2015 first quarter results

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).

In the first quarter of 2015, we spent approximately $160 million in operating expenditure and $470 million in capital expenditure on ACG activities.

Production

In the first quarter, ACG continued to deliver stable production. Total ACG production in the quarter was on average 661,000 barrels per day (b/d) (59 million barrels or 8 million tonnes in total) from the Chirag (54,000 b/d), Central Azeri (159,000 b/d), West Azeri (129,000 b/d), East Azeri (71,000 b/d), Deepwater Gunashli (149,000 b/d) and West Chirag (99,000 b/d) platforms. During the first quarter, West Chirag continued to ramp up production reaching its current level of over 116,000 barrels per day.

At the end of the quarter, 84 oil wells were producing, while 40 wells were used for gas or water injection.

Drilling and completion

In the first quarter of 2015, ACG delivered four oil producer wells.

Associated gas

In the first quarter, ACG delivered an average of 13.6 million cubic metres per day of ACG associated gas to SOCAR (1.2 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 mainly re-injected for reservoir pressure maintenance.

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 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.

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.

In the first quarter, the Sangachal terminal exported 79.2 million barrels of oil and condensate. This included about 69 million barrels through Baku-Tbilisi-Ceyhan (BTC), over 8 million barrels through the Western Route Export Pipeline (WREP), about 1.6 million barrels by rail and about 0.5 million barrels via a condensate export line.

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).

In the first quarter, BTC spent approximately $44 million in operating expenditure and $4 million in capital expenditure.

BTC’s throughput capacity is currently 1.2 million barrels per day.

The 1,768km BTC pipeline became operational in June 2006. Since that time BTC has carried a total of about 2.2 billion barrels (289 million tonnes) of crude oil loaded on about 2,850 tankers and sent to world markets.

In the first quarter, BTC exported about 69 million barrels (9 million tonnes) of crude oil loaded on 96 tankers at Ceyhan.

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

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 quarter, Shah Deniz spent approximately $0.1 billion in operating expenditure and $1.1 billion in capital expenditure, the majority of which was associated with the Shah Deniz Stage 2 project.

Production

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

During this period, the field produced 2.6 billion standard cubic metres (bcm) of gas and 0.6 million tonnes (about 5 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 bcma.

Drilling

In the first quarter, the existing Shah Deniz Stage 1 platform continued drilling a new production well, whilst the Istiglal and Heydar Aliyev rigs continued drilling operations in support of the Shah Deniz Stage 2 pre-drill programme. These two rigs have already drilled seven production wells in preparation for the first gas. Drilling operations will continue towards delivery of all wells required to reach the planned plateau level.

In the first quarter, the Shah Deniz Stage 2 project continued to move ahead with a number of milestones achieved ahead of schedule.

The project is currently progressing at pace with wide scale activities ongoing at all 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 particular, the platform decks and jackets are taking shape at the ATA and BDJF yards, respectively.

The project has already awarded the major engineering, construction and supply contracts, valued at about $10 billion.

In Azerbaijan, over 10,000 people are involved in construction activities across all main contracts and over 93% of them are Azerbaijani nationals.

The SCP Co. shareholders are: BP, operator (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 first quarter, SCP spent about $12 million in operating expenditure and $245 million in capital expenditure.

The pipeline has been operational since late 2006, transporting Shah Deniz Stage 1 gas to Azerbaijan Georgia and Turkey from.

In the first quarter, SCP’s daily average throughput was 21 million cubic metres of gas per day.

In the first quarter, SCPX activities continued along the pipeline route across Azerbaijan and Georgia. Shipment of pipe sections, which started last year, will continue throughout 2015 and into early-2016. In total, over 40,000 sections of pipe will be delivered in 19 shipments.

The key achievements to date include:

• Acquisition of land for the first 200 km right of way in Azerbaijan is complete. Land acquisition has commenced on the remaining part of the route.
• Construction of Compressor Stations 1 and 2 in Georgia commenced
• Stockpiling of pipe at the first pipe storage yard is complete and is in progress at the second storage yard in Azerbaijan.Activity on the SCPX project will continue during 2015 including the commencement of pipe-laying activity in Azerbaijan and Georgia during the third quarter.
  

In the first quarter, we continued the interpretation of the seismic dataset for Shafag-Asiman. This work will require some 18 months to complete and will be followed by another year required for planning of the first exploration well.

We also signed a new exploration contract with SOCAR in 2014 to jointly explore for and develop potential prospects in the shallow water area around the Absheron Peninsula in the Azerbaijan sector of the Caspian Sea. On 14 April, this PSA was ratified by the Milli Majlis (Parliament of Azerbaijan). This is a significant milestone that enables BP to move forward with its commitments under this PSA using its experience and advanced technology solutions from other shallow water areas around the world.

At the end of the first quarter, BP employed directly 2,829 Azerbaijani nationals. Some 85% of BP’s permanent professionals in Azerbaijan are nationals and many of them are in senior leadership positions.

BP continues to focus on the training of nationals including technicians who are trained in the Caspian Technicians Training Centre (CTTC) at Sangachal. Over the 10 years of its existence CTTC has successfully trained more than 1,000 national technicians for BP-operated facilities. The role of these highly qualified technicians is critical to running all of BP-operated facilities both onshore and offshore safely and reliably.

BP also continues the training of selected national engineers through the world-class training initiative called “Petro-technical Resource Entry Programme” (PREP). This 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.

In addition, BP remains committed to achieving 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.

The success of BP-operated projects in the Caspian, in part, depends on the operator’s ability to create tangible benefits from these projects for the people of the regional countries. To achieve this, BP continues to implement 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.

In the first quarter, BP and co-venturers spent $1.73 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 its co-venturers’ Enterprise Development and Training Programme (EDTP) which is a multi-million dollar initiative in support of local business development. The programme is part of BP’s and its co-venturers’ efforts to increase the local content of their contracts in Azerbaijan and contribute to the healthy and transparent development of local economy. Since its start the EDTP has aimed to contribute to the broadening of Azerbaijan’s economic base and to enhance the capacity of local firms to compete in domestic markets and the wider Caspian region and beyond. The EDTP has proven to be an excellent opportunity for local enterprises to reach international standards and compete for supply contracts in the oil and gas industry. BP and its co-venturers have also hosted ‘Meet the Buyer’ events to provide additional opportunities for local companies to enhance their capabilities, develop their business and build relationship with their potential clients. To date three ‘Meet the Buyer’ events have been successfully arranged. In addition, for a number of years BP and its co-venturers have funded a group of most successful local companies’ participation in the annual Caspian International Oil Exhibitions in Baku.
  
• 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 three highly successful graduations with a total number of 300 representatives of some 98 private and public sector organizations trained using globally-recognized project management training curriculum. In March 2014, BP and its co-venturers extended their support for the SPM until November 2015 by signing a new Memorandum of Understanding on extension of the initiative.
  
• BP on behalf of its co-venturers and UNICEF have signed a memorandum of understanding (MOU) in Baku to confirm their intention to cooperate within a planned major educational initiative. The project called “Partners in Education” is designed to support the country in initiating and implementing projects aimed at creating new educational models. The MOU enables the two parties to work together with other stakeholders, which include the Ministry of Education and the Ministry of Emergency Situations, to develop new effective school models. The scope of the project specifically focuses on the establishment of new comprehensive child-seeking school models in the Kurdamir, Ujar, Agdash, Yevlakh, Samux, Goranboy, Shamkir and Tovuz districts along the BP-operated BTC and SCP pipelines.
  
• BP is an Official Partner of the Baku 2015 European Games. This has allowed BP to assist elite athlete development in Azerbaijan. As part of this partnership BP has continued to help fund the development of aspiring medal hopes for Azerbaijan as the host nation ahead of the European Games. In addition, as part of this project, BP is the exclusive Official Partner of the Baku 2015 Games Academy initiative, an innovative learning programme which supports the creation of a capability legacy in Azerbaijan. It specifically aims to develop national staff members including university graduates from Azerbaijan and Europe, preparing them for the efficient delivery of a major multi-sport event, as well as developing skills which will assist them in their future career. For more information please visit: bp.com/baku2015.
  
• 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 is also cooperating with SOCAR in the training and development of national workforce and in the human resources area. The two 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 BP is supporting vocational and technical discipline training for about 90 representatives of the local communities residing in the neighbourhood of the Sangachal Terminal - Sangachal, Umid, Azimkend and Gobustan settlements.
  
• 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 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, met with the teaching staff and students of Baku Higher Oil School last December sharing his own experience in the industry and information about BP operations and plans.