2007 first quarter results media briefing by the BP Azerbaijan Leadership Team

29 May 2007

Azeri-Chirag-Gunashli (ACG) ACG participating interests are: BP (operator - 34.1%), Chevron (10.2%), SOCAR (10%), INPEX (10%), Statoil (8.6%), ExxonMobil (8%), TPAO (6.8%), Devon (5.6%), ITOCHU (3.9%), Hess (2.7%). 

During the first quarter of the year ACG spent $79 million in operating expenditure and $614 million capital expenditure. For the full year, we plan to spend $396million in operating expenditure and $2,579 million in capital expenditure. 

During the first three months of the year we produced a total of 61 million barrels (around 678,000 barrels per day average) from the Chirag, Central Azeri, West Azeri and East Azeri platforms. Our current total daily production is over 700,000 barrels per day. 

Our plan to produce an average of 708,000 barrels per day from the four platforms in total for the full year remains on target. Of this, 141,000 barrels per day is expected from Chirag, 257,000 barrels per day from Central Azeri, 168,000 barrels per day from West Azeri and 142,000 barrels per day from East Azeri. 

Chirag has 21 wells in operation (14 oil producers and seven water injectors) and is now producing around 142,000 barrels per day. From the start of production in November 1997 to the end of the first quarter 2007, Chirag had produced over 395 million barrels (over 53 million tonnes) of oil. 

Central Azeri (CA) has 14 wells (11 oil producers and three gas injectors). CA is currently producing around 250,000 barrels per day. From the start of production in February 2005 to the end of the first quarter 2007, CA had produced over 149 million barrels (over 20 million tonnes). 
West Azeri (WA) has six wells all of which are oil producers. WA is currently producing around 185,000 barrels per day. From the start of production in early January 2006 to the end of the first quarter 2007, WA had produced 49.7 million barrels (6.7 million tonnes) of oil. 

East Azeri (EA) is currently producing around 150,000 barrels per day from five out of the eight pre-drilled wells. We expect production to increase through 2007 as the other pre-drilled wells are brought online, prior to platform drilling commencing later this year. 

Chirag: We are currently completing a sidetrack producer well, A-10z. We will then conduct some re-completion works on A-11 and finalise completion operations on A-21, which is an extended reach drilling water injector. We plan to drill two more sidetrack producer wells on Chirag this year. 

Central Azeri: We completed the fourth platform-drilled well (a gas injector) on April 18. The B16Y (re-entry) platform well was completed in mid-May. We plan to drill four more wells from the CA platform this year - two water injectors and two production wells. 

West Azeri: To date, we have drilled six platform wells. We are currently drilling a further producer well which was spudded in April. We plan to complete this well at a total depth of 3755m by early-July. We plan to drill four more wells from West Azeri in 2007. 

East Azeri: We are continuing completion and tie-back activities on pre-drilled wells. To date we have tied back five wells (including a cuttings-re-injection well) with one more outstanding. We plan to drill two new wells (both water injectors) from the platform by the end of 2007. 
Deep Water Gunashli: Pre-drilling continued successfully using the Dada Gorgud semi-submersible drilling rig during the first quarter of this year. We completed ten wells before the drilling, utilities and quarters (DUQ) platform jacket transferred offshore. Of these, one is planned as a cuttings re-injection well and one as a platform water injector. We are planning to start-up DWG’s tie-back programme later this year once the topsides offshore installation is complete. 

The DWG drilling campaign also includes ten subsea water injection wells, which will also be drilled with the Dada Gorgud. 

The rig will then undertake drilling and completion activities at the south manifold location on well G-01, and drill and suspend two further wells - G-02 and G-03. Once completed the rig will be moved to the north manifold location to drill and complete well F-01 and drill and suspend two other wells - F-02 and F-03. 

Associated gas
Since the beginning of this year, supply of associated gas from the CA, WA and EA platforms has continued via the 28” gas subsea pipeline into the Sangachal Terminal and into Azerigas’s national grid system for domestic use. Some of the associated gas produced from the Chirag platform has continued to flow to the SOCAR compression station at Oil Rocks via the existing 16” subsea gas pipeline. The rest of the associated gas from the ACG platforms has continued to flow via in-field subsea gas pipelines to the Compression and Water Injection Platform (C&WP) for re-injection to maintain pressure in the reservoir. 

In 2007 we planned to deliver 1.4 billion cubic meters of ACG associated gas to SOCAR. However, as agreed by AIOC and SOCAR early this year we have been delivering up to 8.5 million cubic metres of gas per day to SOCAR since January 1st 2007. 
Export operations
During the first quarter of 2007 oil from ACG has continued to flow via one 24" and two 30" subsea pipelines to the Sangachal terminal. The terminal's total oil processing capacity is now over 800,000 barrels per day and plans are to raise it to over one million barrels of oil per day when ACG Phase 3 facilities are commissioned at the terminal later this year. 

In April the facility's operations reached a significant milestone: 1300 days without a day away from work case. The terminal's performance over the past three years has been outstanding. Commissioning, start-up and integration were successfully completed, including the Phase 1 and Phase 2 processing facilities, BTC main pump station, SCP facilities, Shah Deniz plant, as well as integrating SOCAR's and third party pipelines into the terminal's operations. In April Sangachal achieved its highest daily export rate to date when over 900,000 barrels were processed and exported. 

During the first quarter of 2007 oil continued to be transported to the global markets, principally via BTC. 

Baku-Tbilisi-Ceyhan Pipeline: In early April the Baku-Tbilisi-Ceyhan (BTC) pipeline celebrated the lifting of the 100 millionth barrel of oil from the Ceyhan Terminal in Turkey. Since last June, 131 million barrels (17.6 million tonnes or 165 tanker loadings) have been exported via BTC. From April 2007, BTC shareholders have been sending all of their oil volumes from ACG via the BTC pipeline. 
Other export routes: From 1997 to the end of the first quarter of 2007, about 186 million barrels (282 tanker loads or approximately 25 million tonnes) of oil (including SOCAR non-ACG oil) was transported via the Northern Route Export Pipeline. Currently an average of around 100 000 barrels of oil per day is being transported via the railway systems of Azerbaijan and Georgia. From the beginning of railway transportation by the end of the first quarter of 2007, about 73 million barrels of oil (9.8 million tonnes or 122 tankers) had been transported by rail to Batumi in Georgia. The Western Route Export Pipeline (WREP) to Supsa is currently shut down as a precautionary measure to allow the completion of an extended repair programme which includes re-routing of a one kilometre section in Georgia. The pipeline will be restarted as soon as we complete all the necessary repairs and satisfy ourselves of the integrity of the pipeline. 

Major highlights for the quarter included: 
  • completion of the pipelay barge refurbishment
  • installation of Phase 3 north and south subsea manifolds
  • sail-away and installation of the Phase 3 Drilling, Utilities and Quarters (DUQ) platform jacket and the Production, Compression, Water Injection and Utilities (PCWU) platform jacket
  • commencement of commissioning of Phase 3 facilities at the Sangachal Terminal
Through our construction contractors we currently employ 7900 people at ACG construction sites. Of these, 75% are Azerbaijan nationals. 

Overall Phase 3 (DWG) construction activities have made very good progress this year. We are on target to achieve first production in the second quarter of 2008. 
The jacket for the Phase 3 DUQ sailed away on April 9 from the Heydar Aliyev Baku Deepwater Jackets Factory (BDJF) and docked onto pin piles at the template location in the Deepwater Gunashli (DWG) part of the Azeri-Chirag-Gunashli (ACG) field on April 11. The PCWU platform jacket sailed away on May 13th and was docked onto pin piles at the DWG site on May 16th. 

The Phase 3 jackets were fully constructed in Azerbaijan at the BDJF. Their total weight is over 15,000 tonnes, they are 190 metres high, and they were installed in a water depth of 175 metres. 

Phase 3 DUQ topsides fabrication is currently 95% complete and we plan to install them during the third quarter of 2007.
Phase 3 PCWU topsides are currently 93% complete and we expect to install them during fourth quarter of 2007. 

This year we began installing the Phase 3 subsea water injection facilities using the Pacific Askari. In March we installed the south flank manifold and umbilical distribution skid, and in May we installed the north flank manifold. These facilities will inject over 400,000 barrels of water per day into the Deepwater Gunashli reservoir through six subsea wells drilled from two subsea drilling centres around five-kilometres from the Deepwater Gunashli platform. Development of these subsea facilities marks the first significant subsea development in the Caspian Sea and paves the way for future Caspian subsea developments in ACG, Shah Deniz and elsewhere. 

The Phase 3 east manifold subsea water injection project is designed to inject another 200,000 barrels of water per day into the Deepwater Gunashli reservoir through four subsea wells drilled from a single subsea drilling centre. The engineering and procurement of this manifold is currently 75% complete. 
Sangachal Terminal Expansion Programme (STEP) ACG Phase 3 is the next important phase of construction at STEP. The main construction works are progressing well and are currently 97% complete overall. The Phase 3 facilities are expected to be completed during the fourth quarter of 2007. 

The remaining 2007 ACG project construction milestones are: 
  • install DUQ topsides -3Q
  • complete brownfield project installation - 3Q (this includes Phase 3 export compressor on C&WP, produced water treatment unit and flash gas compressor on CA)
  • deliver DWG east manifold subsea water injection trees to Baku - 3Q
  • complete produced water project detail design and pipelay - 4Q
  • deliver all main produced water packages to site - 4Q
  • complete trains 5 and 6 at the Sangachal Terminal - 4Q
  • install PCWU topsides - 4Q
Baku-Tbilisi-Ceyhan (BTC) 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 Hess (2.36%). 

During the first quarter of this year BTC spent $16 million in capital expenditure and the total capital expenditures in 2007 will be $152 million. 

Following the final commissioning of BTC pump stations and conversion of all pumps in Azerbaijan and Georgia from diesel fuel to gas turbines in March, BTC is now capable of running at its design capacity of one million barrels of oil a day. It has already exceeded an export rate of 870,000 barrels of oil per day and is on target to achieve one million barrels per day (approximately 50 million tonnes per year) in late 2008. At its peak the Ceyhan terminal will fill 1-2 tankers per day. 

Deliveries of Shah Deniz condensate into the BTC pipeline began with the start of Shah Deniz production earlier this year. 

We expect that future volumes will include those from other Caspian fields. 
Shah Deniz Shah Deniz participating interests are: BP (operator - 25.5%), Statoil (25.5%), SOCAR (10%), LUKoil (10%), NICO (10%), Total (10%), and TPAO (9%). 

The Shah Deniz project is a gas condensate development in the Azerbaijan sector of the Caspian Sea with planned gas export to markets in Azerbaijan, Georgia and Turkey. 

During the first quarter of 2007, the project spent $29 million of the planned $183 million operating expenditure, and $102 million of the planned $334 million capital expenditure on Shah Deniz activities. 

The field has been producing steadily since early March to off-take points in Azerbaijan and Georgia. 

Shah Deniz is currently producing around 180 million cubic feet (about 5.2 million cubic metres) of gas, plus about 15,000 barrels of condensate per day from two wells. This makes around 46,000 barrels of oil equivalent per day. A second well - Well-01 was brought back on production on May 25 following successful completion of repair works. Production will continue to increase during the year as the remaining two pre-drilled wells are brought on stream. Drilling of new wells will commence from the platform later this year. 

In 2007 we plan to produce an average of around 65,000 barrels per day (oil equivalent) from Shah Deniz. 8.6 billion cubic meters of gas per annum and approximately 30,000 barrels of condensate per day. 

Appraisal drilling
Work on the exploration and appraisal well SDX-4 continues with a geological sidetrack. In March 2007 we logged the deeper section of the pre-Fasila formation depths of about 7300m. 

We will know the results of these appraisal activities after we have completed drilling and analysis. 
South Caucasus Pipeline (SCP) The SCP Co. shareholders are: BP (technical operator - 25.5%), Statoil (commercial operator - 25.5%), the State Oil Company of Azerbaijan Republic (SOCAR - 10%), LUKoil (10%), NICO (10%), Total (10%), and TPAO (9%). 

During the first three months of 2007 we spent $12 million of the planned $41 million for capital expenditure on SCP activities in 2007. 

SCP has been operational since 2006, delivering gas from Shah Deniz to Azerbaijan and Georgia. The pipeline was tied-in with the Turkish pipeline system at the Georgian - Turkish border in December and is ready to deliver gas to Turkey when they are ready to receive it. 
Exploration Inam PSA (BP 25% and operator, SOCAR 50% and Shell 25%): Planning of the INX-2 well (using the Istiglal rig) has moved into the final stage. The start of drilling activities will follow SDX-04 completion. 

Further information:
Tamam Bayatly at BP’s Press Office in Baku, telephone: 994 (0) 12 599 4557