2014 third quarter results

20 November 2014

Azeri-Chirag-Deepwater Gunashli (ACG)

ACG participating interests are: BP (operator – 35.8 per cent), SOCAR (11.6 per cent), Chevron (11.3 per cent), INPEX (11 per cent), Statoil (8.6 per cent), ExxonMobil (8 per cent), TPAO (6.8 per cent), ITOCHU (4.3 per cent), ONGC Videsh Limited (OVL) (2.7 per cent).

During the first three quarters of 2014, we spent approximately $720 million in operating expenditure and $1,741 million in capital expenditure on ACG activities. For the full year, it is planned to spend approximately $1,052 million in operating expenditure and $2,068 million in capital expenditure.

Production

In  2014, ACG marked a major milestone by starting production from the Chirag Oil Project (COP). First Oil from the West Chirag platform was achieved on 28 January from one of the pre-drilled wells.  Since that time West Chirag production has been increasing to its current level of about 90,000 barrels per day from five wells.  Production will continue to increase as the other pre-drilled wells are brought on-line.

In 2014, ACG has continued to deliver stable production. Total ACG production during the nine months of 2014 was on average 655,700 barrels per day (b/d) (179 million barrels or approximately 24.2 million tonnes in total) from the Chirag, Central Azeri, West Azeri, East Azeri, Deepwater Gunashli and West Chirag platforms. 

At the end of the third quarter of 2014, a total of 77 oil wells were producing, while 36 wells were used for injection in the ACG field, as follows:

Chirag produced on average 63,600b/d and had 16 wells operating (11 oil producers and 5 water injectors). 

Central Azeri (CA) produced on average 169,600 b/d and had 24 wells operating (17 oil producers, 1 water injector and 6 gas injectors). 

West Azeri (WA) produced on average 159,600 b/d and had 25 wells operating (19 oil producers and 6 water injectors). 

East Azeri (EA) produced on average 77,300 b/d and had 15 wells operating (11 oil producers and 4 water injectors). 

Deepwater Gunashli (DWG) produced on average 147,200 b/d and had 28 wells operating (14 oil producers and 14 water injectors). 

West Chirag produced on average 38,400 b/d from five wells. 

As part of the ACG annual work programme, a planned maintenance programme (turnaround - TAR) is currently being implemented on the Central Azeri platform. 
These activities are an important part of maintaining the high plant efficiencies that have been achieved on ACG.

The maintenance programme started on 31 October by gradually reducing production from the Central Azeri platform to full suspension on 6 November. The platform is expected to re-start on 27 November.  

This is a routine planned maintenance programme and is part of normal operations. The planning for the programme started in early 2013 and these activities are included in the annual work programme and budget.  

The programme work-scope includes internal vessel inspections and upgrades, replacement of flare-tips and general mechanical, instrument, control system and electrical activities that cannot be performed while the facility is online.

Production from the Chirag, Deepwater Gunashli, West Chirag and Shah Deniz, as well as export operations via BTC, SCP and WREP continue as normal. The Sangachal Terminal continues to operate enabling loadings at Ceyhan to continue in accordance with the lifting schedule. 

Associated gas

During the first three quarters of 2014, 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 on CA.  From CA 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 six wells on CA.

Most of the associated gas from West Chirag has been exported to the Sangachal terminal.  The commissioning of the gas conditioning and compression systems on West Chirag has been completed and the systems have been fully handed over to operations allowing full export of West Chirag gas to the terminal.

Most of the associated gas produced from the Chirag platform continued to be sent to the SOCAR compression station at the Oil Rocks via the existing 16” subsea gas pipeline. BP has completed its planned work on the flash gas compressors and pipelines which has allowed us to significantly reduce flaring on Chirag. 

During the first three quarters of 2014, we delivered 7.3 million cubic metres (257.8 million standard cubic feet) per day of ACG associated gas to SOCAR (2 billion cubic metres or about 70.4 billion cubic feet in total). 

Drilling and completion activity

In 2014 (by the end of the third quarter), ACG delivered 10 oil producer wells and 3 water injection wells. 

Chirag - In March 2014 the producer well A06X was handed over to production. We then had a surveillance and intervention programme in April 2014 and later a one-month maintenance programme. Following this, we drilled well A05y which was completed in late October. This will be followed by a two-month platform maintenance programme.

Central Azeri - The oil producer well B28 was completed and handed over to production in May 2014. This was followed by intervention activities on B22 and B13 and a four-conductor driving campaign. We then conducted intervention activities on B06 and B05, a rig maintenance programme and initial drilling activities on B29. The drilling of the reservoir section and completion activities on B29 will be conducted in 2015. 

West Azeri - The oil producer C28 was completed and handed over to production in March 2014.  This was followed by a series of intervention and well-work activities. We are currently conducting well C06 gas-lift retrofit well-work after which the rig will move to well C31. 

East Azeri - In January 2014, we completed intervention activities on D03 which was followed by further intervention and cleaning activities.  Drilling then started on oil producer D25 which was completed in late October 2014.  This will be followed by a series of well-work activities. 

Deepwater Gunashli (DWG) - Intervention activities to install gas-lift on E02Y was completed in January followed by surveillance work on E12.  We then side-tracked and completed E09y and conducted rig maintenance and additional intervention operations.  Following this, we drilled the water injector E19 and completed it in August. After conducting E14 well surveillance work we started to drill oil producer E20 which is expected to be completed in January 2015.

Dada Gorgud - In 2014, the rig delivered two subsea water injector wells - H07z and H08.  Currently, the rig is drilling the water injector F05.  

West Chirag – In 2014, six producer wells - J05, J11, J07, J14, J03 and J02z were completed and handed over to production.   Drilling activities are ongoing on the cuttings re-injector J10.

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 approximately 970 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 nine months of 2014, the Sangachal terminal exported about 227 million barrels of oil. This included about 198 million barrels through Baku-Tbilisi-Ceyhan (BTC), about 24 million barrels through the Western Route Export Pipeline (WREP), 4 million barrels by rail and about 1.4 million barrels via a condensate export line.

On average, 26.351 million standard cubic metres (930.6 million standard cubic feet) of Shah Deniz gas was exported from the terminal daily during the nine months of 2014. 

Baku-Tbilisi-Ceyhan (BTC)

The BTC Co. shareholders are: BP (30.1 per cent); AzBTC (25.00 per cent); Chevron (8.90 per cent); Statoil (8.71 per cent); TPAO (6.53 per cent); ENI (5.00 per cent); Total (5.00 per cent), ITOCHU (3.40 per cent); INPEX (2.50 per cent), ConocoPhillips (2.50 per cent) and ONGC (BTC) Limited (2.36 per cent).

During the first three quarters of 2014, BTC spent $152.4 million in operating expenditure and $84.3 million in capital expenditure.  For the full year, BTC operating expenditure is expected to be approximately $230 million and capital expenditure about $119 million.

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

The 1,768km BTC pipeline became operational in June 2006. Since that time BTC has carried a total of about 2.03 billion barrels (272 million tonnes) of crude oil loaded on 2665 tankers and sent to world markets.  

In  August, BTC celebrated the loading  of the 2 billionth barrel of oil at the Ceyhan terminal in Turkey. 

During the first nine months of 2014, BTC exported 199 million barrels (26.4 million tonnes) of crude oil loaded on 276 tankers at Ceyhan.

The BTC pipeline currently carries mainly ACG oil and Shah Deniz condensate from Azerbaijan. In addition, crude oil from Turkmenistan continues to be transported via BTC. Starting October 2013, we have resumed transportation of some volumes of Tengiz crude oil through the BTC pipeline. In addition, in February 2014, the direction of flow through the SOCAR-operated Northern Route Export Pipeline (NREP) was successfully reversed.  This was a result of a collaborative effort by BP and SOCAR to activate some facilities along NREP. Commercial agreements were finalised which allowed NREP volumes to be exported via BTC.

Shah Deniz

Shah Deniz participating interests are: BP, operator (28.8 per cent), AzSD (10.0 per cent), SGC Upstream (6.7 per cent), Statoil (15.5 per cent), Lukoil (10 per cent), NICO (10 per cent) and TPAO (19 per cent). These percentages include the recent purchases of equity from Statoil by BP and the Azerbaijan Government (SGCU) and sale of Total equity to TPAO

During the first nine months of 2014, Shah Deniz spent approximately $371 million in operating expenditure and over $2,797 million in capital expenditure. For the full year, it is planned to spend around $435 million in operating expenditure and $3,885 million in capital expenditure. The great majority of this capital expenditure is on the Shah Deniz Stage 2 project, which includes both offshore developments and expansion of the Sangachal terminal.

Production

During the first nine months of 2014, the Shah Deniz field continued to provide reliable deliveries of gas to markets in Azerbaijan (to SOCAR), Georgia (to GOGC), BTC Company and Turkey (to BOTAS)  

During this period, the field produced 7.25 billion standard cubic metres (over 256 billion cubic feet) of gas and 1.72 million tonnes (13.8 million barrels) of condensate or 26.6 million cubic metres of gas per day (over 938 million standard cubic feet per day) and 50,450 barrels per day of condensate.

Since the start of Shah Deniz production in late 2006 until the end of the third quarter of 2014, 55.2 bcm (about 1,950 billion standard cubic feet) of Shah Deniz gas, and about 113.3 million barrels (14.2 million tonnes) of Shah Deniz condensate has been produced.

As a result of debottlenecking of existing facilities in 2013, Shah Deniz capacity was increased to 966 million standard cubic feet per day and approximately 55,000 barrels per day of condensate. The Shah Deniz partners have also agreed terms with SOCAR for further expansion of production capacity to around 1,040 million standard cubic feet per day by the end of 2014.

Drilling

During 2014, Shah Deniz completed intervention operations on SDA02. After completing SDA06 and SDA04 well-work, the top hole sections on SDA07 and SDA08 were drilled.  Drilling of the lower section on SDA07 is currently in progress.

Shah Deniz Stage 2

Istiglal – During the second quarter, the Istiglal rig completed drilling operations on SDC03 and started SDC04. This well is expected to be completed by January 2015.

Heydar Aliyev – During the third quarter, the drilling of lower section of SDD02 was finished, top holes of SDD03 and SDD04 wells were drilled.  Currently the rig is drilling the lower section of SDD03. 

Shah Deniz Stage 2 (SD2) project

Since the final investment decision, the SD2 project has progressed to schedule. 

On 20 September, the Sangachal Terminal near Baku hosted the   groundbreaking for the Southern Gas Corridor. This marked a major milestone in the realisation of the project which will provide for export of 16 billion cubic metres per year (bcma) of gas from the giant Shah Deniz field through some 3,500 kilometres of pipelines to Georgia, Turkey, Greece, Bulgaria, Albania and Italy. 

First gas is targeted for 2018, with sales to Georgia and Turkey; first deliveries to Europe will follow approximately a year later.

Most of the major engineering, construction and supply contracts, valued at some $9.6 billion, have been awarded and early works have already started in most construction areas across Azerbaijan and Georgia. 

These construction and supply contracts include:
  • construction and commissioning support of the SD2 onshore terminal facility at Sangachal near Baku
  • fabrication, load out and offshore hook-up and commissioning of the topsides units of the two SD2 platforms
  • fabrication of the jackets for the two planned offshore platforms, pin piles and subsea structures
  • all offshore transport and installation work
  • provision of detailed engineering, project management and procurement support services for the offshore and onshore facilities
  • supply of the subsea production systems
  • design and construction of a Subsea Construction Vessel to be used for installation of the subsea structures
  • subsea and pipeline engineering and project management services
  • engineering, procurement and construction of the offshore platform living quarters
  • subsea flow-line coating and early subsea export line coating
Work has commenced at the fabrication yards for jackets and decks, as well as at the onshore terminal construction sites. In addition, first consignments of steel for fabrication of the platform jackets and topside units have already arrived in the country. These activities complement overall progress across the Southern Corridor projects. 

Work at all construction yards is underpinned by a continued commitment to safe site activities. Baku Deepwater Jackets Factory (BDJF) has already achieved one million man hours and the ATA yard (AMEC-Azfen-Tekfen) two million man hours without an injury. 

The ATA yard upgrades are nearing completion, and fabrication of decks, jackets and subsea equipment is all ahead of schedule. 

As noted above, drilling activities continue successfully using the Istiglal and Heydar Aliyev rigs with six production wells already completed in preparation for first gas. These two rigs will continue working on the Shah Deniz field to deliver all the wells required to deliver production up to the planned plateau level of 16 bcma.

The South Caucasus Pipeline (SCP)

The SCP Co. shareholders are: BP, operator (28.8 per cent), AzSCP (10.0 per cent), SGC Midstream (6.7 per cent), Statoil (15.5 per cent), Lukoil (10 per cent), NICO (10 per cent) and TPAO (19 per cent). These percentages include the recent purchases of equity from Statoil by BP and the Azerbaijan Government (SGCM) and sale of Total equity to TPAO.

During the first nine months of 2014, SCP spent $36.5 million in operating expenditure and $599 million in capital expenditure. For the full year, operating expenditure is expected to be $47.2 million. As a result of the ramp-up in the SCP expansion work, capital expenditure will increase to $1,244 million.

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

During the first nine months of 2014, SCP’s daily average throughput was 17.412 million cubic metres (615 million cubic feet) of gas or 106,017 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 whilst Statoil, as commercial operator, is responsible for SCP's business administration. 

SCP Expansion (SCPX) Project

Since final investment decision on 17 December 2013, most of the SCPX project contracts have been awarded. These include contracts for:
  • pipeline construction in Azerbaijan and Georgia
  • line pipe coating
  • construction and commissioning of the SPCX project facilities in Georgia
  • pipeline and facilities engineering and project management services for the Georgia section of the SPCX
  • horizontal directional drilling and line pipe installation for five river crossings for the Azerbaijan section of the SCPX
  • shaft and tunnel construction and line pipe installation for the two river crossings of the SCPX (one in Azerbaijan and one in Georgia)
The first shipment of line pipe is expected to arrive in Azerbaijan in the next few weeks.

Exploration

In early 2012, the Gilavar seismic vessel completed the planned 3D seismic acquisition on the Shafag-Asiman structure. This was the first 3D seismic ever conducted on the Shafag-Asiman contract area. Since that time we had been processing the acquired data. This processing is believed to be the largest 3D survey ever processed in-country. 

In 2014, we completed the data processing and started interpretation of the seismic dataset, which will require some 18 months to complete. This will be followed by another year required 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. It is located in a deep-water section of about 650-800 metres with reservoir depth of up to 7,000 metres.  

People

BP currently employs directly 2,883 Azerbaijani nationals. In total, 85% of BP’s permanent professionals in Azerbaijan are nationals and many of them are in senior leadership positions. 

The Caspian Technicians Training Centre (CTTC) at Sangachal continued training national technicians effectively. In May, CTTC celebrated its 10th anniversary and the success of its training of about 900 national technicians for BP-operated facilities. The role of these highly qualified technicians has been critical to running all of BP-operated facilities both onshore and offshore safely and reliably over the past ten years. 

BP also successfully manages a world-class petro-technical resource entry programme (PREP) for national engineers. PREP is a multi-million dollar learning programme designed for petro-technical graduates and is aimed at supporting capability development of young engineers joining BP. 

In addition, BP has developed a nationalization plan for the years 2014-18 with a target to reach 90% professional staff nationalization rate by the end of 2018. This envisages nationalizing some of the professional roles that are currently occupied by the expatriate staff. Non-professional staff is already 100% nationalized. The nationalization agenda also includes further optimization of BP’s learning and development programmes, close participation in the public and private sector initiatives in order to further improve the local talent market and enhancing the rigorous internal performance management process.

BP has also committed to cooperating with SOCAR in the training and development of national workforce and in the human resources area. The two companies continue to work together to create training and development opportunities for Azerbaijani nationals specializing in the oil and gas industry related disciplines.  As part of this commitment BP is supporting vocational and technical discipline training for about 100 representatives of the local communities residing in the neighbourhood of the Sangachal Terminal - Sangachal, Umid, Azimkend and Gobustan settlements.

BP and SOCAR have also agreed to cooperate in the area of staff recruitment and deployment processes. This enables them to work together to fill national positions announced by BP for external recruitment.

BP also continues to cooperate with Baku Higher Oil School engaging the students of the School in its various programmes, initiatives and development activities, as well as delivering business lectures at this educational institution. 

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 implement 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 three quarters, BP and co-venturers spent $3.84 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 to establish an online environmental database - a web based Caspian Environmental Information Centre. The site is 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 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’ events hosted by BP on behalf of its co-venturers. These events are 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. The 3rd ‘Meet the Buyer’ event was held during the 21st 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. To date SPM has had two highly successful graduations with a total number of 300 representatives of some 98 private and public sector organizations trained using globally-recognized project management training curriculum. In March 2014, BP and its co-venturers extended their support for the SPM until November 2015 by signing a new Memorandum of Understanding on extension of the initiative.
  • 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 at creating 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’ projects to provide community-based support to dairy producers to help increase dairy production by small and medium-sized farmers.
  • In June 2014 BP on behalf of its co-venturers and UNICEF signed a memorandum of understanding (MOU) in Baku to confirm their intention to cooperate within a planned major educational initiative. The project called “Partners in Education” is designed to support the country in initiating and implementing projects aimed at creating new educational models. The MOU enables the two parties to work together with other stakeholders, which include the Ministry of Education and the Ministry of Emergency Situations, to develop new effective school models. The scope of the project specifically focuses on the establishment of new comprehensive child-seeking school models in the Kurdamir, Ujar, Agdash, Yevlakh, Samux, Goranboy, Shamkir and Tovuz districts along the BP-operated BTC and SCP pipelines.
  • 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 civil 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. In 2011, the mechanical engineering department was opened at the university and in December 2013, BP presented eleven world-class laboratories to this department.
  • 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. The latest training session for this group of leading journalists was arranged on social media in November 2013.
  • BP’s bursary awards programme was launched in 2007 as part of the company’s educational support commitment. The programme is aimed at supporting the best students specializing in petro-technical disciplines. Overall to date BP has presented its bursary awards to about 400 top students.
  • BP’s business lectures at Baku Higher Oil School, which are designed to support national petroleum engineers development in Azerbaijan.
  • In June BP signed an agreement with Baku 2015 European Games Operation Committee (BEGOC) to become an Official Partner of the Baku 2015 European Games. BP is proud to become Oil and Gas Partner for the first ever European Games which will allow us to assist elite athlete development in Azerbaijan. As part of this partnership BP will help fund the development of aspiring medal hopes for Azerbaijan as the host nation ahead of the European Games. Also as part of this project BP is partnering with BEGOC’s innovative Games Academy initiative to help identify and develop professional talent in the country.

Presentation slides

For further information please contact:
Tamam Bayatly, BP Baku Press office, telephone:      994 (0) 12 599 4557