2014 first half results

14 August 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 half of 2014 we spent approximately $479 million in operating expenditure and $1,231 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

During the first half of 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 over 50,000 barrels per day from four wells. Production will continue to increase through 2014 as the other pre-drilled wells are brought on-line.

Total ACG production during the first half was on average 656,100 barrels per day (b/d) (118.8 million barrels or approximately 16 million tonnes in total) from the Chirag, Central Azeri, West Azeri, East Azeri, Deepwater Gunashli and West Chirag platforms. 

At the end of the first half of 2014, a total of 81 oil wells were producing, while 36 wells were used for injection in the ACG field, as follows:

Chirag produced on average 65,800b/d and had 18 wells operating (13 oil producers and 5 water injectors). 

Central Azeri (CA) produced on average 167,600 b/d and had 25 wells operating (18 oil producers, 1 water injector and 6 gas injectors). 

West Azeri (WA) produced on average 165,100 b/d and had 24 wells operating (18 oil producers and 6 water injectors). 

East Azeri (EA) produced on average 83,200 b/d and had 17 wells operating (13 oil producers and 4 water injectors). 

Deepwater Gunashli (DWG) produced on average 148,500 b/d and had 29 wells operating (15 oil producers and 14 water injectors). 

West Chirag produced on average 25,900 b/d from four wells

Associated gas

During the first half 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. During the second quarter, the commissioning of the gas conditioning and compression systems on West Chirag was completed and the systems were fully handed over to operations. This has allowed full export of West Chirag gas to the terminal  via the same 28" subsea pipeline.

Most 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 second quarter of 2014, BP completed its planned work on the flash gas compressors and pipelines which has allowed us to significantly reduce flaring on Chirag. 

During the first half of 2014, we delivered approximately 6.6 million cubic metres (233.8 million standard cubic feet) per day of ACG associated gas to SOCAR (1.2 billion cubic metres or 42.3 billion cubic feet in total). 

Drilling and completion activity

During the first half of 2014, ACG delivered 8 oil producer wells and 1 water injection well. 

Chirag - The producer well A06X, which started at the end of December 2013, was completed and handed over to production in March 2014. Following a surveillance and interventions programme in April 2014, Chirag had a one-month maintenance programme. In July drilling started on well A05y. The well is planned to be completed in mid-fourth quarter 2014.

Central Azeri - The oil producer well B28 was completed and handed over to production on 19 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 moved the rig to well B29 on which drilling operations are still ongoing.

West Azeri - The oil producer C28, which we started in December 2013, was completed and handed over to production in March 2014. This was followed by intervention operations on well C25, sand shut-off work on C14, C11 gas lift retrofit, a conductor driving campaign and a rig maintenance programme. We are currently conducting additional intervention clean-out activities on C14.

East Azeri - In January 2014, we completed intervention activities on well D03. This was followed by further intervention and cleaning activities. We then started to drill oil producer well D25 which is expected to be completed by the mid-fourth quarter. 

Deepwater Gunashli (DWG) - Intervention activities to install gas lift on well E02Y were completed in January.  This work was followed by surveillance work on E12, side-tracking of E09Y and completion of E09y. We then conducted rig maintenance and further intervention operations and started to drill well E19. 

Dada Gorgud - During the first quarter of 2014, we delivered one subsea water injector well - H07z. In early March we started to drill another water injector well - H08, which is nearing completion.

West Chirag – During the first half of 2014, four producer wells - J05, J11, J07 and J14 were completed and handed over to production. Drilling operations on well J03 commenced in June 2014 and are ongoing

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 half of 2014, the Sangachal terminal exported about 152 million barrels of oil. This included about 133 million barrels through Baku-Tbilisi-Ceyhan (BTC), 15.4 million barrels through the Western Route Export Pipeline (WREP), 2.6 million barrels by rail and about 0.9 million barrels via a condensate export line.

On average, 26 million standard cubic metres (918.2 million standard cubic feet) of Shah Deniz gas was exported from the terminal daily during the first half 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 half of 2014, BTC spent $100 million in operating expenditure and $61.3 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.

On 11  August, BTC celebrated the loading  of the 2 billionth barrel of oil at the Ceyhan terminal in Turkey. 

The 1,768km BTC pipeline became operational in June 2006. Since that time BTC has carried a total of about 2 billion barrels (263 million tonnes) of crude oil loaded on 2580 tankers and sent to world markets.  

During the first half of 2014, BTC exported approximately 134 million barrels (17.8 million tonnes) of crude oil loaded on 185 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), SOCAR (16.7 per cent), Statoil (15.5 per cent), Total (10 per cent), Lukoil (10 per cent), NICO (10 per cent) and TPAO (9 per cent). These percentages include the recent purchases of equity from Statoil by BP and SOCAR.

During the first half of 2014, Shah Deniz spent approximately $243 million in operating expenditure and over $1,766 million in capital expenditure. For the full year, it is planned to spend around $483 million in operating expenditure and $3,781 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 half of 2014, the Shah Deniz field continued to provide reliable deliveries of gas to markets in Azerbaijan (to SOCAR), Georgia (to GOGC) and Turkey (to BOTAS and the BTC company). 

During the first six months of 2014, the field produced 4.75 billion standard cubic metres (about 168 billion cubic feet) of gas and about 1.12 million tonnes (9 million barrels) of condensate or about 26.2 million cubic metres of gas per day (over 926.4 million standard cubic feet per day) and 49,757 barrels per day of condensate.

Since the start of Shah Deniz production in late 2006 until the end of the second quarter 2014, about 52.7bcm (1,861 billion standard cubic feet) of Shah Deniz gas, and about 108.5 million barrels (over 13.6 million tonnes) of Shah Deniz condensate has been produced.

As a result of debottlenecking of existing facilities in 2013, Shah Deniz Stage 1 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

Shah Deniz Stage 1

During the second quarter of 2014, Shah Deniz completed intervention operations on SDA02 which was followed by drilling operations on SDA07. The well was drilled and suspended at the 28” liner point after which the rig was moved to SDA08. This well was also suspended after the 28” liner was run and cemented. Currently, intervention activities are ongoing on SDA06. 

Shah Deniz Stage 2

Istiglal – During the second quarter, the Istiglal rig completed drilling operations on well SDC03. At the end of the second quarter, drilling operations commenced on SDC04. Drilling operations on this well are expected to be completed by January 2015.

Heydar Aliyev – During the second quarter, the drilling of lower section on SDD02 continued. Drilling operations on this well are expected to be completed by the end of the third quarter of 2014.

Shah Deniz Stage 2 project

Shah Deniz Stage 2 (SD2) 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 a new Southern Gas Corridor. It is one of the largest gas development projects anywhere in the world.

The total cost of the SD2 project, including the South Caucasus Pipeline (SCP) expansion, will be approximately $28 billion. 16bcma of gas produced will be transported some 3,500 kilometres to provide energy for millions of consumers in Georgia, Turkey, Greece, Bulgaria and Italy. First gas is targeted for late 2018, with sales to Georgia and Turkey; first deliveries to Europe will follow approximately a year later.

The SD2 development, which lies some 70 kilometres offshore in the Caspian in water depths of up to 550m, includes two new bridge-linked production platforms; 26 subsea wells drilled with two semi-submersible rigs; 500km of subsea pipelines and expansion of the Sangachal terminal

The final investment decision for the SD2 development on 17 December 2013 triggered plans to expand the South Caucasus Pipeline through Azerbaijan and Georgia by 16bcma (comprising a new 48’’ diameter pipeline in Azerbaijan and two compression stations in Georgia). It also triggered plans to construct the Trans Anatolian Gas Pipeline (TANAP) across Turkey and to construct the Trans Adriatic Pipeline (TAP) across Greece, Albania and into Italy. Together these projects, as well as gas transmission infrastructure to Bulgaria, will create a new Southern Gas Corridor to Europe.

The SD2 project will provide for delivery of some 10bcma of Shah Deniz gas for 25 years to customers in Italy, Greece and Bulgaria. In addition, some 6bcma of Shah Deniz Stage 2 gas will be delivered to consumers in Turkey. All gas sales and transportation contracts will be managed by the Azerbaijan Gas Supply Company. 

Since the final investment decision, the SD2 project has progressed to schedule. Most of the major engineering, construction and supply contracts, valued at some $8.5 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
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. 

As noted above, drilling activities have continued successfully using the Istiglal and Heydar Aliyev rigs with five production wells already completed in preparation for First Gas planned for late 2018. 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), SOCAR (16.7 per cent), Statoil (15.5 per cent), Total (10 per cent), Lukoil (10 per cent), NICO (10 per cent) and TPAO (9 per cent). These percentages include the recent purchases of equity from Statoil by BP and SOCAR. Total has entered into an agreement to sell its 10% interest in Shah Deniz to TPAO and both companies are now in process to finalise this transaction.

During the first half of 2014, SCP spent $22.4 million in operating expenditure and $325 million in capital expenditure. For the full year, operating expenditure is expected to be $50 million. As a result of the ramp-up in the SCP expansion, capital expenditure will increase to $1,250 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 half of 2014, SCP’s daily average throughput was 17.8 million cubic metres (over 627 million cubic feet) of gas or 108,137 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. 

South Caucasus Pipeline Expansion project (SCPX)

Since the final investment decision on the SCPX project 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 later this year. 

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. 

During the first half of 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 2,912 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. 
In addition, BP has committed to cooperating with SOCAR on the training of national workforce at Gobustan Regional Training Centre. As part of this commitment BP will support vocational and technical discipline training for 100 representatives of the local communities residing in the neighbourhood of the Sangachal Terminal - Sangachal, Umid, Azimkend and Gobustan settlements.  BP will also continue 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

  • 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’ 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` 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’ 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 will partner 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