Winter 2000 (8.4)
Pages 94-97

BP Current Developments

by Tamam Bayatly

Progress on Pipeline
On October 17, 2000 the Azerbaijani Government and the State Oil Company (SOCAR) along with the international companies who are sponsoring the construction of the pipeline reached an agreement to commence basic engineering of the Baku-Tbilisi-Ceyhan (BTC) oil pipeline project. [Note that Ceyhan is the Turkish spelling for what is pronounced as "Jeyhan" in English].

They also signed Host Government Agreements with Azerbaijan, Georgia (October 18) and Turkey (October 19) for transit across these countries. In Turkey, the project sponsors signed a lump sum fixed price turnkey agreement with BOTAS [pronounced BOTASH], of which the first phase will be basic engineering of the line in Turkey and a Turkish Government financial and performance guarantee. At this stage the project sponsors include: SOCAR (50%); BP (25.41%); Unocal (7.48%); Statoil (6.37%); TPAO (5.02%); Itochu (2.92%); Ramco (1.55%); and Delta Hess (1.25%).



Above: The Baku-Tbilisi-Ceyhan (BTC) signing ceremony in Ankara, Turkey on October 19, 2000.

The parties will undertake a $24-million eight-month program involving project mobilization, basic engineering and environmental study, together with development of owners' agreements, a preliminary financing plan and initial marketing of ownership and throughput capacity.

Basic engineering, the first step, will lead to a more accurate technical and commercial definition of the project, allowing potential owners and shippers to make future investment decisions with increased confidence.

Basic engineering is expected to be followed by a further 12-month, $110-million program that will include detailed engineering, works on land preparation, environmental impact assessment and bids.
A decision will follow regarding the 32-month land acquisition and construction period of the BTC project. This timetable is designed to make the BTC pipeline available in time to receive the first oil produced by Phase 1 of the Full Field Development of the Azeri, Chirag and deepwater Gunashli PSA, which is planned to come onstream at the end of 2004.



Above: In Baku, the BTC Ceremony was highlighted when BP Azerbaijan Associate President David Woodward gave President Aliyev a Baku-Tbilisi-Ceyhan triple time zone clock.

Phase 1 Project
Significant progress has been made in the Phase 1 project of the Azeri, Chirag and deepwater Gunashli Full Field Development. The shareholders and the Steering Committee made a decision late October to move into the next phase of engineering. This marks the beginning of the Phase 1 contracting and procurement stage. This stage will dominate the period leading up to third quarter next year, when the company expects the project to be sanctioned by shareholders. The sanction will depend on a satisfactory outcome to the Phase 1 Define stage and also on satisfactory progress of the export pipeline commercial and project arrangements.

Phase 1 of the Azeri, Chirag and deepwater Gunashli development will focus on the Azeri field and will allow average production of up to 350,000 bpd (17 mtpa). It will comprise a 48-slot Drilling and Quarters platform, plus an optional Gas Compression Platform, a new 30-inch subsea oil pipeline to Sangachal, conversion of the existing 24-inch subsea oil pipeline from Chirag to Sangachal to a gas pipeline and expansion of the Sangachal terminal. Estimated capital expenditure is $2.9 billion. Production from Phase 1 is planned to commence at the end of 2004.



Above: The BTC Ceremony in Tbilisi with Georgian President Shevardnadze.

Chirag Water Injection
The Chirag Water Injection Project, completed this year, included the offshore lifting and installation of the 250-ton water injection module and 50-ton deaerator on the Chirag-1 platform, enabling BP to start up water injection at the end of May in order to safeguard the productive life of the reservoir by maintaining the field pressure. The water injection system is also designed to enable extension of the plateau production period. The $55-million Chirag water injection system is capable of injecting up to 220,000 barrels per day when in full operation, with an operating pressure of 297 bar. By the end of 2000, the water injection equipment will be utilizing four wells, with additional wells to be added in the future as needed.

Chirag Future Development
Work on the significant infill development on Chirag has already commenced. Through the application of Extended Reach Drilling (ERD) technology, the project will increase Chirag recoverable reserves by 330mmbbls. As a result of expansion and debottlenecking of the existing oil and gas facilities on Chirag and Western Export Route facilities, as well as drilling of ERD wells, daily oil production will be increased to 130mbd by the end of 2001. Through cooperation with and the completion by SOCAR of the Oil Rocks Gas Compression expansion project, it is expected that gas exports to SOCAR will be significantly increased. The first stage of the Chirag Future Development is expected to cost $116 million, $21.6 million of which is being spent this year on offshore construction and pre-planning for the drilling operations, which will commence in 2001. Next year's drilling program includes the drilling of three wells.

Left: AIOC recently published "Azerbaijan Dili", an Azeri-language textbook for third graders.

Continued Safety
Since the beginning of 2000, BP Azerbaijan has had an excellent safety performance with zero DAFWCF (day away from work case frequency). The company's highest priority is to maintain this achievement throughout the remaining part of the year by continuously improving safety performance in all of its operations.

Plans for 2001
The highest priority in all of BP's operations will continue to be outstanding safety performance achievements. The company expects to raise the average production rate from Chirag to 115,000 barrels per day. Next year's major milestones will include implementation of the Chirag Future Development Project, sanctioning of the Azeri, Chirag and deepwater Gunashli Phase 1 Project by the third quarter, and commencement of the Phase 2 detailed engineering during the fourth quarter.

SDX-3 Update
Shah Daniz partners have begun evaluation of results from the SDX-3 appraisal well in order to agree on next steps in the development of the world-class gas field. Drilling of the SDX-3 well in the northern extremity of the field was completed on November 6. The well was drilled to a total depth of 6,688 meters. This appraisal well has added considerably to the understanding of the field and in particular the precise location of the bulk of commercial reserves within the field, which were proven via wells SDX-1 and SDX-2. The extraordinary drilling performance in SDX-3 has given Shah Daniz partners confidence that the project could be delivered economically. While partners review their options, negotiations with Turkey on securing a gas purchase agreement will continue.

Inam
Front-end engineering has been completed on the first Inam exploration well (INX-1). BP is now preparing to drill the first Inam well with the semi-submersible Dada Gorgud rig, following the latest upgrade by the contractor. The INX-1 well is expected to be spudded in December after completing anchoring operations. A deviated well will be drilled to a total depth of 5,025 meters in a water depth of 137 meters.

Oil Conferences
BP was the general sponsor for the Fourth International Baku Mammadaliyev Conference "Petrochemistry into the 21st Century," held September 19-22. BP also exclusively sponsored the Fourth International "Khazarneftgas-2000" Conference held at the Aznipineft Institute in Baku October 10-13. These two major international events provided a forum for discussing the latest research on new processes and technology in oil and gas production, as well as new technologies and materials in the science and practice of petrochemistry.

Left: BP sponsored the Junior Chess Team to compete in World and European Championships.

Chess Team
BP sponsored Azerbaijan's 12-member junior chess team on their trips to the European Chess Festival in Halkidiki, Greece and the World Junior Chess Festival in Oropesa, Spain, where Zeynab Mammadyarova won the World Championship in her age group [see article about Zeynab in this issue]. At the European Championship in Greece, Vugar Hashimov won a silver medal and Afag Khudaveriyeva won a bronze.

Mugham Festival
Nearly 1,000 young mugham and folk music singers competed in BP's Fifth Annual Children's Mugham Festival in the Rashid Behbudov Song Theatre October 4. Most of the participants were refugee children from Karabakh, which is now under Armenian occupation. The region is known as the cradle of Azerbaijani mugham [traditional modal music]. For the first time in the five-year history of the Festival, the selection process of the festival expanded beyond Baku to include participants from most of the refugee camps, including the Sabirabad, Saatli, Imishli and Barda districts.

Textbooks for Refugees

Left: Rashad Sadigov, 13, won First Prize at AIOC's Fifth Mugham Festival on October 4, 2000.

At the "Hello School" event, AIOC presented 500 refugee first-graders with textbooks and school supplies at the beginning of a new school year. This year AIOC also sponsored the publication of 18,000 copies of "Azerbaijan Dili" (Azerbaijan Language) textbooks for third-graders. Nearly 17,000 copies of the textbook were distributed to children from refugee and IDP families in 40 regions.

Refugee Poetry
Thirteen-year old Lamiya Safarova (penname: Kochkunlu, which means "runner", the Azeri word for refugee) is a poet from the Jabrayil district in Karabakh. BP recently published a book of her poetry in two languages - Azeri and English. This richly illustrated poetry holds symbolic meaning, as it communicates the feelings of a whole generation of Azerbaijani children who fled their native villages six to eight years ago. They were just small children then, but they can still remember and see every path in their gardens, every tree and flower bush in their yards. Now these children are scattered all over the country and forced to live in shelters, railway cars and tents with their families. A ceremony marking the presentation of the book was held jointly by BP, the Ministry of Youth and Sports and the State Committee on the Problems of Refugees and IDPs. At the event, Lamiya recited her poems and played the saz, one of Azerbaijan's traditional musical instruments.

Left: Young Refugee poet Lamiya Safarova at the dedication of her first poetry book.

Outreach to Children
BP is supporting 150 disabled children between the ages of 7 and 16 at the Zugulba Bone Tuberculosis Sanatorium.

Forty percent of the children are from refugee and IDP families, many of them traumatized as a result of the war in Karabakh. The project started in October 2000 and will last until April 2001. BP support includes production and distribution of computer training manuals, English-language textbooks, and classes in the Internet, personal hygiene, human rights and rights of the child, sewing, knitting, music and the arts. BP also helped establish a children's library at the sanatorium. In addition, BP has refurbished a children's camp in Shuvalan near Baku, equipping it with sports facilities and equipment, arts materials, computers, musical instruments and teaching materials.

New Safety Park
BP recently opened its third children's traffic park in Baku in the Yasamal district. The park operates as a recreation area and training center for raising children's road safety awareness. To date, BP Azerbaijan's Road Safety Project has involved close to 20,000 schoolchildren from 200 schools of Baku. The company holds Children's Road Safety Awareness Weeks twice a year in collaboration with the Baku City Traffic Police and the Baku City Center for Extracurricular Activities.

Left: BP's third Children's Traffic Park opened in Baku School No. 295 as part of the Children's Road Safety project.

Children's Day
BP and AIOC joined local and international organizations in marking November 18th as Universal Children's Day. BP employees visited orphanages in the Ramana and Mashtaga villages near Baku and presented the children with clothing, school supplies and blankets. BP also presented gifts and prizes to winners of a children's sports competition organized by the Ministry of Youth and Sports.

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From Azerbaijan International (8.4) Winter 2000.
© Azerbaijan International 2000. All rights reserved.

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