The application of pre-drilling which is conducted in advance of the platform jacket and topsides construction facilitates a much higher production rate of oil immediately after the platform is operational, thus benefiting the shareholders of both Azerbaijan and AIOC.
Construction works within West Azeri and East Azeri (Phase 2) Project which was sanctioned in September last year were 13 percent complete by the end of the first quarter. The West Azeri pre-drilling program will commence in early June, following installation of the West Azeri template by the derrick barge Azerbaijan.
Left: AIOC-sponsored workshop for local geologists on Western methods of oil reserve estimation. April 28, 2003-May 2, 2003.
Excellent progress has been achieved so far on the Baku-Tbilisi-Ceyhan (BTC) project. The project remains on schedule in all three countries - Azerbaijan, Georgia and Turkey. In Azerbaijan, over 4,300 agreements were signed by the end of February for land acquisition.
Following the Cabinet of Ministers decree of April 7th, the compensation payment process has begun and will be completed in June.
A major milestone for the project was achieved in April as construction activities commenced in all three countries with clearance of Right of Way in preparation for pipe laying activities.
In Azerbaijan work commenced on the Right of Way at KP5.3 on April 8, 2003, working from east to west. The first activities included service location and fencing of the site. The clearing of land commenced with grading on April 23rd. Following this, the pipe joints which are being stored in the Umbaki pipe yard, were transferred to the site and stringing activities started in May.
Construction at the Umbaki and Mughan Pipe yards has already been completed and work is underway for construction of a pipe yard in Kurdamir.
Left: Refugee schoo children at the national Zoo, sponsored by AIOC. April 2003.
Other activities include construction of the Mugan Construction Camp, which is currently ongoing with an expected first occupancy at the end of May and full occupancy in mid-June. Similar camps are planned at four locations: Kurdamir, Yevlakh, Ganja and Tatlu.
A total of 16,300 pipe joints were delivered to Azerbaijan by the end of April in seven shipments and they are being stored at three pipe yards in Umbaki, Mugan and Kurdamir from where the construction contractor is transferring them to the Right of Way.
The project remains firmly within the original budget of $2.95 billion and the schedule to be completed by the fourth quarter of 2004 to export First Oil from the Azeri-Chirag-Gunashli Development in the first quarter of 2005.
Finance negotiations with various international finance organizations including the IFC, EBRD, export credit agencies and commercial banks have also begun and should be completed in the fourth quarter of this year. The public disclosure periods by IFC and EBRD of 120 days are scheduled to begin at the end of May.
BTC is a major project which will make a positive difference by bringing significant benefits to the region. By avoiding the Bosphorus near Istanbul, it will relieve the inevitable growth in oil-related traffic and associated environmental risks, will create substantial revenues for the transit countries, and will help strengthen economic and political links between these three countries and the West.
Shah Deniz Project
Since sanctioning of the Stage 1 Development Project late February, the work has been progressing on schedule. This includes the spudding of the first pre-drill well on April 19. The Stage 1 pre-drilling program includes drilling of three production wells which will be drilled by the "Istiglal" semi-submersible rig.
The well is located in the north-east flank of the Shah Deniz field at a water depth of approximately 101 meters. The design depth of the well is 7,244 meters. It will take approximately 170 days to drill and suspend. The drilling operations are being conducted by the Shah Deniz Partners' drilling contractor - Caspian Drilling Company (CDC).
Use of pre-drilling in advance of installation of the TPG500 Production Platform allows an earlier First Gas date and a much faster ramp-up of gas and condensate production immediately after the platform is commissioned, benefiting both Azerbaijan and the Shah Deniz partners. The project is moving ahead on schedule and we are confident that we will be able to meet the First Gas delivery target of late 2006.
BP Azerbaijan currently employs about 1,000 Azerbaijan nationals and is intending to recruit an additional 100 Azerbaijanis this year.
The construction contractors for Azeri Development currently employ more than 4,000 Azerbaijan nationals for construction works. The current forecast is that local workforce employment will peak at 6,000 in 2004 in contrast to the project target of 5,000 which we had earlier announced.
In addition, BTC will generate 10,000 construction jobs: Azerbaijan (2,300), Georgia (2,500) and Turkey (5,000), as well as long-term operation employment opportunities for the communities in all the three countries.
The Shah Deniz project will also provide significant employment opportunities both during the construction and operating phases. During construction, the project will provide 4,200 direct local jobs for the Southern Caucasus Pipeline (SCP), and an additional 1,300 jobs within the construction of the onshore and offshore facilities.
Approximately 30 local companies are currently involved in these related construction activities. Some of them have been awarded more than one contract award, such as Azerkorpu, Rovshan Oguz, Azfen, SPS, Azertunnel, KMNF, Azpetrol, Enkotek, Neptune.
The projects will also provide opportunities for supply of goods and services by local businesses, community and environmental investment programs and will encourage future foreign investment by demonstrating confidence in the potential of the region. It is also expected that the local procurement strategy under the umbrella of the Enterprise Centre, will further spur local small and Medium Size Enterprise (SME) development. The Enterprise Centre in Baku which is jointly funded by the partners in AIOC, BTC and Shah Deniz, and which aims at helping local companies develop their business in support of major oil and gas developments in Azerbaijan, has developed wide-scale activities and networking in support of local SMEs development since it was opened in May 2002.
More than 500 hours of training have already been provided for local companies at the Enterprise Centre and other comprehensive training and education programs are planned in support of local SMEs which will help equip them with necessary capabilities to be more widely involved in construction and subsequent operating activities.
Spending with local SMEs has increased by 36 percent in comparison to the target of 25 percent in 2002. We expect this percentage to increase to 50 percent this year. A special technical assistance program for local SMEs has been launched jointly by BP, Statoil, IFC, BMZ/GTZ and Unocal.
Local Schools Near Sangachal
AIOC's Azeri Project worked with local schools around Sangachal to implement a project which affected 360 children from the four schools located in the Garadagh district where the terminal is based. These included two schools for children from refugee and internally displaced (IDPs) families from the war, who are temporarily living in the Sahil settlement and the Umid refugee camp, an orphanage in Sahil and Sangachal secondary school. The project is aimed at supporting the schools in their efforts to improve the standards of the teaching process and provide more opportunities for schoolchildren from needy families to visit places of interest in Baku and tour childrenÅfs entertainment facilities.
The project lasted for two weeks during which the children were taken in groups on educational trips to places of interest and were treated to some entertainment. Altogether, 12 all-day trips were arranged with 30 children each, who were accompanied by their school teachers and representatives of the Parents' Councils and AIOC. All children from the 6th grade classes in the four schools participated. An expert led each group at the places of interest to deliver environmental information to the children.
Supporting Local Geologists
AIOC supported an educational and development project for local oil industry experts in May. The project was aimed at helping strengthen technical knowledge of Azerbaijan's geologists in the Western methods of oil reserve estimation.
The project was implemented by AIOC's Organizational Capability Development Department in collaboration with the National Oil Academy of Azerbaijan. It included one-week intensive training course which was conducted by Alan Jones, a world-class specialist who provides similar training for BP employees in the UK.
Participants in the course included professors and advanced students from the Oil Academy and a group of experts in relevant fields from the State Oil Company of Azerbaijan Republic (SOCAR). At the conclusion of the course, all participants were awarded special certificates.