BP-AZERBAIJAN: HAPPY-END

The main intrigue of the past year - President Ilham Aliyev's dissatisfaction with the activity of the country's main business partners - BP - had a happy-end.

BP CEO Robert Dudley paid a visit to Baku, which already indicates that the parties have come to an agreement. "At the meeting with President Ilham Aliyev, satisfaction was expressed with the development of cooperation between Azerbaijan and BP. It was emphasized that effective results had been achieved in the implementation of joint projects to develop deposits in Azerbaijan, including Azari-Ciraq-Gunasli [Azeri-Chirag-Gunashi] and Sah Daniz [Shah Deniz], and opinions were exchanged on issues relating to the current state and prospects of cooperation." This scanty news in the official media can be considered a kind of full stop in the unpleasant situation that had arisen.

So, in the last few months, a noose around BP's neck was tightening more and more, and not only in Azerbaijan. BP and its affiliated companies have been suspended from signing new contracts with the US government because of the oil spill in the Gulf of Mexico in 2010. This decision was taken after the British company formally pleaded guilty to 11 charges brought by the US Department of Justice. This means a serious blow to the business image of the company and, of course, considerable financial losses. Some skeptics do not even rule out that the decline in the market value of BP and the sharp drop in stock prices may make the company a subject of takeover.

It is clear that, in such circumstances, it is of no benefit to the company at all to damage relations with Azerbaijan. At the same time, some experts also agree that the decline in oil production at the Azari-Ciraq-Gunasli block, for which the Azerbaijani leader blamed BP, was a result of the accident in the United States. For example, the first vice-president of SOCAR (State Oil Company of Azerbaijan), Xosbaxt Yusifzada, believes that the sharp drop in production at ACG should not have happened because so far about one-third of the reserves have been developed at the deposits. One of the causes of the fall in production at the block, he said, was the work to tighten safety and the policy of warning and risk prevention organized by BP (operator of the field) after the problems encountered by the company in the Gulf of Mexico. "To improve the safety systems, work on the platforms at the field was stopped, and there was downtime, which is also justified in terms of avoiding accidents and difficulties in the Caspian Sea," the vice president said.

He said that BP is now conducting all necessary work to ensure stable production in 2013. For example, according to Yusifzada, this year, BP had to finish drilling eight new wells, but completed drilling on only two in the end. "Accordingly, to ensure stable oil production at ACG, it is necessary to start drilling new wells and continue to use the existing ones," he said.

In addition, in continuation of discussions with SOCAR, BP completed a detailed review of the productivity of ACG. The purpose of the review was to analyze the plan of supplies from the block in 2013 and identify opportunities to respond to technical problems. The review was conducted by a team of BP specialists led by BP Head of Subsurface Ian Cavanagh. "Our attention was focused on issues that are vital to substantiate the production of oil in 2013 and in subsequent years. We developed a plan and agreed actions to access world experience in managing reservoir pressure, decline in production, wells and the optimization of the system, and control of sand," Cavanagh said.

We must say that this kind of reports indicating that BP is taking all the necessary steps to improve relations with Baku appeared in the final months of the last year very often. Adding the decision to change the management of the local office, it may be noted that the company actively worked towards reconciliation with Azerbaijan, which they managed to do in the end.

Robert Dudley's visit in December dotted the i's and crossed the t's, although, we must say, there was a lot of doubt regarding his visit. In any case, the head of BP visited Baku and discussed a number of important issues with SOCAR President Rovnaq Abdullayev. Officially, it was reported that during the meeting, Abdullayev approved the productive work of the subcommittee established by the decision of the steering committee for the development of ACG for taking effective measures and developing plans for the short- and long-term development of the block. It was also noted that the work carried out jointly with SOCAR, BP and other project participants creates confidence that stable development will be achieved in the shortest possible time. Dudley, in turn, praised the work carried out over the past three months as part of the stabilization of production at ACG and thanked the Azerbaijani side for their help and support.

Obviously, Azerbaijan and BP need each other - and it is of no benefit for us to lose a partner at the current stage of the development of ACG, the operator of pipeline projects and the main gas project Sah Daniz, and BP Azerbaijan, in which it has already invested $ 40 billion together with partners.

Thus, we can say that the storm in relations with BP is over. Although ... the calm may be temporary, depending on how consistent the company will be in fulfilling its promises. As they say, time will tell.

FIRSTHAND

"I am very glad that our main business partner - BP - took these thoughts and remarks with great responsibility. I am very glad that issues of stabilizing oil production are a priority among the company's plans"

Ilham Aliyev, president of Azerbaijan