October 24, 2012 / 12:06 PM / 8 years ago

Azeri SOCAR keeps BP as field operator, confirms output plan

BAKU (Reuters) - Azerbaijan’s state oil firm signaled on Wednesday BP (BP.L) would keep the operatorship of one of its major foreign projects after Baku recently accused the British oil major of “false promises” following a shortfall in planned output.

BP logo is seen at a fuel station of British oil company BP in St. Petersburg, October 18, 2012. REUTERS/Alexander Demianchuk

The head of Azeri SOCAR said it was working with BP on a plan to keep output roughly flat at the Azeri-Chirag-Guneshli (ACG) field through the end of the decade and was not looking at a change of operator there. It expects production of 33 million metric tonnes (36.37 million tons) this year and in 2013.

“We are preparing a program which envisages oil production at ACG at 33-34 million tonnes in 2015-20,” SOCAR chief Rovnag Abdullayev told reporters.

“The contract has not been changed,” Abdullayev said, referring to BP’s operatorship. “I think there is no need to use possibilities, which are envisaged by this contract.”

Falling output at the ACG oilfields, one of BP’s largest global projects, raised concerns in the ex-Soviet republic and prompted its president to accuse BP of making false promises.

ACG was expected to produce more than 1 million barrels per day (bpd) after a third phase was completed in 2008. But after hitting 823,000 bpd in 2010, output has fallen, averaging 684,000 bpd in the first half of this year.

Abdullayev said he would have talks with three BP vice-presidents who were visiting Baku. BP confirmed there were negotiations, but declined to elaborate.

“Talks are under way,” Tamam Bayatly, BP Azerbaijan’s spokeswoman, said. “We will issue a press release later today.”

Azerbaijan said BP had promised to sack staff responsible for the output shortfall. BP later made managerial changes in its Azeri office which it said were not related to President Ilham Aliyev’s criticism.

Exxon Mobil (XOM.N), Chevron (CVX.N) and Statoil STL.OL also have stakes in the consortium.

Oil executives and diplomats told Reuters last month BP would have to invest billions of dollars more than previously planned in order to slow the output decline. Doing so might not be commercially viable if the PSA is not extended beyond 2024.


Abdullayev’s comments on Wednesday made clear that Azerbaijan did not intend to expel BP, the oil-rich country’s biggest investor and a major tax payer.

Abdullayev said SOCAR did not believe that BP intentionally perpetrated the decline on its partners, saying there was no “trace or probability” of such wrongdoing.

He added that one of the reasons for the decline was a gas leakage at Azeri field in 2008, which disrupted works at the platform for two months.

“We also could not fulfill output forecast after that accident,” Abdullayev said, but added: “BP’s tactics after the accident was not managing risks, but avoiding them.”

Analysts said BP could be encouraging SOCAR to soften its position on the ACG decline by offering concessions to the Azeri state energy company on other points of contention over their projects in Azerbaijan.

“Negotiations between BP and SOCAR over joint projects in Azerbaijan gave positive results,” Ilham Shaban, the head of the Baku-based independent Centre for Oil Research, told Reuters.

They are at odds over delivery and marketing of gas from the next phase of another giant hydrocarbon project, Shah Deniz.

Shaban also suggested BP might be willing to withdraw its request to extend its the production sharing agreement at ACG beyond 2024.

Abdullayev said an extension was not under consideration.

Writing by Margarita Antidze in Tbilisi; editing by James Jukwey

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