President Aliyev and Head of BP Discuss Future Plans for ACG Development

Azerbaijani President Ilham Aliyev and the head of BP, Robert Dudley in Baku yesterday discussed further prospects of participation of BP in the oil and gas industry of Azerbaijan. In particular, BP plans to develop the block of fields Azeri-Chirag-Guneshli (ACG) after the expiry of the existing contract in 2024, the website of the head of state wrote.

“During the meeting the sides noted the successful cooperation between Azerbaijan and BP for many years, discussed the ACG block development after 2024. It was noted that foreign companies are interested in participating in the future development of this block,” the information says.

At the meeting it was stressed that the multi-billion dollar investment by foreign companies in the future development of this unit and the additional production of large volumes of oil will create an opportunity for new jobs.

In addition, Aliyev and Robert Dudley discussed the progress made in the implementation of projects for the creation of Southern Gas Corridor and Stage 2 of the field development Shah Deniz, and the work conducted by BP in the shallow part of the Absheron archipelago.

It should be noted that the contract for the development of the ACG was signed on 20 September 1994 and the Parliament of Azerbaijan adopted it on December 12 of the same year. The term of the contract is 30 years.

The project participants are at present BP (35.78%, the operator), Chevron (11.27%), ExxonMobil (8%), Indian ONGC (2.72%), Azerbaijan's SOCAR (11.65%) Japanese Inpex Corp. (10.96%) and Itochu Oil (4.3%), Norwegian Statoil (8.56%), and Turkish TPAO (6.75%).

Oil production from the block has been carried out since November 1997. Since then more than 3 billion barrels of oil has been produced. According to the geologists of SOCAR, the ACG contract area can still produce almost 4 billion barrels of oil. BP claims that it is necessary to invest billions of dollars. SOCAR and BP have already come to an agreement on the further development of the block. The consensus is that there is no need to wait for the completion of the end of the first contract on ACG.

According to Turan, signing a new PSA contract and its approval in Parliament would mean suspension of the action of the first contract on ACG. From now on, a new calculation will start.

Why is a new contract needed by Azerbaijan? Firstly, it opens up the possibility of an inflow of foreign investment in the project. Secondly, production at the ACG block will stabilize at the level of 24-25 million tons per year from the next decade. This is a very important stage in a stable foreign exchange earnings of the Oil Fund.

Why are foreign companies interested in signing a new contract, not completing the first one? By 2025, energy prices are forecast lower. That is risks are very high for mining companies to invest in exploration. For over 20 years of the ACG project they have studied it carefully, besides, the host country itself is comfortable for them in terms of the least political and economic risks. Investment in the ACG project has always brought good dividends to the shareholders.

Turan recalls that the new project plans to invest more than $ 8 billion in ACG. As a result, another major production platform will be built in the Azeri field and subsea infrastructure will be created. First oil from the new platform is expected in early 2021. -12B--