2020 first half results

ACG participating interests are: BP (30.37%), SOCAR (25.0%), MOL (replaced Chevron as of 16 April 2020 (9.57%), INPEX (9.31%), Equinor (7.27%), ExxonMobil (6.79%), TPAO (5.73%), ITOCHU (3.65%), ONGC Videsh Limited (OVL) (2.31%).

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 2020, we spent about $268 million in operating expenditure and more than $947 million in capital expenditure on ACG activities.

During the second quarter the ACE (Azeri Central East) platform fabrication activities on the topsides and drilling facilities at the Bibi-Heybat fabrication yard, and the jacket fabrication at the Heydar Aliyev Baku Deepwater Jackets (BDJF) factory continued with social distancing measures in place and limitations on the work force numbers. Good progress is being made with the first major lift of the drilling support module lower deck achieved and the first major equipment delivered to Baku in the second quarter. The next major topsides lift was successfully completed in July 2020.  

The fabrication of the living quarters in Sweden continues, as does the subsea fabrication at BDJF with the subsea pipe coating already completed at Caspian Pipe Coating (CPC).

COVID-19 pandemic restrictions in Azerbaijan and around the world continue to impact the delivery of materials and equipment throughout the supply chain. Despite of these, the project team continue to work collaboratively with all parties to achieve the best outcome for the project and the jacket pin piles are on target for installation in the third quarter of
2020.

Production

During the second quarter, ACG continued to safely and reliably deliver stable production. Total ACG production for the first half of 2020 was on average about 498,000 barrels per day (b/d) (about 91 million barrels or more than 12 million tonnes in total) from the Chirag (38,000 b/d), Central Azeri (123,000 b/d), West Azeri (122,000 b/d), East Azeri (66,000 b/d), Deepwater Gunashli (96,000 b/d) and West Chirag (53,000 b/d) platforms.

At the end of the quarter, 129 oil wells were producing, while 42 wells were used for water and seven for gas injection.

Drilling and completion

In the first half of 2020, ACG completed eight oil producer wells.

Associated gas

During the first half, ACG delivered an average of 6.9 million cubic metres per day of ACG associated gas to SOCAR (1.3 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.

During the first half of 2020, 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 condensate, and about 81 million standard cubic metres of Shah Deniz gas, while overall processing and export capacity for gas, including ACG associated gas is around 101 million standard cubic metres per day.

During the six months, the Sangachal terminal exported about 127 million barrels of oil and condensate. This included around 111 million barrels through Baku-Tbilisi-Ceyhan (BTC) and around 16 million barrels through the Western Route Export Pipeline (WREP).

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

On average, more than 51.1 million standard cubic metres (more than 1,805 million standard cubic feet) of Shah Deniz gas was exported from the terminal daily in the first half of the
year.

The BTC Co. shareholders are: BP (30.1%); AzBTC (25.00%); MOL (replaced Chevron as of 16 April 2020 (8.90%); Equinor (8.71%); TPAO (6.53%);

In the first half of 2020, BTC spent around $48 million in operating expenditure and about $14 million in capital expenditure.

Since the 1,768 km BTC pipeline became operational in June 2006 till the end of the second quarter of 2020, it carried a total of 3.47 billion barrels (more than 462 million tonnes) of crude oil loaded on 4,526 tankers and sent to world markets.

During the first half, BTC exported more than 113 million barrels (about 15 million tonnes) of crude oil loaded on 145 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.

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

In the first half of 2020, Shah Deniz spent about $409 million in operating expenditure and $452 million in capital expenditure, the majority of which was associated with the Shah
Deniz 2 project.

Production

During the six months, the Shah Deniz field continued to provide deliveries of gas to markets in Azerbaijan (to SOCAR), Georgia (to GOGC and SOCAR), Turkey (to BOTAS) and to
BTC Company in multiple locations.

In the first half of 2020, the field produced around 9.4 billion standard cubic metres (bcm) of gas and 1.9 million tonnes (15.4 million barrels) of condensate in total from the Shah
Deniz Alpha and Shah Deniz Bravo platforms.

The existing Shah Deniz facilities’ production capacity is currently over 56  million standard cubic metres of gas per day or more than 20 bcma.

The Shah Deniz 2 project

In the second quarter of 2020, the project team continued the installation of the subsea production infrastructure using the subsea construction vessel Khankendi. Mechanical
installation of flowlines between the Shah Deniz Bravo platform and the East South flank is progressing on board of the pipelay barge Israfil Huseynov. All activities within the Shah Deniz 2 project continue as planned to achieve the start up of the East South flank in 2021.

Drilling

During the second quarter of 2020, the Shah Deniz Alpha platform rig was on warm stack.

The Istiglal rig continued drilling the lower section of the SDC05 well. The Maersk Explorer rig drilled the SDF04 well to total depth and the well was then suspended. The rig then drilled the top hole of the SDF05 well.

The above two rigs have already drilled 18 wells in total, and completed 16 out of those, for Shah Deniz 2 production and subsequent ramp up (four wells on the North Flank, four
wells on the West Flank, four wells on the East South Flank, two wells on the West South Flank and two wells on the East North flank were drilled and completed, two wells on the West South flank were drilled to final depth and suspended). Drilling operations will continue to deliver all wells required to ramp up Shah Deniz 2 to plateau level.

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

In the first half of 2020, SCP spent about $22 million in operating expenditure and about $5 million in capital expenditure in total.

The SCP has been operational since late 2006, transporting Shah Deniz gas to Azerbaijan, Georgia and Turkey. The expanded section of the pipeline commenced commercial deliveries to Turkey in June 2018.

As of 20 March 2020, technical operatorship of the South Caucasus Pipeline (SCP) has been transferred from BP Exploration (Shah Deniz) Limited to SOCAR Midstream Operations Limited, a fully-owned subsidiary of SOCAR. More information is available in the official press release.

During the first half of the year, the daily average throughput of SCP was about 32.8 million cubic metres of gas per day.

On the Shafag-Asiman offshore block, the first exploration well was spudded on 13 January 2020. Drilling activities are currently ongoing at the depth of 2,500 metres. Once the well reaches the target depth, the well data will be analysed and, if successful, an evaluation programme may be conducted to confirm the results.

On D230, a 3D seismic acquisition programme, which commenced in December 2019, was successfully completed on 14 March 2020. The processing of the first stage of the acquired data was completed in June 2020. The full processing is expected to complete in the third quarter of 2020 and will be followed by interpretation. If the results from the interpretation of the seismic survey are positive, we will begin planning for the first exploration well.

In the Shallow Water Absheron Peninsula, planning for the exploration wells drilling in three selected prospective areas is ongoing. We will commence drilling activities early next year once the upgrade of the rig selected to drill the first well is completed.

At the end of the second quarter of 2020, the number of bp’s Azerbaijani national employees was 2,485 including fixed-term employees.

Since mid-2018, 90% of bp Azerbaijan’s professional staff has been nationals. Non-professional staff of bp in Azerbaijan is 100% nationalized.

bp will continue its efforts to optimize its learning and development programmes and will actively participate in public and private sector initiatives contributing to the development of 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 2020, bp and the co-venturers in bp-operated joint ventures spent more than $1.8 million in Azerbaijan 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 (on behalf of the co-venturers in the joint ventures that bp operates in Azerbaijan) is supporting a programme aimed at enhancing employment opportunities for people with disabilities in Azerbaijan. The programme called “Enhancing employability skills for people with disabilities” aims to develop skills and capabilities of selected people with disabilities through trainings and other specialised activities. The project also provides psychological counselling sessions to enhance the participants’ self-confidence. The first
  
• phase of this project ended in January 2019 and it moved to Phase 2 in July. In this new phase of the project the training programme has been expanded in order to further enhance employment opportunities for the participants. In 2019, bp Azerbaijan developed a special work placement programme and provided an opportunity for selected 9 participants from Phase 1 of the project to engage in an international working environment practicing their new skills and learning from experienced bp staff. Currently, the project continues in Phase 2 with 95 participants in attendance. Starting from April 2020, trainings and psychological support have been shifted to the online format.
• 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. In the first half of the year eleven new local companies enrolled for the programme  and seven companies graduated from it.   
  
• bp (on behalf of the co-venturers in the joint ventures that bp operates in Azerbaijan) is supporting secondary schools in enhancing IT skills teaching. As part of this 3-year initiative, a new curriculum for IT specialised secondary schools has been developed in cooperation with the Ministry of Education. In addition, 50 teachers representing 25 Baku schools have been were trained to pilot and effectively use the new curriculum. On the basis of the new curriculum, new teaching and learning materials including textbooks for the 10th and 11th grades have been developed and  printed.
  
• bp (on behalf of the co-venturers in the joint ventures that bp operates in Azerbaijan) is involved in the “Build your Future” project to support a large group of 11th grade students in their preparation for university admission exams. The participants in the project are selected from disadvantaged families. The project activities include two components – academic knowledge and social integration. In total, some 188 young people out of 207 participants in the past three academic years (91%) have been successful, meeting the requirements of the higher school entrance exams and becoming students. The project is currently ongoing with 108 participants targeting the university exams of 2020.
• bp (on behalf of the co-venturers in the joint ventures that bp operates in Azerbaijan) is supporting a livelihood generation project which initially covered 100 community members from the Yevlakh, Goranboy, Samukh and Shamkir districts by providing equipment, training and continuous consultancy in beekeeping and small farming. This project called “Sweet Gold” was then expanded to cover two more districts - Agstafa and Tovuz, along the bp-operated pipelines. This new phase is for three years - 2018-2020 aiming to benefit over 500 community members and to achieve the planting of over 110000 nectar trees for bee-breeding. To date over 60000 nectar trees have already been planted and over 400 new project beneficiaries have been selected.
• bp (on behalf of the co-venturers in the joint ventures that bp operates in Azerbaijan) is supporting Baku Engineering University by purchasing materials for chemical experiments and installing new equipment in the 11 laboratories earlier established at that university by bp. In addition, the project scope includes the translation from English into Azerbaijani of learning materials for the Chemical Engineering Department. The project, which is currently nearing completion, is expected to benefit more than 400 students every year. 
• bp (on behalf of the co-venturers in the joint ventures that bp operates in Azerbaijan) is supporting a project to improve the capability of up to 60 child development specialists through provision of trainings in physiotherapy. The project offered  trainings on the effective application of rehabilitation methods for the treatment of developmental delays and disabilities. The project scope also included preparation of  training materials  and their distribution among the project participants.
  
• bp (on behalf of the co-venturers in the joint ventures that bp operates in Azerbaijan) is supporting “English for Engineers Project” which intends to enhance English language knowledge of teachers and students of the Azerbaijan State Oil and Industry University. The project helps educational capacity-building, as well as improves the university’s international co-operation. To date, 18 English language teachers have successfully completed “Train-the-Trainers” courses. Classes for 200 students selected for the programme will commence online in the third quarter of the year.
  
• bp (on behalf of the co-venturers in the joint ventures that bp operates in Azerbaijan) is supporting the transfer of international business education expertise to the country through bringing the internationally-recognised Adaptive Strategic Execution Programme to Azerbaijan, basing it at Baku’s ADA University. Overall six streams are planned within the duration of the project covering a total of up to 108 students and of these two streams with a total of 44 participants have been completed. The training programme of the project is certified by the Fuqua School of Business at Duke University (USA) and is based on a world-class business education curriculum developed by Duke Corporate Education (Duke CE), a leader in providing executive education globally. The project is designed to help meet the current market demand in executive education. 
  
• bp (on behalf of the co-venturers in the joint ventures that bp operates in Azerbaijan) commenced a social infrastructure development project in September 2019 to support local communities in Hajigabul and Kurdemir. As part of this project, the renovation of three kindergartens (one in Hajigabul and two in Kurdemir) were completed during the first half of 2020.
  
• bp (on behalf of the co-venturers in the joint ventures that bp operates in Azerbaijan) are is implementing a project to support development of micro-entrepreneurial skills and capabilities of rural women and enhance their self-employment opportunities by setting up a Community Family Support Club in the Tovuz district.  The Club, whose staff have already been recruited and trained, will also provide daily care services to the children of vulnerable women. To date, the project has selected over 20 women who will be trained on entrepreneurship and will be provided with equipment to support their self-employment efforts.
• bp (on behalf of the co-venturers in the joint ventures that bp operates in Azerbaijan) are is supporting a three-year educational project to strengthen data analytics research and training capacity in Azerbaijan. This will be achieved through establishing a competitive and sustainable dual Master of Science in Computer Science and Master of Science in Data Analytics (MSCS/DA) degree programme, as well as further developing the Centre for Data Analytics Research at ADA University. The degree programme will be comprised of five semesters of which three semesters will take place in Baku and two semesters in Washington DC.   
  
• bp (on behalf of the co-venturers in the joint ventures that bp operates in Azerbaijan) have recently commenced a social project which aims to strengthen project management capabilities of over 10 local universities. Participants in the project will be trained to become internationally certified project management specialists (Certified International Project Management Associates, Level D) and make up project management teams in their respective universities. A textbook on project management has been prepared in the  Azerbaijani language to be used as a manual during the trainings
• bp (on behalf of the co-venturers in the joint ventures that bp operates in Azerbaijan) have launched a pre-school educational project which will bring together a group of local experts to develop a learning material for parents, childcare specialists and pre-school teachers. The learning material, comprised of 12 sections, will provide recommendations and guidance on effective care of children from birth to school age.

In addition, in the first half of the year, bp alone spent $0.9 million  on sponsorship projects in Azerbaijan. These included:

• Translation from English into Azerbaijani and publication of 10 academic textbooks on sustainability and supply chain management; human resources management; media and mass communications; banking and financial markets, principles of marketing; fundamentals of management; political science; social sciences; case management; ethics and values in social work.  It is expected that this project will help raise the quality of teaching of these disciplines in higher educational institutions benefiting more than 17,000 students at 10 universities. To date translation of six books have been completed and three of them have already been donated to local universities and libraries. 
• bp recently completed  a project aiming  to enhance the quality of education at the Azerbaijan State University of Economics (UNEC) through funding the establishment of three research laboratories related to the themes of food chemistry, food technology and ecology. The laboratories will be incorporated into graduate and undergraduate educational programmes of the university and will support the university in its efforts to provide the labour market with qualified workforce.     
  
• 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 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 Tokyo 2020.
• bp are supporting a youth project called “Yuksel” to help students and young people realize their professional dreams and develop individual qualities. The main idea of the project is to inspire young people to success and achievements. As part of the project, renowned people and well known specialists, who can serve as role models for young people,  lead workshops at Baku Book Centre every week and  present their audience with books purchased by bp on the subjects they cover at the workshops.
•  bp Azerbaijan sponsored online World Net Summit on innovations. This virtual conference on post-pandemic innovations industry took place 11-15 May to discuss and exchange views on the challenges imposed by COVID-19. bp Azerbaijan was the main sponsor of the event which was also supported by the Ministry of Transport, Communications and High Technologies, the United Nations Development Program, SUP VC and the Innoland Incubation and Acceleration Center. The conference brought together more than 30 speakers from 15 countries.     
  
• bp Azerbaijan also sponsored in April the first-ever 'EY Entrepreneur Of The Year' contest held in Azerbaijan. This EY founded programme is the world’s most prestigious business awards competition for entrepreneurs who contribute to innovation, growth and prosperity that transform our world.        
  
• bp recently  funded a technical study project which was designed as support for the Ministry of Energy aiming to improve efficiency of several existing small hydroelectric power plants in Azerbaijan as well as to conduct prefeasibility studies for some new plants.        
  
• bp is funding the “Management and business skills for young engineers” programme for Baku Higher Oil School. This is a comprehensive training programme that will equip young engineers with analytical tools and techniques to improve internal and external operations. The students will develop skills in the analysis and evaluation of complex business problems and gain a methodical approach to problem solving and decision making. The curriculum consists of eight core modules.       
  
• bp are also supporting the Enactus Azerbaijan project  which promotes entrepreneurship by developing students’ business skills. Enactus teams from 23 local universities, a total of 150 people, participated in the Winter School.  The universities winning annual competitions in different countries represent their countries and universities in the Enactus Global competition held in various countries around the world.
• bp relaunched its bursary progamme in late 2019. The programme aims to improve English language skills of the 2nd year students representing petrochemical universities. This will enable the students to pursue their career ambitions more confidently with improved English language skills. Currently about 30 students from different universities are taking part in the programme online.