2013 third quarter results

13 November 2013

Azeri-Chirag-Deepwater Gunashli

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

During the first nine months of 2013, ACG spent about $574 million in operating expenditure and $2,039 million in capital expenditure. For the full year, we expect to spend about $758 million in operating expenditure and $2,514 million in capital expenditure on ACG activities. 

Production 

During the first three quarters of 2013 ACG produced on average 663,200 barrels per day (b/d) (about 181 million barrels or 24.5 million tonnes in total) from the Chirag, Central Azeri, West Azeri, East Azeri and Deepwater Gunashli platforms. 

By end of the third quarter, a total of 72 oil wells were producing, while 33 wells were used for injection in the ACG field, as follows: 

Chirag produced on average 70,800 b/d and had 18 wells operating (13 oil producers and 5 water injectors). 

Central Azeri (CA) produced on average 150,700 b/d and had 23 wells operating (16 oil producers, 1 water injector and 6 gas injectors). 

West Azeri (WA) produced on average 191,700 b/d and had 23 wells operating (17 oil producers and 6 water injectors). 

East Azeri (EA) produced on average 113,000 b/d and had 15 wells operating (12 oil producers and 3 water injectors). 

Deepwater Gunashli (DWG) produced on average 137,000 b/d and had 26 wells operating (14 oil producers and 12 water injectors). 

Associated gas

During the first nine months, BP as operator of the ACG field continued to deliver associated gas from the DWG platform via the 28” gas subsea pipeline directly to the Sangachal terminal and from there into Azerigas’ national grid system for domestic use. 


Gas from the three Azeri platforms - CA, WA and EA – continued to be sent via in-field subsea gas pipelines to the compression and water injection platform (C&WP) on CA from where it was partly re-injected to maintain pressure in the reservoir and partly delivered to the Sangachal terminal via the same 28” subsea pipeline for further hand over to the national grid system. Gas injection activities currently continue from six wells on CA. 

Some of the associated gas produced from the Chirag platform was sent to the SOCAR compression station at the Oil Rocks via the existing 16” subsea gas pipeline. BP continued to work closely with SOCAR to minimise flaring on Chirag and maximise recovery of associated gas for delivery to SOCAR. In support of this effort BP completed upgrades to the flash gas compressor and successfully re-started the unit during the third quarter, which will eventually allow further reductions in flaring on Chirag and increase exports of associated gas delivered to the SOCAR. 

By the end of September 2013, ACG associated gas flaring was 2.9%. This represents 41% reduction from 2012. As result of further improvement measures ACG associated gas utilization rate has reached about 98% which is in line with the best European standards. BP as operator of ACG will continue its efforts to minimize associated gas flaring while maintaining safe operations. 

During the first nine months of 2013, we delivered around 5.9 million cubic metres (210 million standard cubic feet) per day of ACG associated gas to SOCAR (1.62 billion cubic metres or 57.3 billion cubic feet in total). 

Drilling and completion activity

During the first three quarters of 2013, ACG delivered seven oil producer wells, one gas injector and two water injector wells. 


Chirag - The A16w producer well drilling was completed and handed over to production in April 2013. This was followed by intervention activities on A09 well and then we started drilling operations on A14u sidetrack oil producer in May. This well was completed on 31 August .followed by intervention works which were completed on A03, A20 and A10 wells. We are currently conducting re-completion operations on A10 well. Remaining plans include rig maintenance and drilling of another oil producer well - A06x in the fourth quarter of 2013. 

Central Azeri - In January 2013, intervention activities were conducted on the B18y and B14 wells. On 21 January, we started to drill B23z producer well and delivered it on April 24. This was followed by further intervention activities on B10 and B05 wells. 

In early May, we commenced drilling the new gas injector well B26, which was completed by end of September. We then conducted intervention operations on B02, B20 and B26 wells. In the meantime critical maintenance work was also conducted on CA and three conductors were installed on slots 35, 36 and 40. Currently drilling operations are ongoing on the new oil producer well B27 with expected delivery time in late December 2013 - early January 2014. 

West Azeri - The C27 oil producer well was delivered and handed over to production on 31 March. This was followed by intervention operations on wells C06 and C03. In early May, we commenced drilling the new oil producer well C30 and this well was delivered on 13 July followed by an intervention campaign and rig maintenance. The drilling of the new oil producer well C29 commenced in September with expected delivery in November 2013. 

East Azeri - In January, we completed intervention activity on D07 well. This was followed by drilling the oil producer well D22 which was completed and handed over to production on 16 April. 
Following this well intervention activity commenced on well D05 to perform sand shut off operations. The intervention campaign continued through mid-May including well work on D03 and D08, and critical inspection operations. In May we started the new water injector well D23, which we are planning to deliver this month. 

The remaining plan for 2013 is to conduct intervention activities on wells D01, D03 and D02. 

Deepwater Gunashli (DWG) - Intervention activities on well E01 were completed in early January. Following this, we started drilling the new oil producer well E17 and it was delivered on 17 May followed by a five-yearly rig maintenance programme. 

Intervention activity on E11 was conducted through June and July followed by the drilling of the producer well E18. This well is planned to be delivered by the end of this year. In addition, by the end of the year we will conduct surface equipment repair and E02y re-completion for gas lift installation. 

During the first nine months of 2013, the Dada Gorgud drilling rig delivered two subsea water injector wells - H06 and H05, followed by rig maintenance activities and installation of manifold piles. In addition, in early May we started the H07 pilot data acquisition well, which was completed at the end of July. At the beginning of August we commenced drilling the GCA07 well and this will continue throughout rest of the year. 

Export operations

Oil and gas from ACG and Shah Deniz continued to flow via subsea pipelines to the Sangachal terminal. 

The daily capacity of the terminal’s processing systems is currently 1.2 million barrels of oil and 966 million standard cubic feet or 27.4 million standard cubic metres of Shah Deniz gas, while overall processing and export capacity for gas, including ACG associated gas is about 41.5 million standard cubic metres per day. 
Gas is exported via the South Caucasus Pipeline (SCP) and via a SOCAR gas pipeline connecting the terminal’s gas processing facilities and Azerigas’s national grid system. 

During the first nine months of the year, the Sangachal terminal exported about 213.5 million barrels of oil. This included about 186 million barrels through Baku-Tbilisi-Ceyhan (BTC), over 22.1 million barrels through the Western Route Export Pipeline (WREP), over 4 million barrels by rail and over 1.4 million barrels via a condensate export line. 

On average about 26.4 million standard cubic metres ( 933.5 million standard cubic feet) of Shah Deniz gas was exported from the terminal daily in the first nine months of 2013. 

Chirag Oil Project (COP) 

During the first nine months of 2013, COP activities continued safely, on schedule and according to plan. 

In April the completed jacket for the West Chirag platform sailed away from the Heydar Aliyev Baku Deepwater Jackets Factory (BDJF) and was safely installed on the pre-installed template in its permanent location. The jacket transportation, launch and installation activities took 45 days to complete. 

The topsides fabrication at the ATA yard was completed during the third quarter. The topsides unit sailed away for offshore installation on 12 September and was safely installed onto the jacket on 14 September followed by offshore hook-up and commissioning activities which are still ongoing. 

Baku-Tbilisi-Ceyhan

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

Note: On 28 March 2013 ONGC Videsh Limited (OVL) completed the acquisition of the respective interest of Hess (BTC) Limited, and Hess (BTC) Limited has since been renamed to ONGC (BTC) Limited. 

During the first nine months of 2013, BTC spent over $48 million in capital expenditures. For the full year BTC capital expenditures are expected to be $97 million. 

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

Since 4 June 2006 up to the end of the third quarter of 2013, 2,304 tankers were loaded at Ceyhan with a total of about 1,773 million barrels (237.2 million tonnes) of crude oil transported via BTC and sent to world markets. 

During the first nine months of 2013, BTC exported about 186 million barrels (about 24.7 million tonnes) of crude oil loaded on 243 tankers at Ceyhan. 

The BTC pipeline currently carries mainly ACG oil and Shah Deniz condensate from Azerbaijan. In addition, crude oil from Turkmenistan has and continues to be transported. 

Shah Deniz

Shah Deniz participating interests are: BP (operator – 25.5%), Statoil (25.5%), SOCAR (10%), LUKOIL (10%), ICO (10%), Total (10%), and TPAO (9%).

During the first nine months of 2013, Shah Deniz spent $143 million in operating expenditure and $1,364 million in capital expenditure. For the full year, we are planning to spend around $222 million in operating expenditure and about $2,191 million in capital expenditure on Shah Deniz activities. 

Production

During the first nine months of the year, the field continued delivering gas to the markets of Azerbaijan, Georgia and Turkey. The gas from Shah Deniz Stage 1 continues to be sold to Azerbaijan, GOGC (Georgia), BOTAS and the BTC Company. 

In the first three quarters of 2013, the field produced about 7.3 billion cubic metres (about 257 billion cubic feet) of gas and 1.85 million tonnes (about 14.6 million barrels) of condensate or about 26.6 million cubic metres of gas per day (941 million standard cubic feet per day) and 53,700 b/d of condensate. 

Since the start of Shah Deniz production in late 2006 till the end of the third quarter of 2013, about 44.8 billion standard cubic metres (1,583 billion standard cubic feet) of Shah Deniz gas, and about 94.6 million barrels (11.9 million tonnes) of Shah Deniz condensate was exported to the markets. 

Shah Deniz Stage 1 production is currently at plateau with production facilities running at maximum capacity of 966 million standard cubic feet per day and approximately 55,000 b/d of condensate when markets are available. 

Drilling

Shah Deniz -Stage 1

During the first nine months of 2013, Shah Deniz continued drilling activities on SDA-03Y sidetrack well. This well is planned to be delivered at the end of the first quarter of 2014 followed by drilling rig inspection and surveillance on SDA-05X well. 

Shah Deniz - Stage 2

On 17 September 2013, the Istiglal rig completed drilling activities on the SDC02. Following this, drilling commenced on well SDC03 with expected delivery in the third quarter of 2014. 

The Heydar Aliyev rig completed drilling activities on SDX07Ay on 27 September 2013. The remaining plan for the Heydar Aliyev rig in 2013 is to complete rig modifications and five-yearly rig certification. Following this, drilling activities will start on SDD02 with an expected delivery date in the third quarter of 2014. 

Shah Deniz Stage 2 

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 the new southern gas corridor. 

The estimated $25 billion Shah Deniz Stage 2 project is expected to add a further 16 billion cubic metres per year (bcma) of gas production to the approximately 9 bcma from Shah Deniz Stage 1. It is one of the largest gas development projects anywhere in the world. 

This Stage 2 development of the Shah Deniz field, which lies some 70 kilometres offshore in the Caspian, is expected to include two new bridge-linked production platforms; 26 subsea wells to be drilled with two semi-submersible rigs; 500km of subsea pipelines built at up to 550m of water depth; a 16 bcma upgrade for the South Caucasus Pipeline (SCP), which will be expanded with a new 48’’ diameter pipeline in Azerbaijan and two compression stations in Georgia; and expansion of the Sangachal terminal. 

In Turkey, Shah Deniz gas will be transported through a new Trans Anatolian Pipeline (TANAP) which is set to become a key part of the Southern Gas Corridor linking the extensive gas resources of the Caspian Sea to Turkish and EU markets. Sales agreements were signed with BOTAS in 2011 to sell 6 billion cubic metres a year of Shah Deniz Stage 2 gas in Turkey. 

The Shah Deniz consortium announced on 28 June that it had selected the Trans Adriatic Pipeline (TAP) to deliver up to 10 billion cubic metres a year of Shah Deniz Stage 2 gas to customers in Greece, Italy and potentially in Southeast Europe. 

On 19 September, 25-year sales agreements were concluded with nine companies for just over 10 billion cubic metres a year of Shah Deniz Stage 2 gas for purchasing the gas in Italy, Greece and Bulgaria. 

In total 16 billion cubic metres a year of Shah Deniz Stage 2 gas will be delivered through more than 3500 kilometres of pipelines through Azerbaijan, Georgia, Turkey, Greece, Bulgaria, Albania and under the Adriatic Sea to Italy. 

Based on the overall progress to date, the project is planning to spend circa $1.7 billion in 2013. A final investment decision for the project is expected in December 2013 and Shah Deniz Stage 2 first production is planned for 2018.

South Caucasus Pipeline

The SCP Co. shareholders are: BP (technical operator – 25.5%), Statoil (commercial operator - 25.5%), Azerbaijan SCP Ltd. (10%), LUKOIL (10%), NICO (10%), Total (10%), and TPAO (9%).

During the first nine months of 2013, SCP spent about $9 million in capital expenditures. For the full year it is planned to spend over $13 million in SCP capital expenditures. 

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

During the first nine months of 2013, SCP’s daily average throughput was about 12.4 million cubic metres (about 437.2 million cubic feet) of gas or 75,376 barrels of oil equivalent per day. 

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

Exploration

Since early 2012 when the Gilavar seismic vessel completed the planned 3D seismic acquisition on the Shafag-Asiman structure, the first 3D seismic ever conducted on the contract area, we have been processing the acquired data. This processing is believed to be the largest 3D survey ever processed in-country. Following completion of this phase of the 3D seismic acquisition programme, some 18 months will be required for data interpretation and another year for planning of the first exploration well. 

The Shafag-Asiman production sharing agreement (PSA) between BP and SOCAR on joint exploration and development of the Shafag-Asiman structure in the Azerbaijan sector of the Caspian Sea was signed in Baku in October 2010. 

The block lies some 125 kilometres (78 miles) to the South-East of Baku. It covers an area of some 1,100 square kilometres and has never been explored before. It is located in a deepwater section of about 650-800 metres with reservoir depth of about 7,000 metres. 

People

BP currently employs directly 2,798 Azerbaijani nationals. In total, 84% of BP’s permanent professionals in Azerbaijan are nationals and many of them are in very senior leadership positions. 

BP has continued to extensively use all existing tools to attract the best local talent both within Azerbaijan and outside. As a result since the beginning of 2013, BP has recruited over 300 Azerbaijani nationals including more than 100 experienced hires, 100 technicians, 85 Challengers and 50 interns. 

In September BP announced that it had hired 45 trainees of its petro-technical resource entry programme (PREP), who had successfully completed the programme, for BP’s global Challenge Programme - the next step of their career development. Three of the trainees have been hired for various specialist roles within BP. 

PREP is a multi-million dollar learning programme designed for national petro-technical graduates and is aimed at supporting capability development of young engineers joining BP. 

PREP was launched last year with 55 graduates specializing in surface engineering, subsurface, and wells disciplines. BP has already hired 88 graduates from various national and international universities for PREP’s second year. These have been selected from among approximately 3000 applicants. 

In addition, BP has developed a nationalization plan for the years 2014 – 2018 with a target to reach 90% professional staff nationalization rate by the end of 2018. This envisages nationalizing 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 local talent market and rigorous internal performance management process. This plan has already been agreed with SOCAR. 

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 nine months of 2013 BP and co-venturers spent about $1.84 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-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-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’ 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 (EPF) to jointly support local governance, youth capacity building and environmental initiatives along the BTC/SCP pipelines in Azerbaijan. The project aims at enhancing effective governance capacity of municipalities in addressing local sustainable development challenges. The project also focuses on the role of young people in addressing local development and environmental challenges in communities.
  • “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 1st event was held June 2011 with more than 80 local small- and medium-size enterprises (SME’s), that had completed BP and co-venturers’ Enterprise Development and Training Programme, exhibiting their products and services to more than 150 local and international buyers. The second event was held during the 20th Caspian International Oil Exhibition in Baku in June this year with over 80 local SMEs participating in it and attracting a larger number of international clients.
  • 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 205 representatives of some 96 private and public sector organizations trained using globally-recognized project management training curriculum. Of these 103 were qualified for Masters and 102 for Associates Certificates from the George Washington University.
  • BP and its co-venturers’ support to the Ministry of Economic Development focused on macroeconomic analysis and forecasting through EU-based think tank.
  • BP and its co-venturers’ project 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 industrial engineering. As part of this project the chemical engineering department was established in 2009 and in 2011, BP opened five fully equipped modern laboratories for this department. The laboratories specialize in general chemistry, analytical chemistry, organic chemistry, chemical engineering and physical chemistry. The chemical engineering department currently has 104 students. In 2011, the mechanical engineering department was opened at the university with 89 students already admitted. The plans are to open fully equipped mechanical engineering laboratories for this department in December 2013.
  • BP’s ‘Business Journalism’ training programme to help develop national business journalism capacity and link local journalists with international journalistic standards. The training helped some 12 journalists gain international practice and become leading business writers in the region. They have created a trend in national business journalism which has many followers.
  • BP’s bursary awards programme was launched in 2007 as part of the company’s educational support commitment. The programme is aimed at promoting the best students specializing in petro-technical disciplines. The annual awards were initially designed for the best students of the Azerbaijan State Oil Academy and for five years BP presented these awards to the first and second year students of the Academy. In November 2012 BP decided to extend the scope of this annual programme and presented bursary awards to top students specializing in petro-technical disciplines at five local universities - the Azerbaijan State Oil Academy, Qafqaz University, the Azerbaijan Architecture and Construction University, Baku State University and Khazar University. In 2012 BP’s bursary awards were presented to 61 first year and 30 second year students. Overall to date BP has presented its bursary awards to 348 top students, of whom 19 have then been successful in pursuing their careers within BP and are currently BP’s employees, seven are BP and its co-venturers’ Graduate Scholarship recipients.
  • BP’s ongoing Geosciences and Engineering Speaker Series initiative which is designed to enhance commitment by future generations of engineers to promoting geosciences in Azerbaijan.

Presentation slides

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