Azerbaijan International

Autumn 2006 (14.3)
Pages 92-95

BP Developments
Tankers Finally Leave Ceyhan Port for World Markets
Tamam Bayatli, Communications Manager

Finally, the long-awaited day has arrived that oil from the Baku via the BTC (Baku-Tbilisi-Ceyhan) pipeline is on its way to the world market. The pipeline linefill was completed on May 28, 2006.

The official inauguration of the Turkish section of the Baku-Tbilisi-Ceyhan (BTC) oil export pipeline - the new Ceyhan marine export terminal and the full BTC pipeline export system - was held on July 13 at the Ceyhan Terminal on the Mediterranean coast of Turkey. The event, hosted by the Turkish Government, was attended by Presidents from Turkey (Ahmet Necdet Sezer), Azerbaijan (Ilham Aliyev) and Georgia (Mikheil Saakashvili), together with visiting senior government and state officials, senior executives of BTC owner companies and business representatives.

Above: Inauguration Ceremony for the Baku-Tbilisi-Ceyhan (BTC) Pipeline at the BTC port facilities at Ceyhan, Turkey on July 13, 2006. Left to right: Presidents of the three countries through which the pipeline passes: Turkey (Ahmet Necdet Sezer), Georgia (Mikheil Saakashvili) and Azerbaijan (Ilham Aliyev). Also Turkish Prime Minister Recep Tayyip Erdogan and Lord Browne, Chief Executive of BP participated at the event.

To fill the 1,768 km pipeline required a total of 10 million barrels of oil. The first tanker to take BTC oil to market was the British Hawthorn, which sailed on June 4, 2006, from the new Ceyhan Marine Terminal on the Mediterranean coast. This tanker was filled with about 600,000 barrels of crude cargo.

It was the first oil from the BTC pipeline headed for world markets, bypassing the Turkish Straits. The oil originated from the Azeri-Chirag-Gunashli (ACG) field in the Azerbaijani sector of the Caspian Sea. In the future, other volumes of oil, including those originating from across the other side of the Caspian will be transported along this pipeline route.

Left: The topsides for East Azeri was installed offshore on July 6, 2006.

The accomplishment was the culmination of years of work by many thousands of people from the three countries. This is truly a world-class project in every respect and all parties involved justifiably take pride in what they achieved together.

Lord Browne, Chief Executive of BP, which operates BTC, addressed the inauguration
ceremony at Ceyhan: "The commissioning of the Baku-Tbilisi-Ceyhan pipeline is a significant step in the long history of the oil industry. It reintegrates significant oil supplies from the Caspian into the global market for first time in a century. On behalf of BP, I would like to express our thanks to all those who made it possible to get to this point.

I'd like to thank the thousands of extraordinary people from the three countries directly involved - Azerbaijan, Georgia and Turkey - and the people from many others beyond whose support and involvement was indispensable - the members of the workforce, the inhabitants of local communities, the companies, governments, international institutions, our partners and, of course, our own staff. BTC is the first great engineering project of the 21st century."

David Woodward, BP Azerbaijan Associate President, said: "Collectively, this is a demonstration that through the efforts of thousands of people over the past 12 years, we have been able to make a project a reality which many thought 'impossible'. I would like to join Lord Browne in thanking everyone involved - the host governments, our partners, lenders, contractors, BP staff and the people of Azerbaijan, Georgia and Turkey for their tremendous effort, cooperation and support."

During this early phase the pipeline oil throughput will vary but has been more than 400,000 barrels per day. This number will increase to one million barrels per day by 2008. While the pipeline will continue initially to carry ACG oil, it is expected that in the future other volumes, including oil from the other side of the Caspian, will flow via BTC.

The BTC pipeline will enable one million barrels of oil per day to be exported safely and responsibly from the Caspian without increasing tanker traffic through the already crowded Turkish Straits.

Above: Workers at AzMETCO measuring plant in Shirvanovka near Sumgayit. Last year, BP awarded AzMETCO a new four-year contract for provision of proven calibration services along the Northern Route, Western Route, Baku-Tbilisi-Ceyhan, and South Caucasus pipelines.

Shah Deniz

The world-class Shah Deniz gas and condensate development project is currently finalizing all work in preparation for the start up of production in the next few weeks. The TPG 500 platform offshore commissioning is complete and the pre-drilled well tieback and completions are underway. The subsea export pipelines have been dewatered and are ready to flow gas to the Sangachal Terminal. The gas processing facilities at the terminal and the South Caucasus Pipeline (SCP) gas export pipeline are currently being pre-commissioned using SOCAR's associated gas coming from the Azeri-Chirag-Gunashli field.

The project commenced testing and commissioning the new SCP gas export system by filling it with gas from the Sangachal terminal in May. The commissioning gas was introduced into SCP from the Sangachal terminal on May 21st and crossed the Georgian border on May 28th.

Following the introduction of commissioning gas into the Azerbaijani section of SCP in late May, the Georgian section was filled with gas in September. This followed the introduction of gas into the Sangachal Terminal processing facilities and into the Shah Deniz subsea gas pipelines.

In the meantime BOTAS performed the "golden weld" connecting their pipeline system to that of SCP on September 30. Following the completion of the testing and commissioning program for BOTAS's connection facilities, it will be possible for gas to be delivered across the border. Initial deliveries of gas into the BOTAS pipeline system will be used to fill and commission the BOTAS pipeline running from the Georgian border to Erzerum in Turkey.

The conclusion of the SCP pipeline and its connection with BOTAS's system in Turkey mark the completion of the gas artery of the East-West energy corridor, which together with the BTC oil pipeline is expected to make a positive difference by bringing significant benefits to the region and the entire world.

Approximately 0.1 bcm of gas was required to commission the entire Shah Deniz/SCP export system from the Shah Deniz Platform to the Sangachal Terminal and on to the Georgian-Turkish border.

SCP, like BTC, is buried underground along its entire length. Numerous design and safety features have been incorporated into the construction of SCP to provide many layers of protection and make it conform to the highest international standards. In addition, to ensure the safety, security and integrity of the pipeline, there will be regular security patrolling by both governmental and SCP operations staff and frequent maintenance checks by SCP pipeline technicians.

East Azeri Topsides
Azeri-Chirag-Gunashli Project achieved another major milestone in July. The topsides of the East Azeri (EA) Production, Drilling and Quarters Platform were safely installed offshore onto the jacket. The topsides successfully sailed away on July 26 from the Heydar Aliyev Baku Deepwater Jacket Factory fabrication yard where since July 6 they had been ready to sail away loaded onto a transportation barge waiting for favorable weather conditions.

The EA platform is located at 150m water depth on the east side of Azeri Field. The jacket of the EA platform was installed offshore in March 2006. First Oil from EA is planned before the end of 2006 following completion of topsides offshore hook up and commissioning activities. This will ultimately increase the Azeri-Chirag-Gunashli offshore facilities oil production capacity by 260,000 barrels per day.

This is, in fact, the fourth major milestone the operator has successfully delivered since the beginning of 2006. The other three were the start up of the West Azeri and Compression and Water Injection platforms and the Phase 2 facilities at the Sangachal Terminal.

BP is now planning to start production from East Azeri by the end of 2006, which is a couple of months ahead of its promised schedule. This early delivery is based on BP's standardized approach and capability to apply successfully the lessons learned from its previous platforms in the Caspian.


Above (Left): Jacobus Nieuwenhuijze, Director of the Sangachal Terminal Expansion Project (STEP) presenting the Winner's Cup at the Third Azerbaijan School Soccer (Football) Tournament.

More than 800 youth representing 82 different teams from 29 different schools in the Garadagh district participated in the Third Azerbaijan School Soccer Tournament organized by the Sangachal Terminal Expansion Project (STEP).

Local Suppliers

BP, on behalf of its project partners, launched in June the first step in an important new initiative, which will give greater access to finance to Azerbaijan's local oil and gas industry supplier and service enterprises.
AzMETCO - a local Joint-Stock Company of "Complex Adjustment and Automation", became the first enterprise to receive a loan under a new Supply Chain Finance Facility pilot project set up by BP, on behalf of its project partners, and the International Finance Corporation (IFC).

Since 1998, AzMETCO has been providing metrological assurance for metering equipment at the Sangachal, Sumgayit, Siyazan, Shirvanovka and Supsa terminals of the Northern Route and Western Route oil export pipelines under a contact with the operator. In addition, last December BP awarded AzMETCO a new four-year contract for provision of proven calibration services along the Northern Route, Western Route, Baku-Tbilisi-Ceyhan and South Caucasus pipelines.

The Supply Chain Finance Facility (SFF) is a joint credit facility aimed at supporting development of Azerbaijan's local oil and gas industry supplier and service enterprises through resources provided by BP and its partners, the IFC and a local financial institution selected by the IFC.

Left: By May 28, 2006, the BTC Pipeline linefill had been completed. Oil had flowed from Baku for nearly 1,100 miles to the Mediterranean port of Turkey. By July 13 when the Inauguration Ceremony took place already 25 tankers, like this one, had loaded up with Azerbaijan's oil and headed off to world markets.

The project is in line with BP's and its partners' target to double their total spending with locally-owned companies by 2010 increasing it to more than $500 million a year. The SFF is designed to be implemented in several phases. The first phase of the credit component of the project has already been launched as a pilot program and will be managed by the IFC.

This pilot project is implemented through a separate IFC grant agreement with the Micro-Finance Bank of Azerbaijan (MFBA) and a total loan capital of $316,000. This will provide loans for up to three selected local suppliers of BP and its partners in Azerbaijan. Under this agreement, BP on behalf of its partners will provide $140,000; the IFC $140,000 (of which $20,000 is for technical development and appraisal of this pilot phase) and the remaining $56,000 will be invested by MFBA.

Local companies eligible to receive SFF loans will be selected for competitive pre-qualification exercises by BP and its partners' Enterprise Centre, then will pass through the MFBA credit appraisal and will finally be approved by the SFF Credit Committee comprising representatives of all the three parties involved.

Phase 2 of the SFF will be much larger in scale and once approved, it will allow us to begin extending further loans to more local companies, who meet the established criteria, by the end of 2006.

RT Services
In August, BP awarded a major contract to a local Azerbaijani service company on behalf of its partners. RT Services Ltd was selected from among 26 participants (18 of them local companies and joint ventures with local business partners) in four-month pre-qualification and tendering exercises conducted by BP for a hazardous liquid waste treatment services contract.

This is BP's first direct contract with RT Services, whose previous experience of joint work with us has been through subcontracting arrangements. The contract duration is one year with a total value of up to $900,000. This new contract is in line with BP's and its partners' efforts to maximize local content in their projects through increasing both the number of companies participating in their contracts, and the value of contracts awarded locally. RT Services Ltd. was founded in 2002 to provide waste management services to both local and foreign companies based in the Caspian region including Azerbaijan. The company is fully licensed by the Ministry of Ecology and Natural Resources to provide industrial wastes (including toxic wastes) utilization services.

"We are very pleased to have this opportunity to work with another specialized local service provider. RT Services Ltd is an experienced company holding all necessary licenses to meet our requirements for providing waste management services to the acceptable standards," says Namig Abbasov, BP's Regional Environmental Compliance Manager.

Sustainability Report 2005
BP recently presented its 2005 Sustainability Report for Azerbaijan. The report covers the company's business performance, environmental track record and its wider role in the country. The report has been issued in Azerbaijan since 2003 as an initiative aimed at reporting openly on the company's activities and how it manages its business, assisting a constructive dialogue with interested parties and demonstrating its approach to corporate responsibility issues.

This third report has more extended people and environmental management sections, as well as the BP and Climate Change section, which has recently been added. Another distinction is that unlike the previous two reports, this one was fully designed and printed in Azerbaijan in two languages - Azerbaijani and English. The report is fully posted in both languages on BP Azerbaijan's website:

Third Soccer Tournament
The Sangachal Terminal Expansion Project (STEP) held in June the Third Azerbaijan School Soccer Tournament, which is believed to be the biggest of its kind in the Caspian region. The event brought together 82 teams. The number of participants was about 820 children aged between 12 and 16 from all the 29 schools located in the Garadagh district. In addition, there were 82 school teachers involved as coaches and a large number of other people supporting the event as referees, doctors, nurses, catering services, coordinators who brought the total number of people involved to more than 1000.

Along with the partners of the projects operated by BP, 30 other sponsoring organizations and individuals supported the 82 teams. The initiative, which the terminal launched two years ago to bring the children of the entire Garadagh district together, has now turned into the biggest annual sporting event in the Caspian region. The number of participating teams and schools and sponsoring organizations and individuals is expanding year after year.

Back to Index AI 14.3 (Autumn 2006)

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