Spring 2002 (10.1)
BP Current Developments
of Sangachal Terminal Begins
On February 20, 2002, BP hosted
a groundbreaking ceremony to mark the commencement of the onshore
Sangachal Terminal's upgrade. Once completed, the Phase 1 terminal
will have a total capacity of approximately 140,000 tons of oil
(1.2 million barrels) per day, a major facility by international
standards. Total cost for the Phase 1 terminal is estimated at
about $345 million.
Above: Signing the Shah Deniz gas export-related
agreements (l-r): Jean Pierre Dolla, Vice-President of Elf, Liv
Fgermestad, Vice President of Statoil, David Woodward, President
of BP in Azerbaijan, Majid Karimov, Minister of Fuel and Energy
of the Republic of Azerbaijan, and Natig Aliyev, President of
the State Oil Company of Azerbaijan (SOCAR).
To commemorate the occasion, David Woodward, BP's Associate President
in Azerbaijan, and Natig Aliyev, President of the State Oil Company
of the Azerbaijan Republic (SOCAR), cut the rope to bury a time
capsule containing a statement for the future from Woodward and
Sir John Browne, BP Group Chief Executive.
Left: At the Sangachal groundbreaking ceremony: BP
President David Woodward, SOCAR President Natig Aliyev and Vilayat
Guliyev, Foreign Minister of Azerbaijan.
On behalf of the Azerbaijan International Operating Company (AIOC),
the Shah Deniz Production Sharing Agreement (PSA), and the Baku-Tbilisi-Ceyhan
(BTC) partners [Ceyhan is spelled through Turkish, but pronounced
Jeyhan in English], BP also signed the first contracts for the
expansion of the terminal at Sangachal.
[BP operates the AIOC contract for the Azeri, Chirag and deepwater
Gunashli (ACG) field; other shareholders of the AIOC consortium
include: Unocal, LUKoil, Statoil, ExxonMobil, TPAO, Devon Energy,
Itochu, Delta Hess and SOCAR.]
The contracts for this terminal expansion were signed with the
Tekfen-Azfen Alliance, which includes Tekfen from Turkey and
the SOCAR-established joint venture Azfen.
Woodward noted on the occasion at the Sangachal Terminal: "A
few years ago there was nothing here. What you see around you
today is the Early Oil Terminal - a facility that can process,
store and then export in excess of 6 million tons of crude oil
per year. What you will see here in three years' time will be
a facility that is linked to several major oil and gas export
pipelines, a facility that is expected to become the hub of regional
energy transportation systems. This new world-class facility
will bring Azerbaijan closer to the realization of its vision
to be a bridge between the Caspian and the world markets."
Contracts for the terminal expansion
will employ a large number of local workers. At the peak of construction,
the Early Civil Works is expected to employ approximately 525
workers, most of them Azerbaijanis. Of these, 150 will be employed
in management and support services.
The contract for Early Civil Works includes the clearing of approximately
1.3 million square meters of site, the excavation of some 650,000
cubic meters of soil, the erection of 7,200 meters of fencing
and the construction of a 2,750-meter main access road. The work
commenced on January 7, 2002 and is expected to be completed
David Woodward, President
of BP in Azerbaijan, and Natig Aliyev, President of SOCAR, cutting
the rope to bury a Time Capsule containing a Statement for the
future from Woodward and Sir John Browne, BP Group Chief Executive.
The Main Terminal Construction Contract comprises all the work
necessary to accommodate and process the increased output from
the offshore facilities through the Sangachal Terminal. This
contract will employ some 750 to 900 Azerbaijani citizens, approximately
80 percent of the contract's total workforce, while the remaining
part will be done by specialists obtained by Tekfen from Turkey.
Construction activities within the Main Construction Works commenced
in March 2002 and are expected to be completed by September 2004.
To maximize the involvement of Azerbaijani citizens, BP has developed
extensive training programs, including compulsory training in
Health, Safety and Environment (HSE) for all operatives and management
to ensure that BP's stringent standards are met.
Three information/recruitment centers have already been established
in the surrounding towns and villages close to the Terminal to
offer maximum opportunity for local involvement. While the impact
on suppliers will be driven by the procurement strategy of the
Tekfen-Azfen Alliance, the contractor is being encouraged to
source goods and materials locally, so long as they meet the
"We are very pleased that this expansion will be executed
by an Alliance that has a local partner," Woodward said.
"The Tekfen/Azfen Alliance was one of the main contributors
to the success story of the Early Oil Project Terminal construction
works and the Western Route Export Pipeline construction project,
and this new contract provides them with yet another opportunity
to contribute to the success story of building Azerbaijan's prosperous
Two more main contracts are still to be awarded within the Phase
1 Terminal expansion. These are the contracts for the fabrication
and construction of additional storage tanks with a capacity
of 110,000 tons (800,000 bbl) as well as the design, fabrication
and construction of a Gas Dew Point Control Unit.
Gas Export Agreements
On February 21, 2002, the Shah Deniz partners and the Azerbaijan
government signed a number of key gas export-related agreements.
The agreements included the Host Government Agreement (HGA) with
the Republic of Azerbaijan for the transit, transportation and
sale of natural gas.
On March 14, 2002, in Tbilisi, the Shah Deniz project partners
signed the HGA with Georgia. Georgian President Eduard Shevardnadze
and other senior officials witnessed the signing. The HGA was
previously ratified as an attachment to the Inter-Governmental
Agreement (IGA) by the parliaments of both the Republic of Azerbaijan
and the Republic of Georgia.
The signing of these two agreements marks the transition into
the final stage of engineering, tendering and commercial development
work, which will lead up to the planned sanction of the project
in July 2002.
This major milestone will enable the delivery of gas from the
Shah Deniz field to the markets of Azerbaijan, Georgia and Turkey.
This is an important step that will enable construction activities
to commence this year and first gas to be delivered to Georgia
and Turkey by 2005.
Share Fair for
BP, on behalf of its partners in AIOC, the Shah Deniz PSA, and
the BTC oil export pipeline project, hosted a Share Fair event
on March 6, 2002 at the Grand Hotel Europe in Baku. The Fair
was organized to update the Azerbaijani and international business
community on the current status of BP-operated projects and operations
and on future plans. The event also provided an update on the
related business opportunities that exist for potential suppliers.
A key aim was to reinforce links with the marketplace, with a
particular emphasis on the local marketplace.
The event's program included presentations on the status of major
projects and future operations and on plans to encourage local
business. The presentations were followed by an open session
of conversations with projects and operations personnel.
BP will open a new Enterprise Center in Baku in April on behalf
of its partners in AIOC, the Shah Deniz PSA, and the BTC oil
export pipeline project. The Center aims to help Azerbaijan-owned
and Azerbaijan-based companies develop their business in support
of major oil and gas developments in Azerbaijan. The Enterprise
Center will provide Information Services on supplier capabilities,
resources available to suppliers, current and future supply opportunities,
BP's expectations for Health, Safety and Environment (HSE), quality
and business conduct, required technical standards, pre-tender
meetings and other related areas.
The Enterprise Center will deal with supplier training and consultancy
services that might include HSE, Doing Business with BP, general
business and technical training as well as use of digital business
tools. The Center is also designed to serve as a facility for
business-related workshops, seminars and events. Users of the
facility will include suppliers, major contractors, BP and other
energy companies, local business associations, embassies, international
finance organizations and non-governmental organizations.
There will also be a strong linkage with the Enterprise Development
Committee, an initiative launched locally in June 2001 to contribute
to sustainable development in Azerbaijan, particularly in the
small to medium enterprise sector.
Progress on BTC
The BTC oil export pipeline project is currently nine months
into its 12-month Detailed Engineering Phase, which commenced
in June 2001. The technical design of the pipeline has been completed,
and all of the construction contracts are now out to tender.
The project sanction is expected in June 2002, followed by an
execution stage that involves awarding the contracts, commencing
the initial land acquisition and implementing construction, such
that the pipeline will be ready in time to accept the first volumes
from the Azeri-Chirag-Gunashli (ACG) Phase 1 project at the beginning
The BTC partners recently welcomed Italian oil and gas company
ENI into the BTC Owners Group. ENI is the only non-ACG Owner
to have joined the project.
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AI 10.1 (Spring 2002)
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