9.3 BP Current Developments - Phase 1 of ACG Sanctioned

Autumn 2001 (9.3)
Pages 90-91

BP Current Developments
Phase 1 of ACG Sanctioned

by Tamam Bayatly

Left: BP's Sir John Browne met with President Aliyev during his June 21st visit to Azerbaijan.

On August 30, the Steering Committee for the development of the Azeri, Chirag and deepwater portion of the Gunashli (ACG) fields sanctioned the construction stage of Phase 1 of Full Field Development. This was a long-awaited event and the official signing took place at the Presidential Palace and was witnessed by President Aliyev.

The Steering Committee includes representatives from the State Oil Company of Azerbaijan (SOCAR10%) and the project's nine other sponsors: BP (operator34.1%), Unocal (10.3%), LUKoil (10.0%), Statoil (8.6%), ExxonMobil (8%), TPAO (6.8%), Devon (5.6%), Itochu (3.9%) and Delta Hess (2.7%).

The Phase 1 project, a $3.4 billion development, is the first major step after the Early Oil Project (November 1997) in the implementation of the ACG Production Sharing Agreement (PSA) and the first step towards achievement of the ACG Full Field Development. Approximately $2.74 billion will be spent on construction of the facilities and pre-drilling to deliver the first oil production from Phase 1 by the first quarter of 2005. The remaining $.66 billion will be spent on subsequent development drilling. The project will create more than 3,000 local construction jobs at its peak.

Left: Children's book about Road Safety.

An Environmental and Socio-Economic Overview covering the ACG Full Field Development was accepted by the Ministry of Ecology and Natural Resources in June 2001 and is designed to provide initial assurance on the environmental standards adopted. A detailed Environmental and Socio-Economic Impact assessment for Phase 1 is being prepared for approval by January 2002.

Phase 1 targets development of the central area of the Azeri field. Phase 2 will focus on the development of the remaining parts of Azeri (West and East), and Phase 3 will develop deepwater Gunashli.

An estimated 193 million tons of Phase 1 reserves are expected to be produced during the PSA period. The development is expected to achieve average rates of 18.7 million tons per annum (375,000 barrels per day) of oil at maximum production. To achieve this production, 48 production, water injection and gas injection wells will be drilled, followed by 46 sidetracks throughout the life of the field.

Pipeline Progress
The Baku-Tbilisi-Ceyhan (BTC) Pipeline Project shareholders met in mid-May to review the results from the project's first phase. They noted that substantial progress had been made with regard to both technical and commercial development. On June 10, after reviewing the project costs and anticipated transportation volumes, the partners decided to undertake the Detailed Engineering stage of the project. The Final Reports were received, enabling the 12-month Detailed Engineering Phase to commence on June 20.

Preliminary discussions with international financial institutions and export credit agencies have indicated that, based on these costs and volumes, the project will attract sufficient financing.

The Detailed Engineering stage of the BTC project will be completed in mid-2002 and cost about $150 million. The key results will be a finalized construction corridor, construction and major equipment contracts ready for award, confirmation of project costs and final pipeline design and environmental impact assessments completed and in the final approval process with the transit governments.

Left: David Woodward, President of AIOC, presenting Phase 1 of Full Field Development of ACG to President Heydar Aliyev.

Discussions with respect to assigning certain portions of SOCAR's interest to potential new shareholders are ongoing with a number of companies. A pipeline project company will be formed towards the end of 2001, incorporating any new participants in the project in addition to the current participants.

All of the necessary agreements for project implementation and operation, including owners and transportation agreements, will be completed during the Detailed Engineering stage. Lenders term sheets required for external financing are also scheduled to be in place during this phase.

A 32-month Land Acquisition and Construction phase will follow Detailed Engineering, with the pipeline ready for testing by the end of 2004. First volumes from Full Field Development Phase 1 are scheduled to flow in early 2005.

BP President Visit
Sir John Browne, BP Group Chief Executive, visited Turkey, Georgia and Azerbaijan June 19-22 and paid courtesy visits to the presidents of these three republics. Sir John met with President Aliyev on June 21 at the Presidential Palace. During the visit, they inaugurated the HIVE (Highly Immersive Visualization Environment) facility in BP's Villa Petrolea Offices in Baku. The HIVE is a computer-based "virtual reality" tool that helps BP's multi-disciplinary teams tackle complex field development problems. The BP HIVE in Azerbaijan is the first of this type of facility in the Caspian region.

Chirag
Chirag Future Development (CFD), which was implemented in late 2000, has continued successfully this year. A significant amount of work has been undertaken on the Chirag platform to allow oil production rates in excess of 130,000 bpd (6.5 million tons per annum). This has included upgrading the drilling rig and separator vessels and increasing the size of the oil booster pumps. Through the application of Extended Reach Drilling (ERD) technology, the Chirag Future Development project will increase Chirag recoverable reserves by 330mmbbls.

More Gas

Left: BP sponsored an exhibition for the Azerbaijan Society for the Protection of Animals.

delivery to Azerbaijan's consumers has increased through cooperation with and the completion by SOCAR of the Oil Rocks Gas Compression expansion project. This has allowed the operator to reduce flaring from the Chirag platform significantly. The completion of the project has enabled AIOC and SOCAR to export up to 2.7 million cubic meters of gas per day from Chirag to Oil Rocks, and then to shore, to meet Azerbaijan's growing demands for gas.

Education
To mark the beginning of the school year, BP/AIOC worked with local communities to build new classrooms and refurbish school buildings in the Garadagh district of Baku and in a number of villages of the Gusar, Guba, Siyazan, Khachmaz, Kurdamir, Yevlakh, Shamkir, Agstafa, Goranboy districts along the Northern and Western Route Export Pipelines.

Media Forum
"Azerbaijan Media in Transition: Problems and Prospects" was the theme of a BP-sponsored Media NGO forum held in Nabran July 13-15 to celebrate Azerbaijan's National Press Day. The Forum brought together media executives and media-related NGOs to discuss the problems of transitioning to Azerbaijan's new Latin script. Other topics included challenges related to educating young journalists, media legislation, the role of media NGOs in the free press building processes and the language of the press. The Committee for the Protection of Journalists organized the forum.

Lada Challenge
AIOC held a Lada Challenge competition in mid-July in Sangachal to attract technicians with hands-on experience to fix deliberate faults in Lada cars that the company provided. The Challenge was designed to celebrate local expertise and skills in car maintenance.

Road Safety
On June 1, International Children's Day, BP held a colorful event at one of its three Traffic Parks designed to raise children's awareness of traffic rules and safe behaviors in the street. To date, the program has reached more than 20,000 children aged 5-9. The company has also produced a series of brochures, leaflets, posters and billboards to teach children about road safety.

Chess Tournament
Azerbaijan's junior chess team received first place at the Third International BP Junior Chess Cup Tournament held in Baku June 18-23. Young chess players from Azerbaijan, Russia, Georgia and Iran participated in this event organized with the Ministry of Youth, Sports and Tourism, Azerbaijan's Chess Federation and the Republican Chess Center.

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From Azerbaijan International (9.3) Autumn 2001.
© Azerbaijan International 2001. All rights reserved.