The Golden Ticket

It has been some 17 years since the so-called “Deal of the Century” was signed between BP and Azerbaijan. What level of investment has gone into making the Azeri-Chirag-Gunashli (ACG) field such a success?

The ACG field is a fantastic asset that has hugely contributed to the country’s national development turning Azerbaijan into the leading country in the region and supporting regional stability and economic development. We at BP are proud to be the operator of this world-class field that has made us a significant part of Azerbaijan’s independent history. To date a total of over $24 billion of investment has been made in the development of the ACG field. In addition, a further $6 billion in investment was committed by the project’s shareholders in 2010 through the new Chirag Oil Project. These numbers are huge by all standards.

If we add to these figures the $10 billion of revenues the project delivers to Azerbaijan every year, the billions of cubic meters of free associated gas, the new facilities built on the most up-to-date design and technology, one of the largest oil and gas storage and processing terminals in the world, a sophisticated web of subsea pipelines, existing facilities refurbished and upgraded to world standards, and tens of thousands of new job opportunities, then the overall benefits from ACG to the country and the region will rise to a huge and extremely impressive scale.

The ACG contract has also meant tens of millions of dollars of investment in social development projects, including educational programs, building skills, and capabilities in local communities, improving access to social infrastructure in communities, supporting local enterprises through the provision of access to finance and training as well as technical assistance to public institutions. Clearly, ACG’s overall impact on the country’s economic development has been massive.

What is the current level of production from this field, and what sort of production life do you see the field potentially having?

The field is currently producing about 800,000 barrels a day from five production platforms. We are currently building a sixth production platform expected to start up in 2013. From the start of production in November 1997 until the end of May 2011 about 1.8 billion barrels of oil were produced at ACG. To date we have sent over 1,540 tanker loads of ACG crude to world markets via the Baku-Tbilisi-Ceyhan (BTC) pipeline, which is another world-class project that has enabled Azerbaijan to re-establish its name in the oil history of the world. The total estimated oil production volumes from ACG are expected to be over 5 billion barrels—a huge field that ranks very high in the global industry, and I believe with further investments and the application of new technologies it will continue to hold one of the top-ranking positions among the world’s high-quality fields for more than a decade.

What sort of a working relationship has BP had with the State Oil Company of Azerbaijan (SOCAR), and in what areas is it seeking to develop this relationship further?

We are very proud of our record of partnership in Azerbaijan. Since day one of our presence in this country we have seen the continued support and goodwill of the government, SOCAR, and the people of Azerbaijan. This partnership has been at the heart of all the projects we have led—the ACG, BTC, and Shah Deniz developments. This has been a true partnership the success of which has been a key driver of Azerbaijan’s rapid economic development over the past 17 years. This partnership has been a driving force in turning the nation’s vision into a reality, and today’s reality is that Azerbaijan enjoys unparalleled economic growth and prosperity, and strong and irreversible independence. It is a regional leader and is strongly linked with its neighbors and the rest of the world. This partnership has generated tens of billions of dollars in revenues and will continue to generate massive revenues for many years to come. BP has a long-term commitment to this partnership and we look forward to new joint projects and initiatives both under the already concluded exploration deals and in new opportunities. BP has proven to be Azerbaijan’s reliable partner, offering its international expertise and standards, technologies and processes, and creating opportunities to combine these with Azerbaijan’s outstanding experience and knowledge of the Caspian Basin. This combination has to date yielded very good results benefiting all of the parties involved.

How significant is Azerbaijan to BP’s global operations?

Well, firstly, I would like to highlight that our activities in Azerbaijan form a very important part of BP’s global business. In Azerbaijan we are the operator of two major upstream projects, three export pipelines, and two exploration projects. Our activities here also extend to Georgia and Turkey. ACG, with its multi-billion-barrel estimated volumes, is one of the largest reservoirs in BP’s portfolio. The planned Shah Deniz full-field development is the largest gas development project operated by BP in the world. This project is expected to export gas to the European Union through a new southern corridor that will for the first time link the region with Europe. We regard our new deal with Azerbaijan—the joint exploration and development of the Shafag-Asiman offshore block in the Caspian Sea—as an exciting opportunity that inspires hopes that, in addition to the existing opportunities, Azerbaijan can become a future growth area in BP’s global business. As a native Azeri, I am really proud that the business I lead in this region ranks at the top of BP’s global business based on the quality of the projects, the benefits it delivers to all parties, and the opportunities it offers for long-term successful partnership in the region.

How successful has the Shah Deniz field been in production terms? What can we expect from Stage 2 of the project?

Shah Deniz is a huge gas field that BP and SOCAR discovered in the Azeri sector of the Caspian Sea in May 1999. With over 1 trillion cubic meters of gas in place, it is one of the world’s giant gas fields. Production from the field started in 2006—just seven years after discovery. Since that time the field has been delivering gas to the markets of Azerbaijan, Georgia, and Turkey within the first stage of development, which can produce approximately 9 billion cubic meters of gas per year and about 50,000 barrels of condensate per day. The success of Stage 1 has been key to developing the next stage of Shah Deniz, which we call full-field development, and is one of the largest gas developments in the world and will provide a further 16 billion cubic meters of gas to the markets of Europe, with the first gas scheduled for 2017. The Shah Deniz full-field development project will include two new bridge-linked production platforms, 26 subsea wells to be drilled with two semi-submersible rigs, and 500 kilometers of subsea pipelines in water depths of up to 550 meters. SOCAR and the Shah Deniz partners have signed a five-year extension to the Shah Deniz Production Sharing Agreement (PSA). The Shah Deniz export transit organization has been established in Ankara to work with Turkey’s BOTAíž and the main prospective EU pipeline groups including Interconnector Turkey-Greece-Italy Poseidon (ITGI), Trans-Adriatic Pipeline (TAP), and Nabucco. The Shah Deniz consortium has requested a firm conditional tariff by October 1, 2011 from all the pipeline groups to enable the selection to be made in the fourth quarter of 2011.

© The Business Year – April 2011