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Great Projects:
High Hopes
Tariel Hasanzadeh, reporter for "Azerbaijan Today", had an interviewwith David Woodward, Associate President of BP in Azerbaijan.
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A.T.: How do you see Azerbaijan's prospects for the near future in the context of the realisation of the "Contract of the Century"?
D.W.: I think the prospects are really very positive. We are embarking upon several very major projects. First of all, there is the
Full Field Development of the Azeri, Chirag, Deep Water Guneshli (ACG) field, and we are now over 50% complete on Phase 1 of the
Full Field Development. So it is on schedule for it to start production at the end of 2004. Associated with the development of
ACG, we are undertaking the Baku-Tbilisi-Ceyhan (BTC) main export pipeline construction, and within the next week or so, construction
activities will commence in Azerbaijan, Georgia and Turkey, which means that we are on schedule for that project to be ready to take
the first oil from ACG by the end of 2004 also. Within the last couple of months, we have sanctioned the Shah Deniz gas development. This is
another very significant project, which will allow us to deliver gas into Azerbaijan, Georgia and the Turkish market by the winter of 2006. These are
very substantial investments that have been made by BP and our partners. They are creating a lot of jobs for Azerbaijani nationals. During the
construction period, they are providing work for Azerbaijani contractors to participate in these activities.Within a few years, they will be
producing very significant quantities of oil and gas, which will generate revenues for Azerbaijan, which I believe will have a very beneficial
impact on the economy of the country and on the standard of living of the people in Azerbaijan, and indeed the region.
A.T.: As a person who has been closely following Azerbaijan's recent development, do you think the government policy regarding the involvement of foreign investment has changed?
D.W.: I don't think it has changed so much as it continues to evolve. Clearly, a major step was taken by Azerbaijan in the early 1990's under the leadership of President Aliyev, when foreign oil companies were invited to participate in the development of Azerbaijan's oil and gas resources. And of course, the start of all of this was the "Contract of the Century" that
was signed in 1994 with the AIOC partners. I think since then with the Early Oil Project (EOP), we have found that we are able to work together with the various authorities in Azerbaijan, with SOCAR and with the ministries to fulfil the intent of these contracts, the PSAs (Production Sharing Agreement).The early experience with the EOP has given us the confidence to move this into the next stage with major commitments that have been made to undertake ACG Full Field Development, to construct the BTC pipeline and to develop Shah Deniz. Over the last few years, I think we have seen positive steps being taken to reorganise the government, to reform the tax system, the legal code, etc. This is certainly encouraging for companies such as my own and, I think, for other foreign companies who wish to invest here, and for local businesses and entrepreneurs as well. But there is still a long way to go. Further progress still needs to be made in reforming the economy of Azerbaijan and transforming it into a real market economy, where business can flourish, jobs can be created and the standard of living throughout the economy can start to grow.
A.T.: When did you first meet President Aliyev and what are your impressions of him?
D.W.: I first met him shortly after I came to Baku at the beginning of 1999, and I think from the outset was very impressed with his very detailed knowledge of the oil business, of the PSAs, of the history of AIOC. Clearly, he was very closely interested in the fulfilment of the oil policy, and since then I have met with him regularly where I reported progress of our activities to the President. At times, we sought his assistance in dealing with the problems in Azerbaijan or in neighbouring countries, in Georgia, in Turkey, and he has always been very helpful to us in terms of providing advice and support to our projects, which clearly he sees as being of considerable importance to the development of Azerbaijan and to this region. I think he is truly a world-class statesman, and this is always very evident to me in any of the dealings that I have with him.
A.T.: How would you estimate his role in the realization of BTC?
D.W.: As I just indicated, he has played a very key part in all of our activities in monitoring the progress, providing advice and encouragement, and assisting us when we have encountered problems. I think that particularly applies to BTC. He has clearly understood from the very earliest of days the importance of Azerbaijan being able to export its oil and gas to international markets and doing it through very reliable means, and that the BTC pipeline could provide that means, whereby oil from the Southern Caspian could flow directly to international markets in an operationally very efficient way, in a cost effective way and in an environmentally responsible way. Throughout various stages of this project, when we have been negotiating agreements, when we have been undertaking our engineering studies, when we have been awarding contracts and now as we move into the actual construction stage, he has maintained a very close interest in our activities and provided us with very considerable support to facilitate the realisation of this project.
A.T.: What are the usual topics of your discussions with the President during your meetings?
D.W.: Unless they are public meetings with the media present, they are private meetings between the President and myself. I've just indicated that usually the topic of our discussion is the status of our projects, the progress that we are making, any challenges that we are facing and how the President may be able to assist us in these areas. But clearly, I can't reveal here the details of the conversations and the full scope of them. That is for the President to discuss publicly if he wishes.
A.T.: For today 15% of the shares in BTC Co belong to oil companies involved in the Kazakhstan shelf development. What amounts of oil are supposed to be transported from the east side of the Caspian and what are the suspected terms of signing the government agreement between Azerbaijan and Kazakhstan?
D.W.: As you have noted, 15% of the equity in the pipeline is held by companies who have interest in Kazakhstan. Effectively, this entitles them to 15% of the capacity in the pipeline, which would be 150,000 barrels per day, or seven and half million tonnes per annum. So far, they have not actually committed any volumes of oil to be transported through the pipeline. As you have indicated, there are discussions ongoing between Azerbaijan and Kazakhstan, which might lead to an intergovernmental agreement. This would certainly facilitate the transportation of oil volumes from Kazakhstan to Azerbaijan and their onward transportation through BTC. We are hopeful that this agreement will be concluded some time within the coming months. Then following up on that, there will be discussions with the various companies who operate in Kazakhstan regarding their possible commitments of oil volumes to the pipeline.As yet, we don't have any specific volumes that we expect to be committed to the pipeline. Actually, we are not dependant on Kazakh oil flowing to the pipeline in order to make it economic. We have decided to proceed with the construction of the pipeline based purely on the volumes of oil here in Azerbaijan - and specifically in ACG - for those volumes alone are sufficient to make the pipeline commercially viable. But we welcome oil from elsewhere, and we are hopeful that we will conclude agreements with the producers in Kazakhstan, which would result in their oil being transported across the Caspian and through the pipeline.
A.T.: Your wishes to President Aliyev?
D.W.: Of course it is a very significant milestone in anyone's life, and we wish the President good health on this occasion and many years to come. What I very much hope is that we can deliver these projects that the President has shown so much interest in, and gives so much support to, on schedule, so that by the end of next year we are able to start producing the first oil from the Full Field Development, that we are able to commission the BTC pipeline, and that President Aliyev will visit the platform, the pipeline in the Ceyhan terminal and see the first production from this development and the first loading of a tanker from Ceyhan. I think that this would be for him the realization of a vision that he has had for many years and would be a very key milestone in the development of the country.
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