Going Underground

The Shah Deniz Stage 2 and South Caucasus Pipeline Expansion projects are progressing significantly. What is the status of these projects?

Shah Deniz 2 is a giant investment project consisting of several major programmes covering marine and subsea, offshore, and onshore sections. This project builds on two decades of BP’s experience in developing oil and gas in the Caspian Sea. The success of the Shah Deniz Stage 1 development, the Azeri-Chirag-Gunashli (ACG), and Baku-Tbilisi-Ceyhan operations, gives us the confidence and know-how to deliver this project, which is expected to provide 16 bcm per year of Caspian gas to millions of consumers along the Southern Corridor countries and into Europe. The project continues to move ahead with a number of milestones successfully achieved. In Azerbaijan and Georgia, over 22,000 people are involved in construction activities across all main contracts. Thus far, nine wells have been drilled out of 26, enough to deliver the first gas. Execution activities are well underway in Azerbaijan and Georgia, including fabrication of jackets, decks, and subsea equipment, upgrades to offshore vessels, and construction of mainline pipe and compressor stations. Overall, the project is making strong progress and is on schedule. Just one example: in 2015, to support the site plans we delivered 35 river ships of materials and equipment that was too big for road transport. This was an outstanding achievement. The South Caucasus Pipeline Expansion (SCPX) project activities also continue along the pipeline route across Azerbaijan and Georgia. In Azerbaijan, mainline construction has continued to ramp up with approximately 71km of pipe welded. Trenching, lowering, laying and backfilling activities commenced at the end of November 2015 and are progressing. Stocks of pipe have been building up at the pipe yards along the route with the most part of the pipe needed for the Azerbaijan section already stored at Mugan, Kurdamir, Yevlakh, and Qazanchi pipe yards. The first horizontal directional drilling site at Agsu Canal has progressed well. In Georgia, main construction works continue for Compressor Station 1 and have commenced for Compressor Station 2 and Area 81. Pipe stringing has continued and preparations for commencement of trenching, lowering, and backfilling continued with the start of this activity expected later this year. Overall, the progress is significant. The project is over 66% complete in terms of engineering, procurement and construction, and remains on target for first gas delivery to Turkey in 2018 and supplies to Europe expected in 2020.

What are your plans for oil production in 2016?

I would like to start with our 2015 results, which we believe were excellent in all aspects of our operations including safety, environment, efficiency and asset reliability, drilling and production. In 2015, the ACG field continued to safely and reliably deliver stable production. Total ACG production for the full year was on average 634,000 barrels per day which is equal to 31.3 million tons in total. In 2016, we will continue to focus on the optimization of existing wells as well as working to make our drilling activities more efficient. Other focus areas in our operations will be sand management, water and gas injection, and delivering our maintenance programs safely and efficiently. We believe doing these, as well as continuing to deliver world-class plant efficiency, will ensure another good year of delivery for ACG.

How would you assess the prospect of searching for additional oil in Azerbaijan, with three-dimensional seismic surveys taking place in the waters of the Absheron Peninsula later this year and the plans to drill an exploration well at the Shafag-Asiman field?

As Azerbaijan’s long-term and reliable partner, we remain committed to investing in exploration activities in the Azerbaijani sector of the Caspian. We look forward to working together with SOCAR to ensure the long-term future for Azerbaijan’s oil and gas production through exploring new opportunities. We believe there are great exploration opportunities here and have signed two exploration contracts with SOCAR. We are committed to moving these projects forward; we have extensive experience in responsibly exploring and developing oil and gas fields in other parts of the world and we also have world-class expertise based on the best technology available in the industry. The Shafag-Asiman production sharing agreement is BP’s first direct contract with SOCAR and it was signed in Baku in October 2010. The most important activity that BP has undertaken as an operator in the contract is the 3D seismic acquisition, which we completed in 2012. This is the first 3D seismic ever conducted on the contract area. We acquired good data using the Gilavar seismic vessel—one of the best built for this purpose. We then processed the data through 2013 to early 2014. The processing of this amount of data was believed to be the largest 3D survey ever processed in Azerbaijan. With the completion of the dataset interpretation in 2015, work has commenced on planning for the first exploration well. The other exploration project is the one that we signed with SOCAR in December 2014 to jointly explore for and develop potential prospects in the shallow water area around the Absheron Peninsula (SWAP) in the Azerbaijan sector of the Caspian Sea. This is an important project for both Azerbaijan and BP, as it marks the beginning of a new era of our cooperation in the shallow water areas of the sea where exploration activities have never been conducted before. This agreement was ratified by the Parliament of Azerbaijan in April 2015, enabling us to move forward with our commitments. Since that time, we have started to plan our short-term activities using our experience and advanced technology solutions from other shallow water areas around the world. These have included the planning of two seismic surveys in the contract area—a 2D seismic acquisition, which was conducted and completed in November-December 2015 and a 3D seismic programme, which we plan to commence in March 2016 and complete by the end of this year. We have just completed public consultations for the Environmental and Social Impact Assessment of the 3D seismic acquisition activities and expect its approval by the government in March before we commence the programme.

With the Formula One event coming up in Baku, what was your role as an official partner of the European Games last year?

As a good corporate citizen, we have supported a number of development areas in Azerbaijan. Our social investment projects are set to support education, cultural heritage, local enterprise development, community development and the development of national sport potential. I am, in particular, proud to highlight our support for Azerbaijan’s National Olympic and Paralympic Committees and for a group of high potential national athletes. There are a group of Paralympians whom BP has selected as its ambassador athletes and we continue to support them as they prepare for Rio 2016. We are also proud to have been an official partner of the first European Games held in Baku last year. We were delighted to be able to support Azerbaijan in preparation for and during that grand sporting event. We believe the Baku Games presented a unique opportunity for the country as it makes efforts to become a greater center for sporting excellence. This was also a unique opportunity for hundreds of enthusiastic young Azerbaijani nationals to develop new skills and knowledge, adding to the country’s international events delivery capability. Therefore, last year we also supported the Games Academy initiative, which presented an excellent opportunity for enhancing Azerbaijan’s overall capability-building efforts, and which we believe will leave a strong legacy of project delivery. As a company, we will continue to invest in building local capabilities in support of Azerbaijan’s efforts to achieve even bigger results.

With the decline in global oil prices, what are your targets in Azerbaijan over the year 2016?

The oil industry is currently experiencing a challenging environment. Similarly to other oil and gas companies, we are taking actions to respond to this situation. This requires remaining focused on improving our competitiveness. We continue to look for opportunities to ensure that we take the right actions to remain competitive. With this in mind, we will continue to take action to remove unnecessary complexity and increase efficiency, including in our upstream business worldwide and in the Azerbaijan-Georgia-Turkey region. In doing so, safety will continue to remain our top priority and will not be compromised in delivering our business objectives. We believe all these efforts will allow us to make our business more competitive while maintaining safe and reliable operations in the Caspian. Having said this, I would like to highlight that our projects in this region are long-term and very important to us and to the country. We remain committed to the region and to the projects that we operate here. I am pleased to be able to say that our projects are moving ahead and will continue to move ahead in accordance with our plans that we have agreed with the government and partners.