The Business Year

Gordon Birrell

AZERBAIJAN - Energy & Mining

Unlocking Potential

Regional President for Azerbaijan, Georgia and Turkey, BP

Bio

Gordon Birrell has an MBA from Warwick University and an honors degree in Electrical and Electronic Engineering from Heriot-Watt University, Edinburgh. He has a 26-year track record in the oil and gas industry, having joined BP in 1986. He spent the first years of his career on the North Sea, later moving to BP’s London Corporate Headquarters in 1999. He then moved to Azerbaijan to lead exploration and appraisal projects, including the early stages of the Shah Deniz development. Having later worked in various other positions for BP around the world, he returned to Azerbaijan in 2012 to become BP’s Regional President for Azerbaijan, Georgia, and Turkey. On September 2014, Gordon was awarded the order of “Dostlug” (Friendship) by the President of the Republic of Azerbaijan for his contributions to the development of oil and gas industry.

TBY talks to Gordon Birrell, BP Regional President for Azerbaijan, Georgia and Turkey, on the key drivers of the success for new and developing exploration projects.

There have been substantial changes to the foreign involvement in Shah Deniz 2. As the operator in the field, what impact has this had on BP?

It is not unusual to see partnership changes at this stage of a project. We are in an industry where companies regularly evaluate their portfolios to concentrate on their strengths. We welcome the expanded relationship with TPAO who bought Total’s 10% stake in the Shah Deniz consortium. TPAO is a key participant in many of our major regional projects. And we very much appreciate the contribution made by Statoil over the years, but welcome Petronas as a new partner in this endeavor. This huge project is in the early stages, but we are on track to deliver it over the next five years. Since the beginning of 2014, the BP-operated projects have already committed about $10 billion in contracts.

How is BP’s project at the Shafag-Asiman field developing so far and what are the next steps?

We successfully conducted the first 3D seismic acquisition on the structure. This in fact was the first 3D seismic ever conducted on this contract area. The processing of the acquired data, which is believed to be the largest 3D survey ever processed within Azerbaijan, took two years to complete. In 2014, we completed the data processing and started interpretation of the seismic dataset and this will require some 18 months to complete. This will be followed by planning of the first exploration well. We look forward to this joint exploration and development opportunity with SOCAR and we continue to hope for a successful exploration result.

In addition, in 2014, we also signed a new exploration contract with SOCAR 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. This is a great opportunity for BP given that we have extensive experience in responsibly exploring and developing in shallow water areas around the world. Working together with SOCAR we have been very successful over the past 20 years in all the projects we have operated in the Caspian. We look forward to building on this success with this opportunity to further expand the country’s resource base.

BP is heavily involved in several terminals and pipelines. How important are these in terms of BP’s long-term ambitions in Azerbaijan and in the region?

Indeed, as the biggest operator in the region, we believe we are in a good position to deepen our involvement in the region. The key drivers of this are 1) our successful partnership with Azerbaijan/SOCAR, 2) very good relationship with all key regional stakeholders, 3) access to all existing world class infrastructure including construction yards, drilling rigs, vessels, 4) operatorship of the region’s biggest offshore and onshore facilities including the Sangachal Terminal, BTC and SCP pipelines that connect the Caspian with the world markets, 5) the opportunity to integrate any new plan with other BP operated projects, expertise and deep understanding of the Caspian basin, and 6) the world-class local project content including suppliers, staff and workforce that we have developed here. These are all the main factors that, we believe, our plans for long-term presence in the region and expansion of our business here can be built on.

On the global scale, we have extensive experience in responsibly exploring, developing and transporting major oil and gas resources. To do this safely and efficiently, we use the best technology available in the industry and environmentally friendly solutions. Throughout our presence here we have been successfully transferring all this to the Caspian and we will continue to do so in the future.

The “Regulation of nationalization and migration issues in the oil and gas sector” meeting was held by SOCAR, BP, and the State Migration Service in November 2014. What was the significance of this meeting and what are the primary objectives of the initiative?

The meeting in November was specifically focused on how we can cooperate in the areas of nationalization of BP’s staff, development and training of professionals specializing in petroleum disciplines, and the workforce involved in oil and gas development projects in Azerbaijan. The long-term and technically complex nature of BP-operated projects requires the involvement of qualified national professionals. Both SOCAR and BP see these projects as a unique opportunity for developing Azerbaijan’s local highly skilled oil and gas industry professionals and workforce. Therefore we have worked closely with SOCAR and other relevant government agencies for many years to agree a long-term strategy that would allow us to reach this goal by combining our efforts. This strategy aims to develop Azerbaijan’s national workforce specializing in oil and gas sector disciplines. As the operator of Azerbaijan’s main oil and gas projects, we are committed to this strategy, which is expected to enhance nationalization of our staff and development of the workforce involved in our operations in Azerbaijan. We all believe that it is in the government’s and BP’s and our co-venturers’ interest that the large majority of the workforce involved in our projects and operations are Azerbaijani nationals. We have signed several documents that enable us to continue to work together to realize our shared vision. I would specifically single out one of them which I believe goes beyond BP-operated projects’ requirements and targets the development of the country’s overall workforce capacity. This is an agreement with SOCAR on cooperation in the area of training of national workforce at Gobustan Regional Training Centre. Under this agreement BP has committed to supporting vocational and technician discipline training for a large group of representatives of the local communities residing in the neighborhood of the Sangachal Terminal – Sangachal, Umid, Azimkend and Gobustan settlements. BP currently covers the tuition and other expenses related to the training of these people at the Gobustan Regional Training Centre.

It was mentioned last year that BP had a target to ensure that 90% of staff in Azerbaijan and Georgia were nationals by the end of 2018. What further steps need to be taken to ensure that this goal is reached

Nationalization of our staff has always been a priority of our business agenda in Azerbaijan. We have already achieved a lot with 86% of our direct professional staff and 90% of the workforce involved in our construction activities through our major contractors being nationals. Looking to the future, we have committed to working even more closely with SOCAR to reach our targets. We have specifically signed a protocol, which will enable us to work together to develop national professionals so that they can take over the maximum number of jobs within BP. Among these targets the most important is the one that you mention — by 2018 BP will have nationalized 90% of its direct professional staff. Work is underway to that end – we have initiated a number of learning and development programs, enhanced our support for local capability-building projects, revised our recruitment strategy. As a result, significant progress has already been made. We will continue to work closely with SOCAR to arrange recruitment campaigns, educational and training programs to support the development of national oil and gas industry professionals.

It has been announced that investments in the Southern Gas Corridor are set to reach up to $45 billion. How important is sustainable investment in Azerbaijan’s energy sector?

We are an industry increasingly alert to the need for greater financial discipline, and focusing more and more on value. All projects must compete for funding within our portfolio of opportunities. Our role during this execute phase is to deliver the project safely, on time and on budget. The numbers we associate with the Shah Deniz 2 and Southern Gas Corridor projects are colossal by any standard: 16 billion cubic meters of gas per year; $45 billion of capital investment; thousands of new jobs; 3,500km of pipeline. But these are over-shadowed by the potential that this new Caspian gas supply will unlock. It will offer a major new source of energy diversity to Europe, it will have a material positive impact on the economies along the Corridor, and it will have created a legacy of agreement and understanding between a host of governments, state and independent energy companies and gas purchasers which will encourage the development of even greater volumes of gas from the Caspian and other countries.

That is an immense prize and the success of the Southern Gas Corridor is key to securing it.

What effect do you expect Russia’s cancellation of the South Stream will have on operations in Azerbaijan and what opportunities can BP derive from this?

Our focus, as a shareholder in the Shah Deniz project, is to get the project completed. Shah Deniz Stage 2 is on track for first gas in 2018, with sales to Turkey. Shah Deniz 2 has long term gas sales contracts in place for essentially all the gas it will produce, as announced in September 2013. And TANAP has customers under contract to ship their gas through TANAP. The Southern Gas Corridor has an important role to play in diversifying European energy supply.

Beyond this it would not be appropriate for us to comment on another project.

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