill activities on the COP area. The sail away for offshore installation is planned for early 2013. 

The construction of the jacket commenced in 2010 and was completed on schedule. Over 2,000 people including sub contractors and specialist vendors were involved in the jacket construction works. Some 96% of the workforce was Azerbaijan nationals. The jacket was constructed by the local company BOS Shelf, now fully owned by SOCAR, who have used local construction infrastructure at BDJF facilities. 

Topsides fabrication at the ATA yard is about 90% 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 3,500 people in total at all construction sites and 90% of these are Azerbaijani nationals. 

During the first nine months of 2012, COP accomplished the following activities: 

At the ATA (AMEC-Tekfen-Azfen) yard: 
  • Completed weather deck skid-rails Q1
  • Completed derrick support module installation on weather deck Q1
  • Completed assembly of separator module Q1
  • First system mechanically complete Q1
  • Achieved 12 million man hours without DAFWC Q2
  • Completed derrick installation Q2
  • First main generator mechanically completed Q2
  • Completed lifting of all living quarter modules Q2
  • Completed commissioning of export compressors Q3
  • Completed commissioning of first main generator Q4
At Baku Deepwater Jackets Factory (BDJF) all planned activities have been completed, in particular: 
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
  • Pipeline prelay activities completed Q3
  • Reactivation of pipelay barge ‘Israfil Huseynov’ completed Q3
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
  • Completed load out of 14”and 16”spool pipe and bends Q2
  • Completed dredging of harbour channel approach Q2
  • Completed post dredging survey and verification Q2
  • Linepipe readiness for load out to pipelay barge ‘Israfil Huseynov’ Q2
  • Pipe load out Q2
  • Contingency pipe and bends preservation and storage completed Q3
  • Pipe load-outs commenced Q3
COP milestones for the remaining part of 2012 are: 

At ATA: 

  • Mechanical Completion of Topside and Drilling facilities Q4
  • Commissioning complete of Flash Gas compressors Q4
At BDJF, all planned activities completed, the jacket is on the barge waiting for sailaway early next year. 

Marine and subsea activities:
  • Reactivation of derrick barge ‘Azerbaijan’ Q4
  • Store COP jacket on STB-1 barge Q4
  • Install clamps for retrofit risers on PCWU jacket Q4
  • Commence COP pipelay Q4
AT CPC all planned activities have been completed.

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 nine months of 2012, the Sangachal terminal exported about 216 million barrels of oil (including about 189 million barrels through Baku-Tbilisi-Ceyhan (BTC), about 22 million barrels through the Western Route Export Pipeline (WREP), about 5 million barrels by rail). 

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 nine months of 2012, BTC spent about $38.7 million in capital expenditures. The 2012 plan for BTC capital expenditures is $73 million. 

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

Since June 4 2006 up to the end of the third quarter of 2012, 1,986 tankers were loaded at Ceyhan with a total of about 1,531 million barrels (205 million tonnes) of crude oil transported via BTC and sent to world markets. 

BTC celebrated 2,000th tanker loads at Ceyhan port on October 19. The tanker named Alexia took on board over 632,000 barrels of crude oil, from the Azeri-Chirag-Gunashli (ACG) field in the Azerbaijan sector of the Caspian Sea and transported via the Baku-Tbilisi-Ceyhan pipeline to the world markets. This time the tanker took the ACG oil to Augusta, in Italy. 

Since June 2006 when the first BTC tanker was lifted at Ceyhan, up to date (November 25) the BTC has safely and reliably carried a total of about 1,565 billion barrels or about 209.5 million tonnes of crude loaded on 2031 tankers. 

During the first three quarters of 2012 BTC exported about 189 million barrels (25.5 million tonnes) of crude oil loaded on 245 tankers at Ceyhan. 

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%).

During the first nine months of 2012, Shah Deniz spent $214.9 million in operating expenditure and $771.5 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 2012, the field has continued 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 nine months of 2012, the field produced about 5.2 billion cubic metres (about 182 billion cubic feet) of gas and 1.4 million tonnes (10.9 million barrels) of condensate or about 18.8 million cubic metres of gas per day (more than 663 million standard cubic feet per day) and about 39,600 barrels of condensate per day. 

Since the start of Shah Deniz production in late 2006 till the end of the third quarter of 2012, about 35.3 million standard cubic metres (about 1,247 billion standard cubic feet) of Shah Deniz gas, and over 75 million barrels (9.5 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 in December 2011 and were completed in February, 2012. This was followed by SDA06 well recompletion which was completed in the second quarter of this year. The five-yearly rig maintenance was completed in September and this was followed by preparing well SDA03Y for sidetrack. This well will be sidetracked and delivered in early 2013. 

Shah Deniz Full Field Development (Stage 2)

SDX07A was spudded in March 2011 and is currently suspended. It is expected to be completed in the first half of 2013. Wells SDD02 and SDC02 have already been drilled and suspended at 22’’ casing shoe. Two more wells will be drilled and suspended at 22” casing by the end of the year. 

Shah Deniz Full Field Development

Shah Deniz Stage 2 has made a very good progress since April 2012 when the project entered the front end engineering and design (FEED) stage. 

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. BP strongly supports the aims of the Azerbaijani and Turkish Governments in developing the TANAP project in conjunction with the development of Shah Deniz Stage 2. SOCAR has confirmed their invitation for BP to participate with a 12% interest in TANAP, and we expect to finalise terms for this by the end of this year. BP is working closely with all TANAP project participants invited by the Governments of Azerbaijan and Turkey to accelerate technical and commercial definition of this pipeline. We also continue the technical cooperation with BOTAS. We believe that it is important to understand the BOTAS system in order to potentially transport more gas from Shah Deniz Stage 1 and have a back up for TANAP. 

Trans-Adriatic-Pipeline (TAP) and the Nabucco West are the two options the consortium continues to evaluate as the final section of the southern corridor to take gas from the Turkish border to supply markets between Turkey and Austria or between Turkey and Greece and Italy. 

The Shah Deniz consortium continues working with the owners of TAP and Nabucco West to decide which of the two options will be the final selected option to carry Shah Deniz gas from the Turkish border into Europe. With TAP Shah Deniz has concluded a Co-operation Agreement and a Funding Agreement to provide the project with short term funding. The consortium is working with Nabucco West to develop the same level of co-operation and alignment, thereby providing a choice between two viable routes to link Azerbaijan’s giant reserves with the giant gas market in Europe. The consortium 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. 

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; 500km 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. 

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 three quarters of 2012, SCP spent about $7.7 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 nine months of 2012, SCP’s daily average throughput was 11.1 million cubic metres (about 393 million cubic feet) of gas or about 68,000 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 2,585 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 nine months of 2012, BP and co-venturers spent about $3.6 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.

Presentation slides