Autumn 2002 (10.3)
Petroleum - BP Current Developments
Embarks on Construction Phase
by Tamam Bayatly
Left: The first shovelfuls of dirt covering the BTC
pipeline (l-r): U.S. Secretary of Energy Spencer Abraham, Azerbaijani
President Heydar Aliyev, Georgian President Eduard Shevardnadze,
and Turkish President Ahmet Necdet Sezer. September 18, 2002
at Sangachal Terminal near Baku.
The construction phase
of the Baku-Tbilisi- Ceyhan (BTC) oil pipeline project has officially
begun, following a ceremony held September 18 at the Sangachal
Terminal Expansion area. This momentous occasion marked a major
step forward for the pipeline, which will eventually export oil
1,760 kilometers from Azerbaijan and the Caspian region, through
Georgia, to Ceyhan [pronounced Jeyhan] on the Turkish Mediterranean
President Aliyev, Turkish President Ahmet Necdet Sezer and Georgian
President Eduard Shevardnadze were on hand to commemorate the
occasion and lay the foundation stone for construction of the
pipeline. They unveiled plaques and buried a time capsule to
mark the commencement of construction.
"We believe that the work we have undertaken is also of
political importance," President Aliyev said. "This
project and its implementation can become a guarantor of peace,
stability and security in the Caucasus region. This steel pipe
will bring Azerbaijan, Turkey and Georgia even closer."
Turkish President Sezer added: "The Baku-Tbilisi-Ceyhan
oil pipeline, the Baku-Tbilisi-Erzurum gas pipeline and oil pipelines
via the Caspian Sea constitute the backbone of the East-West
energy corridor. This corridor will provide an environmentally
friendly, stable, economic and reliable supply of the Caspian
basin countries' reserves of oil and natural gas to international
"The construction of the Baku-Tbilisi-Ceyhan Main Export
Pipeline is one of the most important events in the histories
of Azerbaijan, Turkey and Georgia," President Shevardnadze
said. "This is Georgia's greatest achievement since the
reestablishment of its independence."
David Woodward, BP President in Azerbaijan, said: "We stand
here today poised at the dawn of a new era for the energy economy
of Azerbaijan, Georgia and Turkey. And it is fitting that Azerbaijan,
a nation that more than 100 years ago helped to create the industry
on which the world continues to rely for much of its energy,
will provide the hydrocarbon resource for these major energy
Phase 2 Construction
September 18 also marked the sanction of the construction stage
of Phase 2 of Azeri-Chirag-Gunashli (ACG) Full Field Development.
SOCAR President Natig Aliyev and AIOC President David Woodward
signed the documents to officially announce the commencement
of construction of the $5.2 billion project, Azerbaijan's biggest
development plan so far.
Above Left: Kamaladdin Heydarov, head of Azerbaijan's
Customs, and BP President David Woodward inaugurate the new Customs
Post at Sahil.
(Right) The Sangachal Expansion Project celebrated
the successful completion of Early Civil Works on July 15.
Along with Early Oil, Phase 2 represents a major step in the
implementation of the ACG Production Sharing Agreement (PSA)
towards achievement of Full Field Development. Some $3.8 billion
of the $5.2 billion will be spent on the construction of facilities
and pre-drilling; the balance will be spent on development drilling
during the subsequent production period.
In Phase 2, the East and West areas of the Azeri field will be
developed; in conjunction with Phase 1 (Central Azeri), this
will complete the Azeri field development. Phase 2 facilities
will be integrated with Phase 1 facilities to create an Azeri
offshore and onshore development complex. Phase 2 development
will be followed by Phase 3, which will be focused on the development
of Deepwater Gunashli.
The Phase 2 project comprises two 48-slot production, drilling
and quarters platforms, an additional 30-inch oil pipeline to
the Sangachal Terminal, expansion of the existing onshore terminal
at Sangachal and expansion of the Phase 1 gas compression and
water injection platform.
The start of first oil production from the West Azeri and East
Azeri platforms in the second quarter of 2006 and the first quarter
of 2007 respectively will add production of more than 20 million
tons per year (420,000 barrels per day). Approximately 210 million
tons (1.6 billion barrels) of Phase 2 reserves are expected to
be produced during the PSA period. To achieve this production,
up to 96 additional production, water injection and gas injection
wells will be drilled, followed by approximately 113 additional
sidetrack wells throughout the life of the field.
INPEX Joins BTC
Left: Presenting awards at BP's first Biodiversity
Competition. From left to right: BP President David Woodward,
SOCAR President Natig Aliyev and Azerbaijan's Minister of Environment
and Resources Husein Baghirov.
Pipeline Company (BTC Co.) was formed in London on August 1 to
construct, own and operate the pipeline. BTC Co., which is operated
by BP on behalf of the other shareholders, will negotiate project
finance loans from a wide group of lenders, including the International
Finance Corporation and the European Bank for Reconstruction
and Development, export credit agencies, political risk insurers
and commercial banks. During the first board meeting of the BTC
Co., SOCAR President Natig Aliyev was elected Chairman and BP's
Michael Townshend was elected Chief Executive Officer.
Japan's INPEX has reached an agreement to acquire a 2.5 percent
share in BTC Co. INPEX's share will come from BP and Turkey's
(State Oil Company) TPAO and will take effect in October. After
that, the shareholdings in BTC Co. will be: BP, operator (32.6%),
SOCAR (25%), Unocal (8.9%), Statoil (8.71%), TPAO (6.53%), Agip
(5%), TotalFinaElf (5%), Itochu (3.4%), INPEX (2.5%), Delta Hess
Construction contractors for the Sangachal Terminal Expansion
Project are currently employing about 1,000 Azerbaijan citizens,
including more than 350 workers who come directly from the area
around the Terminal, including Sahil, Sangachal village, other
Garadagh villages and the refugee camp Umid (Hope) in the Garadagh
district. The current construction contractor for the Terminal
expansion is the Tekfen/Azfen Consortium.
The project's major construction contractors, McDermott and Bouygues,
are implementing a substantial part of their activities under
the Central Azeri Project at SOCAR's SPS construction site. To
date, about 900 local workers have been recruited by Bouygues
for jacket and piles. McDermott has recruited more than 1,000
local workers for the drilling and quarters platform topsides
and pipelay activities.
In total, more than 3,000 local workers have been involved in
Phase 1 construction activities. This number already exceeds
the target for local jobs to be provided by the project, even
though construction is only 30 percent complete.
Central Azeri Project
The subsea drilling template for the Central Azeri Project was
successfully installed at the location of the production, drilling
and quarters platform in June. The template was placed over the
first well already pre-drilled by the Dada Gorgud semi-submersible
rig and will be used by the same rig for the drilling of the
remaining pre-drilling wells.
The fabrication of the 150-ton template and its five piles commenced
in November 2001 at the SPS yard and was conducted by BOS-Shelf,
an alliance between Bouygues Offshore and the SPS yard, a local
The Central Azeri drilling program will be conducted in three
stages: pre-drilling, platform wells and sidetracks. The first
stage of drilling has already commenced. AIOC is currently drilling
the third pre-drilling well with the Dada Gorgud. The Phase 1
pre-drill program will be completed in 2003.
In June AIOC awarded CMP Entrepose of France the contract for
construction of storage tanks for the existing onshore terminal
in Sangachal. The contract envisages expansion of the terminal
storage tankage by 1.6 million barrels (250,000 cubic meters).
It includes construction of two crude oil storage tanks and a
smaller tank for the storage of produced water, with a capacity
of 50,000 barrels.
The construction of the smaller tank is scheduled to be completed
by February 2004. The completion date for the crude oil tanks
is planned for June 2004. Overall cost for the tank construction
works is estimated at $16 million.
The Sangachal Expansion Project celebrated the successful completion
of Early Civil Works on July 15. This stage included terminal
site clearing and leveling, digging a drainage trench around
the terminal, relocation of power cable, construction of temporary
terminal accommodation, creation of access roads and provision
of water and utilities at the site.
The project used a significant number of Azerbaijan's local subcontractors;
the majority of the local workforce came from surrounding settlements
in the Garadagh district and was recruited through the three
information/recruitment centers that AIOC/BP has established
in the Sangachal village, Umid refugee camp and the Sahil settlement.
BP recently held its first biodiversity competition for best
NGO project related to the theme of "Ecology and Economy
in Harmony." The competition reflects the commitment on
the part of the company and its partners toward having a real,
measurable and positive impact on biodiversity.
Out of the 39 projects submitted by local NGOs, 15 projects were
identified as relevant to the biodiversity theme. The remaining
24 were identified as social or environmental in nature and as
such were presented to BP's relevant departments for further
The winner of the competition was a project to plant trees near
the Sangachal Terminal, submitted by the local NGO Karvan. Additional
prizes were awarded to the Environmental NGO Green Way, the Green
Movement of Azerbaijan, the International Hydrology Program Association
of Azerbaijan and the Azerbaijan Society for the Protection of
Sahil Customs Post
AIOC, the State Customs Committee and the State Oil Company of
the Azerbaijan Republic (SOCAR) opened a new customs post in
August at the Sahil settlement near Baku. The customs post is
the second such facility that Azerbaijan's State Customs Committee
has opened in support of AIOC's operations.
The post will facilitate delivery of AIOC's major projects, as
large quantities of supplies and materials will need to be imported
into Azerbaijan in support of these projects. To maintain project
schedules, it is crucial that these materials are cleared through
customs and delivered to the work sites in a timely manner. The
post will handle about 90 percent of the total goods and supplies
to be delivered by ships, railway and trucks for AIOC projects.
At peak, this will amount to more than 50,000 tons of cargo per
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