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BP to address ACG output issues after Azeri President slams performance

Increase font size  Decrease font size Date:2012-10-22   Views:501
BP is working with Azerbaijan's state-owned Socar to address output problems "as quickly as possible" at the offshore Azeri-Chirag-Gunashli oil field complex, the company said Thursday, following a scathing attack by the Azeri President Ilham Aliyev on BP's management of the fields.

"We are fully committed to Azerbaijan," a BP spokesman said in an emailed statement.

"We are working with Socar to address ACG production issues as quickly as possible," he said.

Production at ACG, Azerbaijan's main producing field, has been falling over the past four years.

Aliyev told a meeting of the Cabinet of Ministers Thursday that BP had made "gross mistakes" at ACG that had led to the decline in production.

He said he expected ACG production in 2012 to come in at just 33 million mt (665,000 b/d), lower than a forecast of 35.6 million mt.

"The wrong forecasts given to us are unacceptable. The false promises given to [Socar] are unacceptable," Aliyev was quoted as saying by state news agency APA.

BP in the first half of 2012 published a production figure for ACG of 684,000 b/d.

This compared with output in 2011 of an average 717,600 b/d, BP's own figures show.

Aliyev said that Socar has been instructed to officially raise the issue with BP and take the necessary steps.

"Serious measures must and will be taken," he said.

BP operates the ACG field complex with a 35.83% stake as part of the Azerbaijan International Operating Company (AIOC).

Its other members are: Socar (11.57%); Chevron (11.3%); Japan's Inpex (11%); Norway's Statoil (8.6%); ExxonMobil (8%); Turkey's TPAO (6.7%); Japan's Itochu (4.3%); and the US' Hess (2.7%).

India's ONGC Videsh last month agreed to buy Hess' stake, with the deal set to complete in the first quarter of 2013.

OUTPUT DECLINE

In his remarks to his cabinet, Aliyev said the start of output decline from the field coincided with a change in the profit sharing agreement between BP and Baku in 2008, which gave Azerbaijan a greater take from the project.

"In the middle of 2008, the production sharing changed in favor of Azerbaijan and since then it is 75/25 -- that is, 75% of the profit oil belongs to Azerbaijan."

He said that after these changes were made, ACG oil production began to decrease.

"This unexpected decline was caused by the gross mistakes of BP, which is leading the consortium on the ACG fields," he said.

"We have been cooperating with BP for years. We have always supported their activity. We supported them when they had hard times. We expect an adequate attitude."

Aliyev said he was grateful for the investment of BP and others into the country's oil sector, but that the most recent oil forecasts made by the operator of the field had not been fulfilled.

"Because of these investments Azerbaijan is one of the most rapidly developing countries in the world," he said.

"Up to now $28.7 billion has been invested in ACG by the consortium led by BP and up to now the consortium has made $73 billion profit. Great profit has been made," he said.

LACK OF PROGRESS

He said he was speaking out publicly because BP had failed to address the production issues at ACG quickly enough.

"I think that all promises, forecasts must be fulfilled," he said.

He said that for 2009, the production forecast was 46.8 million mt, but that only 40.3 million mt was produced.

In 2010, he said, the forecast was 42.1 million mt compared with actual output of 40.6 million mt and in 2011 the forecast was 40.2 million mt compared with actual production of just 36 million mt.

BP gave total 2011 production as 35.4 million mt.

"Very serious changes must be made regarding this matter," Aliyev said. "Why do I make public this information today? Because last month BP officially promised me that all the problems would be addressed in a short period of time. All these mistakes were admitted. It was admitted that the situation was not satisfactory," he said.

"I was promised that very serious changes would be made in a short period of time, the working program would be amended, measures would be taken to keep the production at a stable level and what is more the people who made those gross mistakes would be replaced. Though a month has passed, I do not see these promises kept. On the contrary I think they are playing for time. Therefore I consider that it is absolutely unacceptable."

 
 
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