BP-led consortium and SOCAR, Azeri state energy firm signed a deal to extended a product sharing contract until 2050 for the super-giant Azeri-Chirag-Guneshli (ACG) offshore fields, the largest in the Azerbaijani sector of the Caspian Sea.
SOCAR (State Oil Company of the Republic of Azerbaijan), signed the contract in Baku on Thursday with BP, who will remain the operator of the field, with partners Chevron, INPEX, Statoil, ExxonMobil, TP, ITOCHU and ONGC Videsh. The existing contract was due to expire in 2024.
As part of the contract, the international partners in the co-venture will pay a bonus of $3.6 billion to the State Oil Fund of the Republic of Azerbaijan, and SOCAR will increase its equity share in the ACG PSA from 11.65 per cent to 25 per cent, BP said in a statement.
ACG currently has eight offshore platforms – six production platforms and two process, gas compression, water injection and utilities platforms. The platforms export oil and gas to the Sangachal Terminal, one of the world’s largest oil and gas terminals, onshore near Baku.
The existing ACG PSA, signed in September 1994, has seen around $33 billion of investment for the development of the field.
During the next 32 years, there is the potential for more than $40 billion capital to be invested in the ACG oil field, it said.
The new deal sees SOCAR increase its stake in the ACG consortium to 25 per cent from 11.65 per cent, while BP, which remains operator, sees its interest drop from 35.8 per cent to 30.37 per cent.
The other consortium partners have also seen their stakes reduce. Chevron now holds 9.57 per cent, Inpex 9.31 per cent, Statoil 7.27 per cent, ExxonMobil 6.79 per cent, TPAO 5.73 per cent, Itochu 3.65 per cent and ONGC Videsh 2.31 per cent.
BP said SOCAR and its co-venture partners have also agreed to progress engineering development work to evaluate an additional production platform in the ACG contract area.
Since the signing of the first PSA in 1994, ACG has benefited from $33 billion of investment, producing around 440 million tonnes of oil, and delivering directly more than $125 billion of net profit to the country, Rovnag Abdullayev, SOCAR president said.
“The terms of the new contract reflect the growing financial and technological potential of Azerbaijan and SOCAR. They also demonstrate the confidence of our foreign partners in the Azerbaijani economy, taking our effective partnership to a new level,” Abdullayev said.
Laura Bennie, research analyst with Wood Mackenzie’s upstream Caspian team, said: “Finalising the contract extension is fitting recognition of the value that ACG represents – not only for BP and its partners, but also the Azerbaijani economy. The combination of the extension, bonus payment and increased SOCAR stake looks like a balanced outcome.
“For the international partners, it's all about moving down the cost curve and securing long-life assets. Finalising the ACG contract extension is right on trend for BP and partners – the fruits of many years of talks.”
First oil was produced from the Chirag field on 7 November 1997. So far, the field has delivered around 3.2 billion barrels of oil production, which has been exported to world markets, primarily via the Baku-Tbilisi-Ceyhan and Western Route Export pipelines.
ACG has also delivered over 30 billion cubic metres of associated gas in total to the government.
In the first half of 2017, total production from ACG averaged 585,000 barrels per day.
“ACG production may now be below 600,000 barrels per day, but there are still billions of barrels to recover and billions of dollars to invest. Attention will now turn to a brand-new production platform [Azeri Central East], which will be commissioned in the 2020s,” Bennie said.