BP aiming to steady Azerbaijan's prized oil output with new platform: upstream chief

BP expects to steady the production of crude oil from Azerbaijan's flagship ACG complex over the next few years thanks to a long-awaited new platform, with the Shah Deniz gas field also boosting Azeri liquids output, upstream chief Gordon Birrell told S&P Global Commodity Insights.

Speaking in his London office in June, Birrell outlined BP's changing approach to managing the Azeri Chirag Deepwater Gunashli field, which accounts for the bulk of Azeri oil production and is the main source of exports through the Baku-Tbilisi-Ceyhan pipeline to Turkey's Mediterranean coast.

Onstream since 1997 and the foundation of BP's presence in the Caspian country, ACG output has been declining for more than a decade; the complex produced 386,000 b/d of light sweet crude in the first quarter, down 11% year on year and 42% from a decade earlier.

ACG remains, however, the main source for the high-value Azeri Light crude blend shipped via the BTC route, even as the blend now includes growing volumes of third-party crude from other Caspian nations -- Kazakhstan has been stepping up shipments via BTC to diversify away from Russian routes and is expected to ship an additional 1.5 million mt of crude through Azerbaijan this year.

Platts, part of S&P Global Commodity Insights, assessed Azeri Light at a $2.79/b premium to the Dated Brent benchmark on July 19.

However, ACG accounted for roughly two thirds of BTC volumes in the first quarter, and Azeri Light continues to attract high prices due to being rich in middle distillates, needed for jet fuel and diesel production.

Output from ACG is due a boost in early 2024 with the startup of the Azeri Central East platform targeting a "new" formation, while the operator steps up injection of oil and gas to boost pressure levels.

Birrell, who is BP's vice president for production and operations, confirmed the UK major still makes some use of Russia's river and canal system, traditionally the main route used by the industry for bringing bulky supplies such as rigs or processing modules into the landlocked Caspian. It follows reports of supply chain problems for some upstream companies in Kazakhstan due to their reliance on an increasingly isolated Russia.

But Birrell said there was no dependence on Russian infrastructure and stressed BP's compliance with sanctions. Alternative road and rail routes through Georgia and Turkey have significantly improved, while the Azeri Central East platform was built at facilities in Baku. "Azerbaijan's fully open for business as we speak," he said.

With production declining at the ACG field's main geological formation, Pereriv, the focus is shifting to the shallower, less prolific Balakhany formation, which will require greater injection of gas and oil to support pressure levels. Unlocking those reserves is the goal of the 100,000 b/d ACE platform -- the seventh ACG platform and first to be added at the complex since 2014. "You should assume I think for the next few years the black oil from ACG pretty constant, maybe slight decline," Birrell said, referring to ACG crude.

Gas liquids

The decision to go ahead with the $6 billion ACE project was the first major investment decision after BP, state-owned Socar and the other ACG partners agreed in 2017 to extend the production sharing agreement to 2049.

BP has also been boosting flows through BTC with liquids from the Shah Deniz complex, which is a key source of gas for Europe, but also brings significant condensate production. Shah Deniz gas output has been ramping up, with first-quarter production of 7 Bcm, or 78 million cu m/d. Condensate output in the first quarter was steady from a year earlier at 100,000 b/d. However, increased inclusion of condensate may alter the quality of Azeri Light over time, BP has said.

In January, BP and its partners also began drilling a new deep gas exploration well below the main Shah Deniz field, expected to take a year to reach its 7,000-meter target depth. Another recent exploration well has identified deep gas reserves beneath the ACG oil complex, BP said in July, adding that it was working on a development concept.

Birrell declined to be drawn on the growing Kazakh crude volumes being shipped through Azerbaijan and which routes they might take -- Kazakh state-owned KazTransOil says it shipped 347,000 mt of Tengiz crude to the BTC pipeline in the second quarter.

"We are focused on investing in both ACG in terms of flattening decline, keeping the oil flowing and Shah Deniz wet gas... so both are on our radar screen," Birrell said.