2013 first quarter results

7 May 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 quarter of 2013, ACG spent about $198 million in operating expenditure and $648 million in capital expenditure. For the full year, we expect to spend about $861 million in operating expenditure and $2,514 million in capital expenditure on ACG activities. 

Production 

During the first quarter of 2013, ACG produced on average 662,000 barrels per day (b/d) (59.6 million barrels or 8.06 million tonnes in total) from the Chirag, Central Azeri, West Azeri, East Azeri and Deepwater Gunashli platforms. 

At the end of the quarter, a total of 64 oil wells were producing, while 30 wells were used for injection in the ACG field, as follows: 

Chirag had 14 wells (10 oil producers and 4 water injectors), producing on average 70,000 b/d. 

Central Azeri (CA) had 21 wells (15 oil producers, 1 water injector and 5 gas injectors), producing on average 148,000 b/d. 

West Azeri (WA) had 21 wells (16 oil producers and 5 water injectors), producing on average 195,000 b/d. 

East Azeri (EA) had 16 wells (12 oil producers and 4 water injectors), producing on average 119,000 b/d. 

Deepwater Gunashli (DWG) had 22 wells (11 oil producers and 11 water injectors), producing on average 130,000 b/d. 


Associated gas

During the first quarter, 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 quarter, we delivered around 5.4 million cubic metres (189 million standard cubic feet) per day of ACG associated gas to SOCAR (0.5 billion cubic metres or over 17 billion cubic feet in total). For the full year we expect to deliver 1.2 billion cubic metres or about 44 billion standard cubic feet of ACG associated gas to SOCAR. 

Drilling and completion activity

In the first quarter of 2013, ACG delivered one oil producer well and one water injector well. In addition, completion operations are ongoing on the Dada Gorgud, EA, CA and Chirag. 

Chirag - The A16w producer well drilling was completed and handed over to production in early April. This was followed by intervention activities on A09 well. The remaining plan for 2013 is to deliver two further oil producer wells - A14u in the third quarter and A06x in the fourth quarter. Intervention campaigns are also planned for the second and fourth quarters. 


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, successfully drilled it to total depth and delivered on April 28. This will be followed by intervention activities on B10 and B05 wells. 

The remaining plan for 2013 is to complete the intervention activities and deliver one gas injector well B26 in the third quarter. Intervention campaigns are also planned for the fourth quarter and operations will continue with drilling of another 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. The remaining plan for 2013 is to complete an intervention campaign in the second quarter, and deliver the oil producer well C30. 

East Azeri - In January, we completed intervention activity on D07 well. This was followed by drilling of D22 oil producer well which was completed and handed over to operation on 17 April. Well intervention activity commenced on well D05 on 18 April to perform sand shut off operations. The intervention campaign will last through the end of July, including well work on D03 and D08, and critical inspection operations. 

The remaining plan for 2013 is to deliver one water injector well D23, in the fourth quarter. 


Deepwater Gunashli (DWG) - Intervention activities on well E01 were completed in early January. Following this, we started drilling the E17 oil producer well. The plan is to deliver this well in early May followed by the five-yearly rig maintenance. Intervention activities are then scheduled and these are expected to be completed by mid-third quarter after which the drilling of the producer well E18 will commence with delivery planned for this year. 

During the first quarter the Dada Gorgud rig completed and handed over to production the H06 subsea water injector well. Following this in March, we re-entered the H05 water injector well and drilled to the reservoir section and started completion operations. H05 was delivered on April 27th. Next, we are also planning to drill the water injector well H07 and to perform coring on the well GCA07 during the time between drilling H07 pilot hole and H07z in the third quarter. 

Drilling activities on the subsea water injector well H08 are expected to commence in the fourth quarter. This well is planned to be delivered in the first quarter of 2014. 

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 quarter, the Sangachal terminal exported about 71 million barrels of oil. This included about 61 million barrels through Baku-Tbilisi-Ceyhan (BTC), over 8 million barrels through the Western Route Export Pipeline (WREP), about 1.4 million barrels by rail and about 0.5 million barrels via a condensate export line. 

On average about 27 million standard cubic metres (over 951 million standard cubic feet) of Shah Deniz gas was exported from the terminal daily in the first quarter of 2013. 

Chirag Oil Project (COP)
 
During the first quarter, COP construction activities continued safely, on schedule and according to plan. Overall, the project has made very good progress at all fabrication sites with 88 per cent of work scope already completed with very high safety achievements. 

In particular, the jacket for the West Chirag platform sailed away on 14 April 2013 from the Heydar Aliyev Baku Deepwater Jackets Factory (BDJF) for offshore installation, the launch and docking occurred on 20 April 2013. The jacket had been fully complete and loaded out onto the transportation barge STB-1 at the quayside of BDJF since 20 October, 2012 waiting for the completion of the planned offshore activities including pre-drilling and subsea pipe-lay installation activities on the West Chirag area. The jacket transportation, launch and installation activities have been carefully planned and are expected to take some 45 days to complete, including allowance for the weather conditions. 

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 will be installed at a water depth of about 170 metres. 

Topsides fabrication at the ATA yard is about 97 per cent complete with sail-away planned for the third quarter of 2013. 

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

Through construction contractors COP employed at peak more than 8000 people in total at all construction sites and 90 per cent of these were Azerbaijani nationals. 

The project accomplished all of the planned activities for the first quarter of 2013. 

In particular, at the ATA (AMEC-Tekfen-Azfen) yard the following activities were completed during the first quarter: 
  • Completed commissioning of the first Main Oil Line pump Q1
  • Completed commissioning of Main Power generators A & C Q1
At Baku Deepwater Jackets Factory (BDJF) all planned activities were completed in 2012 and the jacket sailed away for offshore installation on 14 April, 2013. 

The following marine and subsea activities were performed for COP in the first quarter of 2013: 
  • Continued pipeline installation Q1
At CPC all planned activities were completed in a safely and timely manner in 2012. 
The remaining COP plans for 2013 are as follows: 

Activities to be accomplished at ATA 
  • Complete commissioning of the export compressors Q2
  • Complete commissioning of the drilling facilities Q2
  • COP topsides ready for sail-away Q3
Marine and subsea activities: 
  • Complete riser tie-ins to DWG Q2
  • Complete pipeline tie-ins Q3
  • Complete pipe-lay Q3
  • Complete installation of the retrofit risers on PCWU Q3
  • Complete the topsides float-over Q3

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 quarter of 2013, BTC spent over $13 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 quarter of 2013, 2,140 tankers were loaded at Ceyhan with a total of about 1,648 million barrels (220 million tonnes) of crude oil transported via BTC and sent to world markets. 

During the first quarter of 2013, BTC exported 59.6 million barrels (7.9 million tonnes) of crude oil loaded on 79 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 quarter of 2013, Shah Deniz spent $42 million in operating expenditure and $395 million in capital expenditure. For the full year, we are planning to spend over $222 million in operating expenditure and about $2,270 million in capital expenditure on Shah Deniz activities. 

Production

During the first quarter of 2013, 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 quarter, the field produced about 2.42 billion cubic metres (about 85.6 billion cubic feet) of gas and 0.63 million tonnes (about 5 million barrels) of condensate or about 27 million cubic metres of gas per day (951 million standard cubic feet per day) and over 55,300 b/d of condensate. 

Since the start of Shah Deniz production in late 2006 till the end of the first quarter of 2013, about 40 billion standard cubic metres (1,414 billion standard cubic feet) of Shah Deniz gas, and about 85 million barrels (10.7 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 quarter of 2013 Shah Deniz continued drilling activities on SDA03Y which were started in September last year. This well is planned to be delivered in the third quarter of 2013. The remaining plan for 2013 is to perform intervention activities on SDA02 with an expected delivery date in the first quarter of 2014. 


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. The plan is to suspend the well at the end of the year to perform rig certification. Drilling will be resumed in the first quarter of 2014 and delivered in the second quarter of the same year. 

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, 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 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. Further pipelines will be built and expanded to transport Shah Deniz gas through Turkey and Europe. 

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. 

Trans-Adriatic-Pipeline (TAP) and Nabucco West are the two options the Shah Deniz consortium continues to evaluate as the final section of the southern corridor to take gas from the western Turkish border to the liquid and growing markets of Europe. On 1 April 2013 the Shah Deniz consortium announced that it had begun evaluating final offers received from the Nabucco Gas Pipeline International and Trans Adriatic Pipeline (TAP). These submissions allow the consortium to conduct the final evaluation of each of the transportation options and make an informed decision on the preferred export route to Europe. The final decision on the European pipeline is expected to be made by the end of June 2013 in advance of the Shah Deniz Final Investment Decision that is expected later this year. 


Some of the Shah Deniz partners, including BP, plan to be participants in each section of the pipeline system to transport gas to Europe. This includes the South Caucasus Pipeline, TANAP and the pipeline option that will be finally chosen to carry gas to Europe – either TAP or Nabucco West. BP has reached an agreement in principle to take 12% equity in TANAP and is working closely with other project participants on the development of the pipeline. Equity option and funding agreements have already been concluded with both TAP and Nabucco West that provide the projects with short term funding and ensure rights to exercise an equity option in whichever of the two projects is finally selected by the Shah Deniz consortium as the European off-take route. 

Shah Deniz Stage 2 has made good progress since April 2012 when the project entered the front end engineering and design (FEED) stage. On 18 December, 2012 a series of agreements was signed between the Shah Deniz consortium and SOCAR providing confidence for a Final Investment Decision planned for 2013. As a result of the progress to date, the project is now planning to spend circa $2 billion in 2013 to ensure Shah Deniz Stage 2 is ready for production in 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 quarter of 2013, SCP spent about $2 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 quarter, SCP’s daily average throughput was over 11 million cubic metres (about 390 million cubic feet) of gas or over 67,000 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 2,659 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 quarter, 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 quarter 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 quarter of 2013, BP and co-venturers spent about $0.62 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 will be achieved by providing them with opportunities to gain real world employment experience through internships at various private companies where they will be 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 used as a centralized hub for information on the Caspian environment. CEIC is also 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 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 to create a new small and medium-size enterprise (SME) portal in Azerbaijan in collaboration with the International Finance Corporation (IFC). The 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.
  • “Meet the Buyer” exhibition hosted by BP on behalf of its co-venturers. The event is 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-size enterprises (SME’s) that had completed BP and co-venturers’ Enterprise Development and Training Programme exhibited their products and services to more than 150 local and international buyers during the first event which was held in June 2011. The second event is planned to be held during the 20th Caspian International Oil Exhibition in Baku in June this year.
  • 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 has just completed a highly successful first year of operation. In its first year, SPM successfully trained 183 representatives of some 81 private and public sector organizations, using globally-recognized project management training curriculum. Of these 51 were qualified for Masters and 126 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 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, 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 eight have then been successful in pursuing their careers within BP and are currently BP’s employees, three 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