First half 2018 results

ACG participating interests are: BP (30.37 per cent), SOCAR (25.0 per cent), Chevron (9.57 per cent), INPEX (9.31 per cent), Statoil (7.27 per cent), ExxonMobil (6.79 per cent), TPAO (5.73 per cent), ITOCHU (3.65 per cent), ONGC Videsh Limited (OVL) (2.31 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 half of 2018, we spent about $236 million in operating expenditure and $552 million in capital expenditure on ACG activities.

Production

In the first half of 2018, ACG continued to safely and reliably deliver stable production. Total ACG production for the six months was on average 596,000 barrels per day (b/d) (about 108 million barrels or 15 million tonnes in total) from the Chirag (49,000 b/d), Central Azeri (158,000 b/d), West Azeri (127,000 b/d), East Azeri (96,000 b/d), Deepwater Gunashli (107,000 b/d) and West Chirag (59,000 b/d) platforms.
At the end of June, 116 oil wells were producing, while 53 wells were used for gas and water injection.

Drilling and completion

ACG completed 6 oil producer wells and 2 water injectors in the first half of 2018.

Associated gas

In the first half, ACG delivered an average of about 6 million cubic metres per day of ACG associated gas to SOCAR (1.1 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.

In the first half of 2018, 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 30 million standard cubic metres of Shah Deniz gas, while overall processing and export capacity for gas, including ACG associated gas is around 50 million standard cubic metres per day.

In the first half, the Sangachal terminal exported more than 141 million barrels of oil and condensate, including third party volumes. Of this, more than 124 million barrels were exported through Baku-Tbilisi-Ceyhan (BTC), more than 16 million barrels through the Western Route Export Pipeline (WREP), and about 1 million barrels via a separate condensate export line.

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

On average, about 27 million standard cubic metres (more than 963 million standard cubic feet) of Shah Deniz gas was exported from the Terminal daily during the first half of 2018.

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

In the first half of 2018, BTC spent approximately $61 million in operating expenditure and about $13 million in capital expenditure.

Since the 1,768km BTC pipeline became operational in June 2006 till the end of the first half of 2018, it carried a total of about 2.99 billion barrels (more than 399 million tonnes) of crude oil loaded on 3,916 tankers and sent to world markets.

In the first half of 2018, BTC exported more than 125 million barrels (about 17 million tonnes) of crude oil loaded on 158 tankers at Ceyhan.

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

Shah Deniz participating interests are: BP (operator – 28.8 per cent), TPAO (19.0 per cent), AzSD (10.0 per cent), SGC Upstream (6.7 per cent), PETRONAS (15.5 per cent), LUKOIL (10.0 per cent) and NICO (10.0 per cent).

In the first half of 2018, Shah Deniz spent more than $250 million in operating expenditure and about $798 million in capital expenditure, the majority of which was associated with the Shah Deniz 2 project.

Production

In the first half of 2018, the Shah Deniz field continued to provide deliveries of gas to markets in Azerbaijan (to SOCAR), Georgia (to GOGC), Turkey (to BOTAS) and to BTC Company in multiple locations.

During the first six months of the year, the field produced 5 billion standard cubic metres (bcm) of gas and 1.1 million tonnes (9 million barrels) of condensate.

The existing Shah Deniz facilities’ production capacity is currently 32.0 million standard cubic metres of gas per day or around 10.9bcma.

Drilling

During the second quarter of 2018, Shah Deniz Alpha platform completed drilling the SDA11 well, with completion operations currently ongoing.

The Istiglal drilling rig completed and tested SDD04 well and commenced SDG04  well completion which is currently ongoing.  The Maersk Explorer rig continues drilling the lower section of the SDH02 well.

The above two rigs have already drilled 14 wells and completed four wells on the North Flank and four wells on the West Flank for Shah Deniz Bravo platform production and subsequent ramp up. Drilling operations will continue to deliver all wells required to ramp up to plateau level.

After achieving significant commissioning and completion milestones across the whole gas value chain during the first half of the year, the Shah Deniz 2 and South Caucasus Pipeline Expansion (SCPX) system entered the start-up phase with the official inauguration event held at the Sangachal Terminal on 29 May. This was followed by the commencement of commercial gas deliveries to Turkey from the Shah Deniz 2 development project as planned on 30 June 2018. The Shah Deniz 2 project is being delivered safely, on schedule and within budget.

In parallel, during the first half of 2018, hook-up and commissioning activities continued on the Shah Deniz Bravo platform. The testing of the subsea flowlines and wells is complete. The Bravo facilities have entered the operational phase.

The SCP Co. shareholders are: BP (28.8 per cent), TPAO (19.0 per cent), AzSCP (10.0 per cent), SGC Midstream (6.7 per cent), PETRONAS (15.5 per cent), LUKOIL (10.0 per cent) and NICO (10.0 per cent).

In the first half of 2018, SCP spent $18 million in operating expenditure and about $241 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 21 million cubic metres of gas per day during the first half of 2018.

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

During the first half of 2018, SCPX activities continued successfully along the pipeline route across Azerbaijan and Georgia. All infrastructure across Azerbaijan and Georgia required to support first commercial gas deliveries to Turkey were completed on schedule and were ready to operate before commencement of export on 30 June.

The pipeline is currently supporting Shah Deniz 2 first commercial deliveries to Turkey with export volumes flowing through SCPX facilities and pipeline sections in Azerbaijan and Georgia.

In parallel, in Azerbaijan, commissioning activities continue at the associated above ground installations. In Georgia, Compressor Station 2 construction is progressing well with over 99% of work completed and commissioning ongoing on schedule.

During the first half of 2018,  the processing and interpretation of the 3D data acquired from the Shallow Water Absheron Peninsula (SWAP) contract area was finalized. A Notice of Prospectivity was signed with SOCAR, signifying BP’s commitment to drill exploration wells in three prospective areas in shallow water Absheron. Planning for the exploration wells drilling in the selected prospective areas is ongoing.

We also continue to plan for the first exploration well on the Shafag-Asiman block.

At the end of the first half of 2018, the number of BP’s Azerbaijani national employees was 2,669 including fixed-term employees. This makes around 90 percent of BP’s professional employees in Azerbaijan, with many of them in senior positions.

BP had a commitment made in 2014 to achieve a nationalization target of 90 per cent professional staff by the end of this year. BP is proud to have supported development of its national staff which has resulted in nationalizing the majority of professional roles initially occupied by expatriate employees. Non-professional staff of BP in Azerbaijan is 100 percent nationalized. BP will continue its efforts to optimize its learning and development programmes and will actively participate in public and private sector initiatives to help improve the local talent market.

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 and the co-venturers continue 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 the first half of 2018, BP and the co-venturers in BP-operated joint ventures spent more than $2.3 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 capacity-building and enterprise development throughout Azerbaijan to assist the country in strengthening its economy.

Some examples of such projects in Azerbaijan are:

• BP and its coventurers are supporting a programme aimed at enhancing employment opportunities for people with disabilities in Azerbaijan. The programme called “Enhancing employability skills for people with disabilities” targets  to develop skills and capabilities of up to 100 selected people through trainings and other specialised activities.

• 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 education in Azerbaijan. Under this partnership, BP and its co-venturers have committed to upgrading agricultural vocational education framework in Azerbaijan. The project is expected to result in the development of 19 modules for four new agricultural occupations (crop production, agriculture machinery, fruit growing, vegetable specialist) and trades thus contributing to the country’s plans to raise the efficiency of the agricultural sector. The project also includes development of textbooks and teaching materials in all of the newly-created occupations.

• 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.

• 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 had five graduations, training and internationally certifying 357 national project managers.  The project has been implemented in phases. One of the objectives set at the start of the project was to hand over the delivery of the training programme to national instructors. The SPM achieved this goal during Phase 4 in 2018 with the full transition of the training programme to the local staff.  The entire training staff of the SPM are now nationals and the project has been handed over to a local organisation for sustainable management.  

• BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) are supporting secondary schools in enhancing IT skills training. As part of this 3-year initiative a new curriculum for IT specialised secondary schools will be developed in cooperation with the Ministry of Education. In addition, 50 teachers representing 25 Baku schools will be trained to pilot and effectively use the new curriculum.

• BP (on behalf of the co-venturers in the joint ventures that BP operates in Azerbaijan) launched in September 2016 the “Build your Future” project to support a large group of 11th grade students selected from disadvantaged families in their preparation for university admission exams. The project activities include two components – academic knowledge and social integration. To date the project has had 2 successful phases with approximately 85 per cent of participants admitted to local universities. Based on this success the project will continue into phase 3.

• BP (on behalf of the co-venturers in the South Caucasus Pipeline Company) launched a pilot project in 2016 for capacity-building in the communities along the pipeline route in Goranboy, Samukh, Shamkir, Tovuz and Agstafa districts. The project was designed to enhance the quality of English language teaching in the communities. Building on the success of the pilot phase, the project has been extended to cover up to 165 teachers and 480 community members from 11 rural districts along the pipeline route.

• 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. As part of the project the first e-service and Consular Reference Manual for the Ministry of Foreign Affairs was developed and launched. In addition, capacity-building trainings have been conducted for a large group of Consular officers.

• BP (on behalf of the co-venturers in the South Caucasus Pipeline Company) is implementing a project to build early intervention services in 13 districts along the pipeline route and beyond - Hajigabul, Kurdamir, Agdash, Ujar, Yevlakh, Samukh, Goranboy, Shamkir, Tovuz, Agstafa, Agsu, Gobustan and Shirvan. 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 through the establishment of Early Intervention Centres at the target districts.

• BP (on behalf of the co-venturers in the Souh Caucasus Pipeline Company) are supporting two livelihood generation projects covering 200 community members from the Ujar, Yevlakh, Samukh and Shamkir districts by providing equipment, training and continuous consultancy in beekeeping and small farming. In December 2017, it was decided to expand the beekeeping project called “Sweet Gold” to cover additional 600 community members in other districts along the BP-operated pipelines.

• BP’s business lectures at Baku Higher Oil School (BHOS) by BP experts and senior executives are designed to support national petroleum engineers’ development in Azerbaijan.  As part of this initiative, BP senior managers and members of the leadership team regularly give lectures and presentations at BHOS, sharing their knowledge and experience and providing information about BP’s activities, technology, operations processes and mechanisms. In addition, BP is funding an innovative educational project at BHOS - the “Business education for engineers”, to help national engineers smoothly step from university to business career. The programme is designed for the 5th year undergraduate students and aims to provide extensive knowledge in management and business.

• 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 series 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.