BP stabilizes Azeri ACG crude oil production at 660,000 b/d

Baku (Platts)--5Jun2013/852 am EDT/1252 GMT


Crude oil production at the BP-operated Azeri-Chirag-Guneshli field complex offshore Azerbaijan has stabilized at 660,000 b/d, a senior BP official said Wednesday.

Gordon Birrell, BP's regional president for Azerbaijan, Georgia and Turkey, stressed at a conference in Baku the importance of continued investment and the application of the most advanced technology in stabilizing output at the giant field.

BP is now effectively in the business of managing decline at ACG, with a current program aimed at stabilizing production at around 650,000-700,000 b/d following peak output of around 800,000 b/d in 2009 and an anticipated fall to around 500,000 b/d in 2023, he said.

"We continue production at ACG at an approximately flat level since the beginning of the year...[at around] 660,000 b/d," Birrell said.

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Birrell described ACG as a world-class reservoir and stressed that BP and its partners were committed to extending the life of the fields for as long as possible.

"We believe ACG can go on for decades as a benefit to Azerbaijan," Birrell said.

He said that current output was running at 660,000 b/d, much the same level as in 2012, and that while there might be some dips ahead, the trend for the next several years would be one of stabilization.

A graph displayed by Birrell showed ACG was expected to see current output rise gently to around 700,000 b/d in 2015, to dip slightly in 2016, and then to recover to around 700,000 in 2017 before tailing off gradually to around 500,000 b/d in 2023.

CONTRACT EXTENSION

In contrast, the World Bank's latest study on Azerbaijan, based on assessments which appear to have been gathered between 2010 and 2012, anticipated that total Azerbaijani oil production would rise steadily over a four-year period from 2012 onward, peaking at 65.7 million mt/year (around 1.28 million b/d) in 2016 before falling to 35.8 million mt in 2024.

This is the year when the 30-year production sharing agreement under which BP operates the giant field expires.

ACG routinely accounts for around 80% of Azerbaijan's total oil production.

When asked by Platts on Tuesday whether the 1994 production sharing agreement -- which the Azerbaijanis dub "The Contract of the Century" -- might be extended, Birrell replied: "I would hope so. We would love to be part of operations at ACG for many more years to come. But you will have to ask the government about that."

So far, Birrell told the conference, BP and its partners had produced 2.2 billion barrels of oil from ACG.

BP has commonly cited the field as possessing some 5.4 billion barrels of reserves considered recoverable in the current 30-year PSA timeframe, with further resources available for subsequent production.

A senior source at Azerbaijan's state-owned oil company Socar told Platts that so far only one-third of the field's recoverable reserves had been produced.

"The objective now is to stop the decline, to get [production] back to a stable or rising level again," the Socar source said.

"We have now managed to stabilize production at a sustainable level," the source added.

"There's been an enormous amount of effort by all parties to address every issue both individually and holistically. That's what BP is now doing."

DECLINING PHASE

Birrell told Platts that he viewed ACG as "a good oil field, right now in its declining phase."

However, he stressed: "We should be able to flatten out the decline for a number of years."

The precise level of plateau production, foreseen by BP as extending roughly from 2012 to 2018, Birrell told Platts, "will depend on how much we invest."

At the conference, Birrell emphasized that BP was indeed committed to further investments, citing in particular the new drilling platform currently being installed in the center of the field as the centerpiece of the $6 billion Chirag Oil Project.

Like all Azerbaijani projects, ACG's operations have been hampered by lack of rigs for drilling wells.

With wells often producing at between 10,000 and 20,000 b/d each, the inability to drill as many wells as anticipated, as well as the need for maintenance of existing facilities, has contributed to the downturn in production in recent years.

The issue threatened a major disruption in relations between BP and the Azerbaijani authorities, although this seems to have been smoothed over when BP President Robert Dudley visited Baku for talks with Azerbaijani president Ilham Aliev and the most senior government and Socar leadership.

Opening the annual Oil and Gas Exhibition in Baku yesterday, President Aliev spoke warmly of BP saying: "In the last 20 years we have created an excellent relationship. For 20 years it has been our strategic partner and we have attained great successes -- and for at least 20 years to come this strategic partnership will continue."

--John Roberts, john.roberts@platts.com; Dina Khrennikova, dina.khrennikova@platts.com
--Edited by Maurice Geller, maurice.geller@platts.com