2014 first quarter results

15 May 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).

Production

During the first quarter 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 - J05. Since that time West Chirag production has been increasing to its current level of over 40,000 barrels per day from three wells. Production will continue to increase through 2014 as the other pre-drilled wells are brought on line.

Total ACG production during the first quarter was on average 645,800 barrels per day (b/d) (58 million barrels or about 8 million tonnes in total) from the Chirag, Central Azeri, West Azeri, East Azeri, Deepwater Gunashli and West Chirag platforms. 

At the end of the quarter, a total of 79 oil wells were producing, while 35 wells were used for injection in the ACG field, as follows:

Chirag produced on average 66,600 b/d and had 18 wells operating (13 oil producers and 5 water injectors). 

Central Azeri (CA) produced on average 168,400 b/d and had 24 wells operating (17 oil producers, 1 water injector and 6 gas injectors). 

West Azeri (WA) produced on average 169,200 b/d and had 25 wells operating (20 oil producers and 5 water injectors). 

East Azeri (EA) produced on average 84,300 b/d and had 17 wells operating (13 oil producers and 4 water injectors). 

Deepwater Gunashli (DWG) produced on average 146,200 b/d and had 28 wells operating (14 oil producers and 14 water injectors). 

West Chirag produced on average 11,100 b/d from two wells. 

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 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 six wells on CA.

Some of the associated gas from West Chirag has been exported to the Sangachal terminal. Work currently continues on the commissioning of the gas conditioning and compression systems for final hand over to operations which will allow full export of West Chirag gas to the terminal.

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 quarter, BP completed much of its planned work on the flash gas compressors and pipelines to reduce flaring. This work will continue through the second quarter.
During the first quarter, we delivered around 6.2 million cubic metres (218,800 million standard cubic feet) per day of ACG associated gas to SOCAR (0.6 billion cubic metres or 19.7 billion cubic feet in total). 

Drilling and completion activity

During the first three months of 2014, ACG delivered 4 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. This well was followed by a surveillance and interventions program in April 2014.  

Central Azeri - During the first quarter, we continued drilling the new oil producer B28, which is expected to be delivered in June 2014. We started drilling this well in December 2013.

West Azeri - The C28 oil producer, 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. Following this sand shut-off work will be conducted on C14.

East Azeri - In January, we completed intervention activities on well D03. This was followed by further intervention and cleaning activities. D11z de-completion and D11y side-track operations will continue into the second 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.

During the first quarter of 2014, the Dada Gorgud rig delivered one subsea water injector well - H07z. This well was completed and temporarily suspended.  The drilling of another water injector well - H08 started in early March 2014. 

West Chirag – During the first quarter two producer wells - J05 and J11 - were completed and handed over to production. A third well – J07 – was handed over to production at the end of April.

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 around 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 quarter of 2014, the Sangachal terminal exported about 75 million barrels of oil. This included 65.2 million barrels through Baku-Tbilisi-Ceyhan (BTC), 8.02 million barrels through the Western Route Export Pipeline (WREP), 1.34 million barrels by rail and 0.44 million barrels via a condensate export line.

On average, 25.5 million standard cubic metres (over 900 million standard cubic feet) of Shah Deniz gas was exported from the terminal daily during the first quarter 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 quarter, BTC spent $14.6 million in capital expenditures. For the full year, BTC capital expenditures are expected to be about $119 million.

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

On 21 April, BTC celebrated the loading and sail away of the 2,500th tanker from the Ceyhan terminal in Turkey. The tanker called the Vinga departed for Spain taking on board 735,000 barrels of oil transported from the Sangachal terminal near Baku across Azerbaijan, Georgia and Turkey to the Ceyhan terminal. The cargo of crude loaded on the Vinga belonged to SOFAZ (the State Oil Fund of Azerbaijan). 

The 1,768km BTC pipeline became operational in June 2006. Since that time BTC has carried a total of over 1.9 billion barrels (256 million tonnes) of crude oil and sent to world markets.  

During the first quarter of 2014, BTC exported about 66 million barrels (8.7 million tonnes) of crude oil loaded on 88 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 quarter of 2014, Shah Deniz spent around $120 million in operating expenditure and over $785 million in capital expenditure. For the full year, it is planned to spend around $480 million in operating expenditure and $3,650 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 quarter, 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 three months, the field produced 2.32 billion standard cubic metres  (about 82 billion cubic feet) of gas and about 0.6 million tonnes (4.44 million barrels) of condensate or about 26 million cubic metres of gas per day (over 909 million standard cubic feet per day) and 49,330 b/d of condensate.

Since the start of Shah Deniz production in late 2006 until the end of the first quarter 2014, about 50.3bcm (1,775 billion standard cubic feet) of Shah Deniz gas, and about 104 million barrels (over 13 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 first quarter of 2014, Shah Deniz completed operations on the gas producer well SDA03x which was handed over to production in early February 2014. This was followed by rig maintenance operations. Currently intervention activities are ongoing on SDA02. 

Shah Deniz Stage 2

Istiglal – During the first quarter, the Istiglal rig continued drilling activities on well SDC-03, which is expected to be completed towards the end of May 2014. This will be followed by the drilling of SDC-04 well.

Heydar Aliyev – During the first quarter, upgrades were performed on the Heydar Aliyev rig, which also received its 5-yearly certification.   The rig has since started to drill the lower section of SDD-02, which will be completed in October 2014. The well will then be suspended for future completion by the Istiglal rig. The drilling of SDD-04 well top hole section will commence in November 2014.

Shah Deniz Stage 2 project

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 a new Southern Gas Corridor. It is one of the largest gas development projects anywhere in the world.

The total cost of the Shah Deniz Stage 2 project, including the South Caucasus Pipeline (SCP) expansion, will be around $28 billion. 16bcma of gas produced from the giant Shah Deniz field will be carried 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 Stage 2 development of the Shah Deniz field, which lies some 70 kilometres offshore in the Caspian, includes two new bridge-linked production platforms; 26 subsea wells drilled with two semi-submersible rigs and 500km of subsea pipelines built at up to 550m of water depth and expansion of the Sangachal terminal

The final investment decision on 17 December 2013 for the Stage 2 development has 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), 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 Stage 2 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 Stage 2 project has continued to progress on schedule with a number of main construction and supply contracts already awarded:
  • for the construction and commissioning support of the Shah Deniz Stage 2 onshore terminal facility at Sangachal near Baku;
  • for the fabrication, load out and offshore hook-up and commissioning of the topsides units of the two Stage 2 platforms;
  • for the fabrication of the jackets for the two planned offshore platforms, pin piles and subsea structures
  • for all offshore transport and installation work;
  • for provision of detailed engineering, project management and procurement support services for the offshore and onshore facilities;
  • for the supply of the subsea production systems;
  • for the design and construction of a Subsea Construction Vessel to be used for installation of the subsea structures;
  • for subsea and pipeline engineering and project management services
  • for 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. 

Offshore, 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.

During the first quarter, SCP spent $12 million in operating expenditure and $137 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 SD Stage 1. 

During the first quarter, SCP’s daily average throughput was 18.14 million cubic metres (640.5 million cubic feet) of gas or 110,430 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. 

South Caucasus Pipeline Expansion project (SCPX))

A Final Investment Decision on the SCPX project was taken on 17 December 2013, coincident with Shah Deniz Stage 2. During the first quarter of 2014 four of the SCPX project contracts were awarded. These included contracts:
  • for the construction and commissioning of the SPCX project facilities in Georgia;
  • for pipeline and facilities engineering and project management services for the Georgia section of the SPCX;
  • for horizontal directional drilling and line pipe installation for five river crossings for the Azerbaijan section of the SCPX;
  • for shaft and tunnel construction and line pipe installation for the two river crossings of the SCPX (one in Azerbaijan and one in Georgia).
The contract for pipeline construction in Azerbaijan is planned to be awarded in the second quarter and 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. 

In 2013, we continued the processing of the acquired data. This processing is believed to be the largest 3D survey ever processed in-country. 

During the first quarter 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 deepwater section of about 650-800 metres with reservoir depth of up to 7,000 metres.  

People

BP currently employs directly 2,854 Azerbaijani nationals. In total, 85% of BP’s permanent professionals in Azerbaijan are nationals and many of them are in very senior leadership positions. 

The Caspian Technicians Training Centre (CTTC) at Sangachal continued training national technicians effectively. In May, CTTC will be celebrating 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. This plan was agreed with SOCAR resulting in the signing of a protocol on cooperation in the area of nationalization. 

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 technician 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. The first of these lectures was delivered in March by Pat Draughon, BP’s Vice President Production, for a large group of students. 

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, BP and co-venturers spent $0.39 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 will be 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 251 representatives of some 98 private and public sector organizations trained using globally-recognized project management training curriculum.
  • 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.
  • 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 to support 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.

Presentation slides

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