BP Approves $6bln To Build Azeri Oil Exploration Platform

BP Approves $6bln To Build Azeri Oil Exploration Platform
April 22, 2019


On Friday last week, BP p.l.c. (NYSE: BP) and its associates approved the $6 billion Azeri Central East (ACE) venture, which involves expansion of the massive Azeri-Chirag-Deepwater Gunashli (ACG) oilfield site in the Azerbaijan area of the Caspian Sea. ACG is the Caspian Sea’s biggest oil and gas field, spanning over 432 km². ACG block of oil and gas fields has proven oil reserves of 1.2 billion tons and gas reserves of 350 billion cubic meters. The stock of BP closed almost flat at $44.39 on Friday.

The project has been approved by the Steering Committee for the improvement “of the Azeri and Chirag fields and the Deep Water portion of the Gunashli (ACG) field.”  The project is a joint effort of BP, SOCAR (State Oil Company of Azerbaijan), Chevron, INPEX, Equinor, ExxonMobil, TPAO, ITOCHU, and ONGC Videsh.

However, BP heads the project with a 30% stake. It is followed by Azerbaijan’s state-owned energy company, SOCAR, with a 25% share. While Chevron owns a 9.57% stake in the venture, Exxon Mobil holds a 6.79% stake. Other parties hold a stake of between 2% and 10% (INPEX – 9.31%; Equinor – 7.27%; TPAO – 5.73%; ITOCHU – 3.65%; ONGC Videsh Limited (OVL) – 2.31%).

The $6 billion expansion includes Azerbaijan’s new offshore platform in the Caspian Sea, and services created to handle up to 100,000 barrels of oil every day. The venture is anticipated to go online in 2023 and extract up to 300 million barrels over its lifecycle. Construction, which is expected to start later this year, is anticipated to result in the creation of nearly 8,000 jobs.  This is the first large investment plan to be initiated by the ACG partnership after the ACG production sharing agreement (PSA) was extended to 2049 in 2017.

In 1994, BP and Azerbaijan entered into an overall development contract. Investments to the tune of over $36 billion have been made since then.

The Azeri Central East (ACE) project focuses on a unique ’48-slot extraction, drilling and quarter platform’ at a depth of roughly 459.32 feet (~140 m) between the prevailing Central Azeri and East Azeri platforms. The venture will include new infield pipelines ‘from the ACE platform to the prevailing ACG Phase 2 oil and gas export pipelines’ for shipping to Sangachal, an onshore Terminal. Furthermore, a water injection pipeline will be fixed between East Azerbaijan and ACE platforms to deliver injection water from the Central Azerbaijan compression platform to the ACE locations.

Commenting on the partnership, Bob Dudley, BP Chief Executive, said “Working together over the past 25 years, this remarkable partnership has turned these world-class assets into tremendous benefits for the people of Azerbaijan. The ACE (Azeri Central East) extension builds on that legacy and helps ensure that the next quarter century will be just as bright.”

While speaking at the ACE project contract signing event, Rovnaq Abdullayev, president of SOCAR, opined that the approval symbolizes another significant landmark in the expansion of ACG for the welfare of the country, following the first contract that was signed 25 years before.

Rovnaq Abdullayev further said, For decades, SOCAR has been reinvesting Azerbaijan’s oil revenues in the development of a highly-qualified workforce and modern industrial facilities in our country. Today we have world-class factories, production and installation complexes, marine vessels and a highly-skilled local workforce, which have created the opportunity for the construction and installation of the ACE platform by Azerbaijani specialists throughout the country. Looking forward, we expect more than three billion barrels of additional oil production from ACG. This strategic decision supports Azerbaijan’s increasing role as an energy supplier for the regional and global markets.”

Gary Jones, BP’s regional president for Azerbaijan, Georgia, and Turkey, had the following to say about the project: “Today’s announcement supports the long-term production plans we set for ACG when we extended the PSA. It demonstrates our commitment to work with SOCAR and Azerbaijan’s government to continue to unlock ACG’s resources more efficiently and competitively.”

Rovnag Abdullayev also divulged to reporters that SOCAR and associates involved in the project intends to take part in a tender to acquire ExxonMobil and Chevron’s stake in the ACG field development project. ExxonMobil and Chevron have announced their intention to divest their stake in the ACG.

The announcement is anticipated to receive a positive response from the market.

Technically, the stock is trading above its 50-day moving average. Additionally, the stock has found strong support at 42.07. The MACD indicator is also making new highs. As a result, we can expect the stock to move up in the short-term.

bp - technical analysis - 22nd April 2019

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Richard W

Richard W

Richard is the guy who know everything there is about the financial industry, working in a top firm for over 15 years, he will give the lowdown on some of the biggest companies in the world

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