3rd quarter 2016 results

18 November 2016

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 the first three quarters of 2016, we spent approximately $378 million in operating expenditure and $1.12 billion in capital expenditure on ACG activities.

Production

In the third quarter, ACG continued to safely and reliably deliver stable production. Total ACG production for the three quarters was on average 644,000 barrels per day (b/d) (over 176 million barrels or 24 million tonnes in total) from the Chirag (53,000 b/d), Central Azeri (149,000 b/d), West Azeri (116,000 b/d), East Azeri (74,000 b/d), Deepwater Gunashli (127,000 b/d) and West Chirag (125,000 b/d) platforms.

As part of our ACG annual work programme, we implemented a planned facility shut down programme (turnaround - TAR) on the Deepwater Gunashli platform in September. 

In accordance with the plan, production from the Deepwater Gunashli platform was suspended in September for about 11 days to enable efficient maintenance, inspection and project work to be undertaken. This work, which was designed to maintain the long-term ability of the platform to produce in a safe, reliable and environmentally sound way, was completed safely and on schedule.

At the end of September, 102 oil wells were producing, while 45 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 September 2016. In addition, three of Shah Deniz wells are also among BP’s top 10 producing wells globally.

Drilling and completion

ACG completed 13 oil producer wells, 4 water injection wells and 1 gas injector well during the first three quarters of 2016.

Associated gas

In the first three quarters of 2016, ACG delivered an average of 7.2 million cubic metres per day of ACG associated gas to SOCAR (1.97 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

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.

In the three quarters of 2016, the Sangachal terminal exported over 219 million barrels of oil. This included over 194 million barrels through Baku-Tbilisi-Ceyhan (BTC), over 23 million barrels through the Western Route Export Pipeline (WREP), and about 2 million barrels via a separate condensate export line.

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

On average, 29.1 million standard cubic metres (1.027 billion standard cubic feet) of Shah Deniz gas was exported from the Terminal daily during the three quarters.

Baku-Tbilisi-Ceyhan (BTC)

pThe 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).

During the first three quarters of 2016, BTC spent approximately $87 million in operating expenditure and $41 million in capital expenditure.  

Since the 1,768km BTC pipeline became operational in June 2006 till the end of the third quarter of 2016 it carried a total of about 2.55 billion barrels (around 341 million tonnes) of crude oil loaded on 3,354 tankers and sent to world markets.  

During the three quarters of 2016, BTC exported around 193 million barrels (about 25.7 million tonnes) of crude oil loaded on 242 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 the first three quarters of 2016, Shah Deniz spent approximately $334 million in operating expenditure and about $2.77 billion in capital expenditure, the majority of which was associated with the Shah Deniz Stage 2 project.

Production

In the three quarters of 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. 

During the three quarters of 2016, the field produced about 8 billion standard cubic metres (bcm) of gas and 1.9 million tonnes (about 15 million barrels) of condensate.

The existing Shah Deniz facilities’ production capacity is currently 29.5 million standard cubic metres of gas per day or around 10.8bcma.

Drilling

During the third quarter of 2016, Shah Deniz existing (Alpha) platform completed the deep hole drilling of the SDA09 well and commenced completion operations which are currently ongoing.

The Istiglal rig upgrade and commissioning was completed in mid-September. After this the rig started completion operations on the SDC04 well, which are currently ongoing. The Heydar Aliyev rig drilled the SDG03 well. It is now drilling the SDG02 well reservoir section.

The above two rigs have already drilled ten 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 the three quarters of 2016, implementation of the Shah Deniz Stage 2 project continued successfully. The project is now over 83% 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. To date the transportation, launch, and positioning activities of the Production and Risers (PR) platform jacket structure have been completed safely while pile installation is still ongoing. 

The pipelay barge Israfil Huseynov has completed installation of all four North Flank and West Flank flowlines and is currently making progress on the remaining 32’’ gas export lines – this scope of work will continue through into the first quarter of 2017.

The subsea construction vessel Khankendi has continued good progress and started up its main engines in September. Once completed, this new vessel will be deployed to the Shah Deniz 2 area for the construction of the subsea structures.

At the ATA yard, construction of both Shah Deniz 2 platform topsides is well above 90% complete and commissioning is progressing. The flare tower has been safely installed on the Production and Risers platform. 

In the third quarter of 2016, over 24,000 people were involved in construction activities 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 the three quarters of 2016, SCP spent about $21 million in operating expenditure and around $764 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 about 20 million cubic metres of gas per day in the three quarters of 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 the third quarter of 2016, SCPX activities continued successfully along the pipeline route across Azerbaijan and Georgia. 

In Azerbaijan, mainline construction continued with approximately 196km of pipe welded, 177km of pipe coated and 168km of pipe lowered into trenches. Trenching, lowering, laying and backfilling activities are progressing.

In Georgia, trenching, lowering and laying activities continued during the third quarter. Mainline construction continued with nearly 59km of pipe welded and coated, and about 52km of pipe lowered into trenches. 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 80% complete and on track for 2017 delivery. Compressor Station 2 (CSG2) and Metering Station (Area 81) construction works are planned to be delivered in 2018.

Exploration

Final interpretation of the Shafag-Asiman 3D seismic dataset was completed during the first quarter of 2016 and work has commenced on planning for the first exploration well on the structure.

On the Shallow Water Absheron Peninsula (SWAP) contract area we commenced 3D seismic acquisition on 31 May. The total programme is expected to last around nine months. This acquisition includes operations onshore and in the shallow water offshore. Up to 17 specialized shallow water vessels are being used to deploy seabed recording nodes and tow small acoustic energy sources in an area which extends up to 20 km from shore. 

To date nearly 582 square kilometers of 3D data has been recorded. Currently we are moving to the central marine part of the SWAP area which will include some land 3D work. Processing of the 3D data has started for the first initially acquired area and continues with the second acquired area.  Processing will continue into 2017.

People

At the end of the third quarter of 2016, the number of BP’s Azerbaijani national employees was 2,865, including fixed-term employees. 86% 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.

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.

As part of the nationalization plan, effective 1 January 2016, Elkhan Mammadov was appointed Vice-President for Production. This new appointment marked the first national vice-president role with a technical portfolio of responsibilities in BP Azerbaijan. This was followed by two new appointments of Azerbaijani citizens to vice-president roles - Orkhan Guliyev was appointed Vice-President for Regional Safety and Operational Risk effective June 2016 and Zaur Pashayev Vice-President for Regional Midstream Operations effective September 2016.

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.

During the first three quarters of 2016, BP and the co-venturers in BP-operated joint ventures spent $0.91 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 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 has been initiated as a pilot phase, if successful its experience will be used to cover all agricultural vocational schools across the country.
  • The Enterprise Development and Training Programme (EDTP), 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 have recently taken a decision 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 131 technicians training at the Centre - 79 in 2015, and 52 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 have completed CISCO certified IT skills and capacities training, expanding their employment opportunities. Work is currently underway to expand the same programme 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, it is planned to continue to support 23 most successful graduates from the CISCO training courses, providing them with further opportunities to acquire advanced IT skills and improve their English language knowledge. 
  • BP (on behalf of the co-venturers in the South Caucasus Pipeline Company) launched 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, 275 computers have been donated to 42 communities in the Garadagh, Hajigabul, Kurdamir, Ujar, Agdash, Yevlax, Goranboy, Samukh, Shamkir, Tovuz and Agstafa regions. The plan is to donate more than 100 additional computers to the remaining communities by the end of 2016.
  • 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’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. This included support for the athletes’ preparation for and participation in the Rio Games. BP has decided to continue its support to both National Committees and a group of national athletes till Tokyo 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