We are committed to ensure security of our assets in the region in a way that asserts and supports respect for human rights. Under agreements covering the BTC and SCP pipelines, the provision of security is the responsibility of the host governments. Each government has designated security organisations to provide this service. For its part, BP in Azerbaijan is responsible for maintaining the security of people and facilities within BP-controlled or operated sites. Early in the development of the BTC and SCP pipelines, BP and its co-venturers in the consortia building the pipelines developed four principles concerning the provision of security - to work closely with community members; to co-operate effectively with host governments and their security agencies; to protect our people and assets, and to ensure that security, like safety, became everyone's responsibility. To support these principles we: work with communities through inter-agency security committee, community liaison officers and field security officers; we also hold numerous security and human rights related public awareness campaigns interact with public security through pipelines security commission; the framework of this interaction is described in various agreements including the bilateral security protocols separately signed with Azerbaijani and Georgian governments; we have also supported human rights trainings for government security agencies have established an efficient grievance resolution mechanism support external monitoring of our activities through a prism of security and human rights; the monitoring was conducted by internationally recognized law firm - Foley Hoag Underpinning our approach to security and human rights are the Voluntary Principles developed in 2000 by the US and UK governments, international NGOs and companies in the extractive industries.
Protection of the environment is one of the primary goals, with an aim to leave a positive legacy in countries where we operate To protect and enhance biodiversity around our assets and in regions where we are present, we are closely working with local communities, local authorities and the government In all of our operation we are striving to comply with international environmental standards and BP group HSSE policies In it’s 2007 report independent advisory panel – Caspian Development Advisory Panel wrote: “Although it will take time, especially in freshly reinstated high altitude areas, for plant cover to reestablish itself fully, BTC’s careful top soil management practices are already being rewarded with the reappearance of native pioneer plants. In lower-lying areas where reinstatement took place relatively early, the ROW marker posts are frequently the only visible evidence of the pipelines’ presence.” I used striving just to be on the safe sided, because “complying” is a bit too strong and determinative but please feel free to take it out
In BP we are committed to ensure professional development of local staff. To this end we implement a number of projects and initiatives including: Caspian Technical Training Centre (CTTC): helps to provide numerous trainings in various fields including: safety, technical fields, HSE, English language and others. Since its operation more than 1,000 technicians were trained in the Centre. In 2007 only more than 100 technicians graduated from the Centre. Educational assistance provided for national staff (2007 numbers): more than 100 employees were supported in their professional education studies in such fields as personnel, accountancy, management, project management and public relations. 32 HR employees are studying for a qualification with the UK Chartered Institute of Personnel and Development. 53 employees are enrolled into the Heriot Watt Petroleum Engineering MSc degree programme. We offer a full curriculum of training, both technical and behavioural, to support national development. This investment exceeded $20 million in 2007. Special entrance and development program for graduate recruits: Challenge programme is open to all university graduates hired for management roles who have achieved globally competitive competency levels. Competencies are developed through on-the job experience and a structured programme of formal training. National staff development also includes overseas assignments. For example in 2007, 43 Azerbaijanis were on various BP’s overseas development assignments As a result of careful career planning a 225 nationals were in middle and senior management grades (170 in 2006) as of end 2007; 13 Azerbaijani citizens were in senior management grades and 8 in middle management grades in BP global organization outside of Azerbaijan.
In Azerbaijan BP and our co-ventures invest a lot of money and time in socio-economic development projects in Azerbaijan. Community Investment Programme: Our community investment projects in Azerbaijan reflect an ongoing support to positive social and community development for people living near our facilities. In 2007, the CIP was implemented in 60 communities. The year was marked by close cooperation with municipalities, local authorities and businesses. In all, BP and co-venturers spent $2.7 million on the CIP in 2007. Environmental Investment Programme: In 2007, the EIP focused on the protection of biodiversity and environment around BP-operated assets and in the regions where we are represented. With our co-venturers, we spent a total of $288,500 on the programme during 2007. Educational Initiatives: Our educational initiatives in Azerbaijan are intended to enhance knowledge of the energy industry, improve skills in the national workforce, promote business training and advance learning. In 2007, we implemented a number of educational initiatives in Azerbaijan: School economic and business education programme Community economics education programme Youth employment and economic opportunities expansion initiative School connectivity and global citizenship programme Various scholarship programmes Other Among other social impact initiatives there are: revenue management, local content development and regional development initiative. I will cover these initiatives by our next slide.
Revenue impact and management is one of the critical issues that is currently faced by Azerbaijan. Depending on its ability to manage a huge windfall of oil revenue, Azerbaijan will either prosper or be dragged into long lasting socio-economic problems. Within our boundaries, BP and our co-venturers as major investors in the country endeavour to help the government and people of Azerbaijan to tackle this challenge. To this end we’re supporting the following three major initiatives: Oxford Economics – a project solely supported by BP EITI – an initiative that is supported by BP and other FOCs operating in Azerbaijan Local content strategy – that is supported by us and our co-venturers Oxford Economics: We support the State Oil Fund of Azerbaijan (SOFAZ) in its work with Oxford Economics to develop a macro-economic model of Azerbaijan's economy. In 2006 the 1 st phase of the project was implemented and specifically the model was developed and was handed over to SOFAZ. The second phase of the project focused on improving the model with additional data and designing options for various scenarios peculiar to Azerbaijan's economy and on building capacity within SOFAZ and the working group (comprising experts from SOFAZ, MED, MOF, NBA, the President's Office) for maintaining and utilizing the model and generating options for policy-makers. EITI: We co-operated with SOFAZ on the implementation of the Extractive Industries Transparency Initiative (EITI). In October, 2007 we have submitted our 7 th EITI report to the independent aggregators. Besides we regularly disclose our disaggregated EITI data in annual Azerbaijan Sustainability Report. Local content strategy: BP and our co-venturers have committed to increase our efforts to maximize local content in Azerbaijan by increasing the number of companies participating in contracts and by raising the value of locally-awarded contracts. The local content and enterprise development group serves as a guide to new opportunities for Azeri companies and facilitates cooperation between local suppliers and foreign investors by: Increasing BP’s and its partners' and major contractors' awareness of SMEs present on the Azerbaijani market; Increasing local SMEs awareness of BP and its partners' (and major contractors') contracting policies, standards and expectations; Assisting local SMEs in developing their business opportunities and capabilities by directing them to publicly available sources of credit, training, certification, etc. Encouraging international contractors to invest in training and infrastructure and to source materials and services locally; Providing a forum/collaboration facility for various NGOs, international financial institutions and development agencies that contribute to business development in Azerbaijan. In 2009 it was decided to take these services on-line through the Enterprise Development Portal. Our PSCM department helps us to implement the commitment that we and our co-venturers have undertook and specifically a commitment to double the local spend with locally-owned companies by 2010 Our third initiative through which we implement our local content strategy is called: Regional Development Initiative and specifically its enterprise development focus. Some challenges for implementing “Local content strategy”: Local economic and regulatory conditions Appreciation of the Azerbaijani Manat Technical and Financial competencies
We remain committed to timely, meaningful engagement with stakeholders. Our aim is to ensure that those affected and/or interested in our business activities have opportunities for dialogue with us, in a manner that can affect positively the way we do business. In fact we think that none of our (I mean BP’s and our co-venturers’) projects and initiatives would’ve been successful have we not had an efficient dialogue and engagement with our stakeholders that include: governments, civil society, communities, media and others. With government: We regularly meet with government officials to provide business updates on our activities in the country and to discuss relevant business affairs As was previously mentioned we have supported the State Oil Fund of Azerbaijan in its work with Oxford Economics on development of the macroeconomic modeling We cooperate with the government in implementation of EITI With NGOs: We engaged local NGOs in monitoring our projects We regularly hold meeting with NGOs to find out there feedback/comments/recommendations We formally consult civil society (and other stakeholders) for input when we prepare new projects, ESIAs, etc. We cooperate with NGO coalition in implementation of EITI With communities: We cooperate with communities through our Community Liaison officers and through our Community Investment project implementing partners We support cooperation of community liaison officers (CLOs), local security forces and communities along the BTC/SCP pipelines to encourage dialogue on issues of common concern With media: we hold regular press conferences we arrange numerous visits to our sites and overseas we hold and supported a number of trainings and workshops for local journalists I have mentioned just a number of examples of how we cooperate with our stakeholders and we currently continue to explore further and more efficient ways of engagement.
Azerbaijan Strategic Performance Unit September 2009 Baku
First oil well in the world was drilled (not dug by hand) in 1848 in Baku in Bibi Heybat oil field
In 1900 Azerbaijan produced more than 50% of world’s oil = 11.4 million tons
In 1897-1907 the 1 st largest oil pipeline in the world was built from Baku to Batumi = 883 km x 200mm
About 80% of oil production during World War II in the former USSR was made in Baku (peak production – 23 . 5 million tons in 1941)
First offshore oil production in the world started in Azerbaijan (1924 – Bibi Heybat beach , 1947 – Oil Rocks - in the open sea)
Ceyhan TURKEY Ankara Erzurum Cyprus Mediterranean Sea Black Sea Caspian Sea GEORGIA AZERBAIJAN Tbilisi Baku Russia Ukraine Armenia Iran Iraq Syria Lebanon Israel Jordan Greece Bulgaria Romania Moldova Kazakhstan Uzbekistan Turkmenistan Sangachal Vale
BP Azerbaijan Interests Caspian Sea Turkey Iran Iraq Syria Russia Georgia Baku Ceyhan Erzurum Kazakhstan Black Sea Tbilisi Med. Sea Azerbaijan Turkmenistan ACG Oil Production & Development Araz-Alov-Sharg Exploration Shah Deniz Gas Production & Development Sangachal Terminal South Caucasus Pipeline Gas WREP Pipeline Oil BTC Pipeline Oil Supsa Stage 1 Stage 2
BP Operated Interests in Azerbaijan Alov SOCAR 40% BP 15% StatoilHydro 15% Exxon Mobil 15% TPAO 10% EnCana 5% ACG BP 34.1% Chevron 10.3% Inpex 10.0% SOCAR 10.0% StatoilHydro 8.6% Exxon Mobil 8.0% TPAO 6.7% Devon Energy 5.6% I tochu 3.9% Hess 2.7% Shah Deniz BTC SCPC (technical operator) StatoilHydro 25.5% BP 25.5% SOCAR 10.0% LUKOil 10.0% Total 10.0% NICO 10.0% TPAO 9.0% 30.1% 2.4% 25% 3.4% 8.9% 2.5% 6.5% 5% 5% 2.5% 8.7% BP Chevron SOCAR StatoilHydro TPAO I tochu Hess Total I npex Eni ConocoPhillips StatoilHydro 25.5% BP 25.5% SOCAR 10.0% LUKOil 10.0% Total 10.0% NICO 10.0% TPAO 9.0%
Project Schedule Appraise Select Define Execute PSA signed / Sanction CVP gate Operation First Oil First Oil WA Ceyhan Lifting First Oil C&WP Start-up 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 First Oil ACG PSA Early Oil Project Central Azeri & C&WP West & East Azeri ACG Phase 3 BTC Shah Deniz PSA Shah Deniz St1 Shah Deniz St2 Chirag Oil Project 2009 First Oil EA 2010 First Gas to Turkey 2011 2012
BTC and SCP BAKU TBILISI CEYHAN Sangachal Erzurum TURKEY GEORGIA AZERBAIJAN BLACK SEA CASPIAN SEA MEDITERRANEAN SEA BAKU TBILISI CEYHAN Sangachal Erzurum TURKEY GEORGIA AZERBAIJAN BLACK SEA CASPIAN SEA MEDITERRANEAN SEA South Caucasus Pipeline (SCP) Full capacity 20 bcma Length 690 km Diameter 42” Gross Capex $1.1bn First gas Jan 2007 Baku-Tbilisi-Ceyhan Pipeline (BTC) Full capacity (March, 2009) 1.2 mmbd Length 1768 km Diameter 46/42/34” Gross Capex $3.9bn First tanker departed June 2006 3000m 2000m 1000m Sea Level