2016 year-end results

20 February 2017

Azeri-Chirag-Deepwater Gunashli (ACG)

ACG participating interests are: BP (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).

BP Exploration (Caspian Sea) Limited is the operator on behalf of the Contractor Parties to the ACG Production Sharing Agreement.

In 2016, we spent approximately $503 million in operating expenditure and $1.45 billion in capital expenditure on ACG activities.

Production

In 2016, ACG continued to safely and reliably deliver stable production. Total ACG production for the full year was on average 630,000 barrels per day (b/d) (over 230 million barrels or over 31.1 million tonnes in total) from the Chirag (54,000 b/d), Central Azeri (144,000 b/d), West Azeri (114,000 b/d), East Azeri (72,000 b/d), Deepwater Gunashli (126,000 b/d) and West Chirag (120,000 b/d) platforms.

As part of our ACG annual work programme, two planned maintenance programmes (turnarounds - TAR) were successfully implemented in 2016 - on the Deepwater Gunashli platform in September and on the East Azeri platform in November.

In accordance with the plan, production from the Deepwater Gunashli platform was suspended in September for about 11 days and from the East Azeri platform in November for about 12 days. The production suspensions were done to enable efficient maintenance, inspection and project work. The programmes, which were designed to maintain the long-term ability of the platforms to produce in a safe, reliable and environmentally sound way, were completed safely and on schedule.

At the end of 2016, 100 oil wells were producing, while 49 wells were used for gas or water injection. Out of these wells, five were among BP’s top 10 producing wells around the world as of the end of 2016.

Drilling and completion

ACG completed 15 oil producer wells, 7 water injection wells and 1 gas injector well during 2016.

Associated gas

In 2016, ACG delivered an average of 7.5 million cubic metres per day of ACG associated gas to SOCAR (2.75 billion cubic metres in total), primarily at the Sangachal Terminal but also to SOCAR’s Oil Rocks facility. The remainder of the associated gas produced was re-injected for reservoir pressure maintenance.

The Sangachal terminal

In 2016, 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 crude oil and about 29.5 million standard cubic metres of Shah Deniz gas, while overall processing and export capacity for gas, including ACG associated gas is about 49.3 million standard cubic metres per day.

During 2016, the Sangachal terminal exported more than 286.8 million barrels of oil. This included over 253.4 million barrels through Baku-Tbilisi-Ceyhan (BTC), over 30.3 million barrels through the Western Route Export Pipeline (WREP), and more than 3.1 million barrels via a separate condensate export line. 

Gas is exported via the South Caucasus Pipeline (SCP) and via a SOCAR gas pipelines connecting the Terminal’s gas processing facilities with Azerigas’s national grid system. 

On average, 28.9 million standard cubic metres (about 1.021 billion standard cubic feet) of Shah Deniz gas was exported from the Terminal daily during the year.

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), CIECO (2.50 per cent) and ONGC (BTC) Limited (2.36 per cent).

In 2016, BTC spent approximately $118 million in operating expenditure and $58 million in capital expenditure.  

Since the 1,768km BTC pipeline became operational in June 2006 till the end of 2016 it carried a total of about 2.61 billion barrels (around 349 million tonnes) of crude oil loaded on 3,425 tankers and sent to world markets. 

In 2016, BTC exported around 251 million barrels (about 33.5 million tonnes) of crude oil loaded on 313 tankers at Ceyhan.

The BTC pipeline currently carries mainly ACG crude oil and Shah Deniz condensate from Azerbaijan. In addition, other crude oil and condensate continue to be transported via BTC, including volumes from Turkmenistan and Kazakhstan.

Shah Deniz

Shah Deniz participating interests are: BP (operator – 28.8 per cent), AzSD (10.0 per cent), SGC Upstream (6.7 per cent), Petronas (15.5 per cent), Lukoil (10 per cent), NICO (10 per cent) and TPAO (19 per cent).

In 2016, Shah Deniz spent approximately $469 million in operating expenditure and about $3.7 billion in capital expenditure, the majority of which was associated with the Shah Deniz Stage 2 project.

Production

In 2016, the Shah Deniz field continued to provide reliable deliveries of gas to markets in Azerbaijan (to SOCAR), Georgia (to GOGC), Turkey (to BOTAS) and to BTC Company in multiple locations.

In 2016, the field produced about 10.7 billion standard cubic metres (bcm) of gas and 2.5 million tonnes (about 20 million barrels) of condensate.

The existing Shah Deniz facilities’ production capacity is currently 30.0 million standard cubic metres of gas per day or around 10.9bcma.

Drilling

In 2016, Shah Deniz existing (Alpha) platform completed and handed over to production the SDA09 well and commenced deep-hole drilling operations on the SDA10 well, which are currently ongoing.

The Istiglal rig upgrade and commissioning was completed in mid-September. In the fourth quarter of 2016, the rig completed the SDC04 well, which is the first completion on the Shah Deniz Stage 2 project. The Heydar Aliyev rig drilled the reservoir sections of the SDG02 and SDG04 wells. It is now preparing to spud the SDF01 well to drill the top-hole section.

The above two rigs have already drilled 12 production wells in preparation for commencement of Shah Deniz Stage 2 and subsequent production ramp up. Drilling operations will continue to deliver all wells required to reach the planned plateau level.

Shah Deniz Stage 2 Project

During 2016, implementation of the Shah Deniz Stage 2 project continued successfully. The project is now over 89% complete in terms of engineering, procurement and construction, and remains on target for first gas from Shah Deniz Stage 2 in 2018.

Project activities continue at all offshore and onshore sites and fabrication yards of the country including the Sangachal Terminal, ATA (AMEC/Tekfen/Azfen) yard near Baku, Baku Deepwater Jackets Factory (BDJF) and along the pipeline route. 

In September, a significant milestone was achieved in the project with the sail away of the jacket for one of the Shah Deniz Stage 2 platforms from the BDJF yard for offshore installation. The official sail away ceremony, which was held at BDJF, was attended by H.E. President Ilham Aliyev of the Republic of Azerbaijan. The transportation, launch, and positioning activities of the Production and Risers (PR) platform jacket structure were completed safely by the end of the third quarter, while pile installation was completed in November.

At the ATA yard, construction of both Shah Deniz 2 platform topsides is nearly complete and commissioning is well underway. The plan is to sail away these decks for offshore installation in the second and third quarters of 2017.

During 2016, at the peak of project activities over 24,000 people were involved in construction works across all main contracts in Azerbaijan and over 80% of them were Azerbaijani nationals.

The South Caucasus Pipeline (SCP)

The SCP Co. shareholders are: BP (28.8 per cent), AzSCP (10.0 per cent), SGC Midstream (6.7 per cent), Petronas (15.5 per cent), Lukoil (10 per cent), NICO (10 per cent) and TPAO (19 per cent).

In 2016, SCP spent about $27 million in operating expenditure and around $974 million in capital expenditure. 

The pipeline has been operational since late 2006, transporting Shah Deniz gas to Azerbaijan, Georgia and Turkey. 

SCP’s daily average throughput was 19.9 million cubic metres of gas per day during 2016.

The SCP has a dual operatorship with BP as the technical operator being responsible for construction and operation of the SCP facilities and SOCAR, as commercial operator, responsible for SCP's commercial operation.

SCP Expansion (SCPX) Project

In 2016, SCPX activities continued successfully along the pipeline route across Azerbaijan and Georgia. 

In Azerbaijan, mainline construction continued with approximately 239km of pipe welded and 207km of pipe backfilled. Four out of five horizontal directional drilling (HDD) activities were completed, with the remaining one HDD on track to be complete in the first quarter of 2017.

In Georgia, mainline construction wass near completion at the end of the year, with 61km of pipe welded and 57km of backfill complete. Tunnelling at the Kura East location is complete with pipe installation due to commence in the fourth quarter of this year.

Main construction works have continued at both of the Compressor Stations and the Metering Station in Georgia. Compressor Station 1 (CSG1) construction works are approximately 90% complete and on track for 2017 delivery. Compressor Station 2 (CSG2) construction works are 55% complete, while Metering Station (Area 81) construction works are 80% complete, with the latter also planned to be delivered in 2017.

Exploration

The 3D seismic acquisition programme, which we commenced on the Shallow Water Absheron Peninsula (SWAP) contract area on 31 May 2016, was safely completed on 27 December 2016 covering acquisition of 1300 square kilometres of 3D data. The acquisition programme used BP’s advanced, proprietary Independent Simultaneous Source with Nodes (ISSNTM) technology. 

The processing of the 3D data for the initially acquired area has already been completed while for other acquired areas it still continues. The full processing is expected to complete by the third quarter of 2017.

We have also commenced planning for the first exploration well on the Shafag-Asiman block.

People

At the end of 2016, the number of BP’s Azerbaijani national employees was 2,817 including fixed-term employees. 87% of BP’s professional employees in Azerbaijan are nationals and many of them are in senior positions, including six members of the regional leadership team of whom three were appointed to Vice-President roles in 2016.

BP remains committed to achieving a nationalization target of 90% for professional staff by the end of 2018. This envisages nationalizing some professional roles that are currently occupied by expatriate employees. Non-professional staff of BP in Azerbaijan is already 100% nationalized. The nationalization agenda also includes further optimization of BP’s learning and development programmes, close participation in public and private sector initiatives in order to further improve the local talent market.

Social Investment

The success of projects in the Caspian region depends, in part, on the operators’ ability to create tangible benefits from these projects for the people of the region. To achieve this, BP  continues to implement major social investment projects, 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, support for cultural legacy and sport, as well as technical assistance to public institutions.

In 2016, BP and the co-venturers in BP-operated joint ventures spent $1.51 million in Azerbaijan alone on social investment projects.

BP (on behalf of the co-venturers in the joint ventures that it operates) will continue their social investment initiatives in support of local enterprise development and capacity-building throughout Azerbaijan to assist the country in strengthening its economy. 

Some examples of such projects in Azerbaijan are:
  • A new partnership with the Ministry of Education which BP (on behalf of the co-venturers in the joint ventures that it operates) launched in September 2016 to support the enhancement of the agricultural vocational training in Azerbaijan. The project is expected to result in the development of a range of new agricultural occupations and trades thus contributing to the country’s plans to raise the efficiency of the agricultural sector. Under this partnership, BP and its co-venturers have committed to upgrading agricultural vocational education framework in Azerbaijan. While this one-year project was initiated as a pilot phase, if successful its experience will be used to cover all agricultural vocational schools across the country.
  • The Enterprise Development Programme (EDP), initiated by BP (on behalf of the co-venturers in the joint ventures that it operates), is a multi-million dollar initiative in support of local business development. The programme is part of the efforts to increase local content of contracts in Azerbaijan and contribute to the healthy and transparent development of the local economy. BP and its co-venturers announced their decision in November 2016 to extend this programme, which was launched in June 2007, for two more years.
  • The School of Project Management (SPM) established by BP (on behalf of the co-venturers in the joint ventures that it operates) in Azerbaijan. The SPM is designed to develop project management capabilities of individuals representing the private and public sectors. To date the SPM has trained 325 national project managers with international certificates. In 2016 the programme entered its sustainability phase with a target to start to be run by local instructors from the third quarter of 2017.
  • BP (on behalf of the co-venturers in the joint ventures that it operates)   are also co-operating with SOCAR in the training and development of national workforce and in the human resources area. The 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  vocational and technical discipline training support is being provided through SOCAR’s Regional Technical Training Centre in Gobustan, for a  large group of representatives of the local communities residing in the neighbourhood of the Sangachal Terminal - Sangachal, Umid, Azimkend and Gobustan settlements. To date BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) have sponsored 126 technicians training at the Centre - 79 in 2015, and 47 in 2016. 
  • BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) are supporting neighbouring communities in developing IT skills. As part of this initiative 50 people from the Sangachal and Umid residential areas near Baku completed CISCO certified IT skills and capacities training, expanding their employment opportunities. In 2016 the programme was expanded to a large number of new communities including those along the BP-operated pipeline routes. It is expected that some 200 members of the local communities will benefit from this new initiative. In addition, the programme covers support to 23 most successful graduates from the previous phase of the CISCO training courses, providing them with further opportunities to acquire advanced IT skills and improve their English language knowledge. They are planned to take the internationally recognized Cisco Certified Network Associates certification exam upon graduation.
  • BP (on behalf of the co-venturers in the South Caucasus Pipeline Company) launched in 2016 a new community capacity-building project in five districts along the pipeline route - Goranboy, Samukh, Shamkir, Tovuz and Agstafa. The project is part of the South Caucasus Pipeline Expansion (SCPX) project’s social investment programme. The project is specifically designed to enhance the quality of English language teaching in the communities. It is implemented by the British Council in collaboration with the Ministry of Education of Azerbaijan.
  • BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) are also implementing a new project to supply a large number of kindergartens in the regions along the pipeline routes with computers. The purpose of the project is to create opportunities for pre-school aged children to develop their cognitive skills. To date, 316 computers have been donated to 42 communities in the Garadagh, Hajigabul, Kurdamir, Ujar, Agdash, Yevlax, Goranboy, Samukh, Shamkir, Tovuz and Agstafa regions.
  • BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) have partnered with the International Organization for Migration (IOM) to support the transition of international best practices in facilitating efficient implementation of migration strategies, policies and legislation through capacity-building and technical assistance. The beneficiaries of the project are the state agencies dealing with the visa matters.
  • BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) established the first Big Data, Data Sciences Instruction and Research Centre in Azerbaijan. The Centre, which was established at Baku’s ADA University, will result in commencement of a new Master’s Degree programme in Big Data Analytics and Data Sciences which will help meet the needs for data scientists and big data analysts.  It is also designed to have a wider impact by providing opportunities for utilization of the resources of the new Centre by public institutions and private sector representatives.
  • BP (on behalf of the co-venturers in the South Caucasus Pipeline Company) launched a new project to build early intervention services in ten districts along the pipeline route - Hajigabul, Kurdamir, Agdash, Ujar, Yevlakh,  Samukh, Goranboy, Shamkir, Tovuz, Agstafa. The project is part of the South Caucasus Pipeline Expansion (SCPX) project’s social investment programme. The aim of the project is to raise both community and health sector awareness of the importance of early intervention in the process of children’s development.
  • As part of its investment in cultural legacy BP presented in 2016 a full documentary film about the jazz virtuoso Vagif Mustafazade. BP’s support for the production of the film “Vagif as I knew him” is part of its long-term commitment to Azerbaijan and to promoting its rich cultural heritage. The documentary is in recognition of Azerbaijan’s and one of the world’s grandmasters of jazz, Vagif Mustafazade - founder of a new genre in the art of music – the jazz-mugham.
  • BP’s ongoing support for the development of sport through its partnership with Azerbaijan’s National Olympic and Paralympic Committees. As part of this partnership BP funds a number of development and capacity building programmes and supports a group of national athletes. In 2016 BP extended its partnership agreement to support Azerbaijan’s national teams, both National Committees and a group of seven national athletes until the end of 2020.
  • BP’s business lectures at Baku Higher Oil School, which are designed to support national petroleum engineers’ development in Azerbaijan. In addition to a series of lectures presented by BP experts and senior executives, Gordon Birrell, BP’s Regional President for Azerbaijan, Georgia and Turkey, has met with the teaching staff and students of Baku Higher Oil School sharing his own experience in the industry and information about BP operations and plans.   

Presentation slides

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