2013 first half results

13 August 2013

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%), ONGC Videsh Limited (OVL) (2.7%).

During the first half of 2013, ACG spent about $374 million in operating expenditure and $1,331 million in capital expenditure. For the full year, we expect to spend about $758 million in operating expenditure and $2,514 million in capital expenditure on ACG activities. 

Production

During the first half of 2013, ACG produced on average 672,000 barrels per day (b/d) (about 122 million barrels or 16.4 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 72 oil wells were producing, while 31 wells were used for injection in the ACG field, as follows:

Chirag produced on average 73,000 b/d and had 17 wells operating (12 oil producers and 5 water injectors). 

Central Azeri (CA) produced on average 152,000 b/d and had 21 wells operating (15 oil producers, 1 water injector and 5 gas injectors). 

West Azeri (WA) produced on average 194,000 b/d and had 23 wells operating (18 oil producers and 5 water injectors). 

East Azeri (EA) produced on average 118,000 b/d and had 18 wells operating (14 oil producers and 4 water injectors). 

Deepwater Gunashli (DWG) produced on average 135,000 b/d and had 24 wells operating (13 oil producers and 11 water injectors). 

Associated gas

During the first half, BP as operator of the ACG field continued to deliver associated gas from the DWG platform via the 28” gas subsea pipeline directly to the Sangachal terminal and from there into Azerigas’ national grid system for domestic use. 

Gas from the three Azeri platforms - CA, WA and EA – continued to be sent via in-field subsea gas pipelines to the compression and water injection platform (C&WP) on CA from where it was partly re-injected to maintain pressure in the reservoir and partly delivered to the Sangachal Terminal via the same 28” subsea pipeline for further hand over to the national grid system. Gas injection activities currently continue from five wells on CA. 

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. 

During the first half, we delivered around 6.7 million cubic metres (236 million standard cubic feet) per day of ACG associated gas to SOCAR (1.21 billion cubic metres or 42.7 billion cubic feet in total). This is almost equal to what we are planning to deliver for the full year - 1.24 billion cubic metres or about 44 billion standard cubic feet. 

Drilling and completion activity

During the first half of the year, ACG delivered five oil producer wells and two water injector wells. 
Chirag - The A16w producer well drilling was completed and handed over to production in April 2013. This was followed by intervention activities on A09 well and following that we started drilling operations on A14u sidetrack oil producer in May. This well is planned to be delivered in the third quarter of 2013. Another oil producer well - A06x is planned to be drilled in the fourth quarter. Rig maintenance and intervention campaigns on A03, A20 and A10 wells are also planned to be conducted by the end of October 2013.

Central Azeri - In January 2013 intervention activities were conducted on the B18y and B14 wells. On 21 January we started to drill B23z producer well and delivered it on April 24. This was followed by further intervention activities on B10 and B05 wells.

In early May we commenced drilling of the new gas injector well B26. Currently this well is in the completion phase and was delivered at the end of July. 

The remaining plan for 2013 is to conduct intervention campaigns in the third quarter followed by rig maintenance activities. This will be followed by the new oil producer well B27 which is expected to be delivered in the first quarter of 2014. 

West Azeri - The C27 oil producer well was delivered and handed over to production on the 31 March. This was followed by intervention operations on wells C06 and C03. 

In early May we commenced drilling the new oil producer well C30 and this well was delivered on 13th of July. 

The remaining plan for 2013 is to conduct an intervention campaign in the third quarter, which will be followed by rig maintenance, and to drill the new oil producer well C29 planned for the fourth quarter. 
East Azeri - In January, we completed intervention activity on D07 well. This was followed by drilling the oil producer well D22 which was completed and handed over to production on 16 April. 

Well intervention activity commenced on well D05 on 18 April to perform sand shut off operations. The intervention campaign continued through mid-May including well work on D03 and D08, and critical inspection operations. In May we started the new water injector well D23 which we are planning to deliver in the third quarter. 

The remaining plan for 2013 is to conduct repair operations on some surface equipment and intervention activities on wells D01, D03 and D02. In addition, de-completion operations are planned to start on well D11 during December. 

Deepwater Gunashli (DWG) - Intervention activities on well E01 were completed in early January. Following this, we started drilling the new oil producer well E17 and it was delivered on 17 May followed by a five-yearly rig maintenance programme.

Intervention activity on E11 was conducted through June and July followed by the drilling of the producer well E18. This well is planned to be delivered by the end of this year. In addition, by end of the year we will conduct surface equipment repair and E02y re-completion for gas lift installation.

During the first half the Dada Gorgud drilling rig delivered two subsea water injector wells - H06 and H05, followed by rig maintenance activities and installation of manifold piles. In addition, in early May we started the H07 pilot data acquisition well which will be suspended in August. This will be followed by drilling the GCA07 well till the end of the fourth quarter. 

Export operations

Oil and gas from ACG and Shah Deniz continued to flow via subsea pipelines to the Sangachal terminal. 
The daily capacity of the terminal’s processing systems is currently 1.2 million barrels of oil and 966 million standard cubic feet or 27.4 million standard cubic metres of Shah Deniz gas, while overall processing and export capacity for gas, including ACG associated gas is about 41.5 million standard cubic metres 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 the year, the Sangachal terminal exported about 144 million barrels of oil. This included about 126 million barrels through Baku-Tbilisi-Ceyhan (BTC), over 14 million barrels through the Western Route Export Pipeline (WREP), about 3 million barrels by rail and about 0.95 million barrels via a condensate export line.

On average about 27 million standard cubic metres (over 950 million standard cubic feet) of Shah Deniz gas was exported from the terminal daily in the first half of 2013.

Chirag Oil Project (COP)

During the first half, COP activities continued safely, on schedule and according to plan. Overall, very good progress is achieved with the project nearing completion. 

In April the completed jacket for the West Chirag platform sailed away from the Heydar Aliyev Baku Deepwater Jackets Factory (BDJF) and was safely installed on the pre-installed template in its permanent location. The jacket transportation, launch and installation activities were carefully planned and took 45 days to complete. 
The West Chirag jacket is the heaviest jacket ever built in the Caspian and it was fully constructed in the country using local construction infrastructure at BDJF facilities. Over 2000 people including sub-contractors and specialist vendors were involved in the construction works. Some 96 per cent of the workforce was Azerbaijan nationals. The jacket was built by the local company BOS Shelf, now fully owned by SOCAR. 

The jacket has a total weight of 18,200 tonnes (which includes 1500 tonnes of floatation tanks) and is about 185 metres high. It is comprised of 13 piles (12 plus one spare) with a total weight of 6700 tonnes, seven risers, eight j-tubes and ten caissons. It was installed at a water depth of about 170 metres. 

The topsides fabrication at the ATA yard is also fully complete undergoing final onshore commissioning. The entire construction work was performed with full commitment to the highest safety standards without a single day off from work case throughout around 20 million man-hours achieved. 

H.E. President Ilham Aliyev visited the ATA (AMEC-TEKFEN-AZFEN) fabrication yard on 23 July where the topsides for the West Chirag platform have been built. The President was pleased to see the completed topsides and offered his congratulations to all those who were involved in the achievement of this major Azeri-Chirag-Gunashli (ACG) milestone.

The topsides are planned to sail away for offshore installation in August once all commissioning activities are accomplished. 
The 18,500 tonne-topside unit is the heaviest structure ever installed in the Caspian and it was fully constructed in the country using local infrastructure at the ATA fabrication yard which had been upgraded for this scale of activities. Maximization of local content has remained a major priority throughout the 3-year construction activities - about 4000 people including sub-contractors and specialist vendors were involved in the construction works with up to 90% of the workforce being Azerbaijani nationals. 

For the first time in the history of Azerbaijan’s world-class construction sites, the West Chirag platform fabrication work was fully undertaken in the country using local resources. 

The design oil capacity of the new installation is 183 thousand barrels per day. The design gas export rate is 229 million standard cubic feet per day but is capable of exporting as much as 285 million standard cubic feet per day. There is capacity for providing up to 80 million standard cubic feet per day of gas lift. 

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 ONGC (BTC) Limited (2.36%).

Note: On 28 March 2013 ONGC Videsh Limited (OVL) completed the acquisition of the respective interest of Hess (BTC) Limited, and Hess (BTC) Limited has since been renamed to ONGC (BTC) Limited.

During the first half of 2013, BTC spent over $26 million in capital expenditures. For the full year BTC capital expenditures are expected to be $97 million.

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

Since 4 June 2006 up to the end of the first half of 2013, 2,227 tankers were loaded at Ceyhan with a total of about 1,715 million barrels (229 million tonnes) of crude oil transported via BTC and sent to world markets. 

During the first half BTC exported about 127 million barrels (about 17 million tonnes) of crude oil loaded on 166 tankers at Ceyhan. 

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%), ICO (10%), Total (10%), and TPAO (9%).

During the first half of 2013, Shah Deniz spent $94 million in operating expenditure and $855 million in capital expenditure. For the full year, we are planning to spend over $225 million in operating expenditure and about $2,314 million in capital expenditure on Shah Deniz activities. 

Production

During the first half of the year, the field 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. 

In the first half, the field produced about 4.8 billion cubic metres (about 169 billion cubic feet) of gas and 1.26 million tonnes (about 10 million barrels) of condensate or about 27 million cubic metres of gas per day (955 million standard cubic feet per day) and 54,800 b/d of condensate.

Since the start of Shah Deniz production in late 2006 till the end of the first half of 2013, about 42.7 billion standard cubic metres (1,500 billion standard cubic feet) of Shah Deniz gas, and about 90 million barrels (11.3 million tonnes) of Shah Deniz condensate was exported to the markets.

Shah Deniz Stage 1 production is currently at plateau with production facilities running at maximum capacity of 966 million standard cubic feet per day and approximately 55,000 b/d of condensate when markets are available. 

Drilling

Shah Deniz -Stage 1 During the first half of the year Shah Deniz continued drilling activities on SDA-03Y sidetrack well which were started in September last year. This well is planned to be delivered at the end of the fourth quarter of 2013 followed by drilling rig inspection and surveillance on SDA-05X well. 
Shah Deniz - Stage 2

In 2013, the Istiglal rig commenced drilling activities on the SDC02 lower section with an expected delivery date in the third quarter of 2013. Upon completion of the well the rig will start drilling activities on well SDC03 and this well is planned to be delivered during the second quarter of 2014. 

The Heydar Aliyev rig continues drilling activities on SDX07Ay which started at the end of 2012. Delivery of the well is expected in the third quarter of 2013. 

The remaining plan for the Heydar Aliyev rig in 2013 is to complete rig modifications and five-yearly rig certification. Following this, drilling activities will start on SDD02 with an expected delivery date in the second quarter of 2014.

Shah Deniz Full Field Development 

Shah Deniz (SD) Stage 2 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 two 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), which will be expanded with a new 56’’ diameter pipeline in Azerbaijan and two compression stations in Georgia; and expansion of the Sangachal terminal. 
In Turkey, Shah Deniz gas will be transported through a new Trans Anatolian Pipeline (TANAP) which is set to become a key part of the Southern Gas Corridor linking the extensive gas resources of the Caspian Sea to Turkish and EU markets. 

The Shah Deniz consortium announced on 28 June that it had selected the Trans Adriatic Pipeline (TAP) to deliver up to 10 billion cubic metres a year of Shah Deniz Stage 2 gas to customers in Greece, Italy and Southeast Europe. This is an important milestone in the Shah Deniz consortium’s multi-phased approach to the opening of the Southern Corridor. 

Terms for such gas sales have already been agreed with a number of buyers in Italy, Greece and Bulgaria and these arrangements will be finalized during September.

Based on the overall progress to date, the project is planning to spend circa $1.9 billion in 2013. A final investment decision for the project is expected in the fourth quarter of 2013 and Shah Deniz Stage 2 first production is planned for 2018. 

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 half of 2013, SCP spent about $5 million in capital expenditures. For the full year it is planned to spend over $13 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 2013, SCP’s daily average throughput was about 12 million cubic metres (about 421 million cubic feet) of gas or about 73,000 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

Since early 2012 when the Gilavar seismic vessel completed the planned 3D seismic acquisition on the Shafag-Asiman structure, the first 3D seismic ever conducted on the contract area, we have been processing the acquired data. This processing is believed to be the largest 3D survey ever processed in-country. Following completion of this phase of the 3D seismic acquisition programme, some 18 months will be required for data interpretation and another year for planning of the first exploration well. 

The Shafag-Asiman 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 was signed in Baku in October 2010.

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 2,655 Azerbaijani nationals. In total, 84% of BP’s permanent professionals in Azerbaijan are nationals and many of them are in very senior leadership positions. 

Since the beginning of 2013 BP has recruited 50 Azerbaijani nationals. 

In addition, during the first half of the year, BP launched its internal Engineering Excellence programme which supports development of engineers by guiding their professional experience in the early years of their career with BP. Such programmes have already existed for wells, subsurface and HSE (Health, Safety and Environment) professionals for some time and have been successful. During the first half BP also presented its annual engineering awards recognizing achievements of a group of national engineers. The number of awarded nationals has considerably grown compared to previous years

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 2013, BP and co-venturers spent about $1.44 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. 

Some examples of such initiatives are:
  • BP and co-venturers’ ongoing Azerbaijan Oil and Gas Scholarship Programme which aims to support the education of Azerbaijani students pursuing Bachelor’s and Master’s degrees in engineering and mathematics at the Middle East Technical University in Turkey and Istanbul Technical University, as well as Khazar and Qafqaz Universities in Azerbaijan.
  • BP and co-ventures’ two-year Youth Business Leadership Project in partnership with the United States Agency for International Development (USAID) and the American Chamber of Commerce (AmCham). The project is designed to empower young students to become entrepreneurs and future business leaders. This is being achieved by providing them with opportunities to gain real world employment experience through internships at various private companies where they are able to develop their business management knowledge beyond the classroom.
  • BP and co-venturers’ project aimed at improving community-based pre-school education, primary education and women’s entrepreneurship. The project is designed to provide access to improved school preparation programmes, quality services by rural public kindergartens, improved implementation of new national primary education curriculum and support for development of women’s entrepreneurship.
  • BP and co-venturers` environmental project designed in the framework of the Caspian Environmental Programme (CEP) to establish an online environmental database - a web based Caspian Environmental Information Centre (CEIC). The site is currently available at www.kaspinfo.net and is used as a centralized hub for information on the Caspian environment and 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 the BTC/SCP pipelines in Azerbaijan. The project aims at enhancing effective governance capacity of municipalities in addressing local sustainable development challenges. The project also focuses on the role of young people in addressing local development and environmental challenges in communities.
  • BP and co-venturers’ project aimed at improving community-based pre-school education, primary education and women’s entrepreneurship. The project is designed to provide access to improved school preparation programmes, quality services by rural public kindergartens, improved implementation of new national primary education curriculum and support for development of women’s entrepreneurship.
  • BP and co-venturers` environmental project designed in the framework of the Caspian Environmental Programme (CEP) to establish an online environmental database - a web based Caspian Environmental Information Centre (CEIC). The site is currently available at www.kaspinfo.net and is used as a centralized hub for information on the Caspian environment and 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 the BTC/SCP pipelines in Azerbaijan. The project aims at enhancing effective governance capacity of municipalities in addressing local sustainable development challenges. The project also focuses on the role of young people in addressing local development and environmental challenges in communities.
  • 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. To date SPM has had two highly successful graduations with a total number of 205 representatives of some 96 private and public sector organizations trained using globally-recognized project management training curriculum. Of these 103 were qualified for Masters and 102 for Associates Certificates from the George Washington University.
  • 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’ 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, mechanical and industrial 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 73 students. In 2011, the mechanical engineering department was opened at the university with 59 students already admitted. The plans are to open fully equipped mechanical engineering laboratories for this department during the third quarter of 2013.
  • BP’s ‘Business Journalism’ training programme to help develop national business journalism capacity and link 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 bursary awards programme was launched in 2007 as part of the company’s educational support commitment. The programme is aimed at promoting the best students specializing in petro-technical disciplines. The annual awards were initially designed for the best students of the Azerbaijan State Oil Academy and for five years BP presented these awards to the first and second year students of the Academy. In November 2012 BP decided to extend the scope of this annual programme and presented bursary awards to top students specializing in petro-technical disciplines at five local universities - the Azerbaijan State Oil Academy, Qafqaz University, the Azerbaijan Architecture and Construction University, Baku State University and Khazar University. In 2012 BP’s bursary awards were presented to 61 first year and 30 second year students. Overall to date BP has presented its bursary awards to 348 top students, of whom 19 have then been successful in pursuing their careers within BP and are currently BP’s employees, seven are BP and its co-venturers’ Graduate Scholarship recipients.
  • 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) 12 437 7442