SEPT. 14 2017 (The Conway Bulletin) — A consortium lead by BP signed a deal to extend its operation of the Azeri-Chirag-Guneshli (ACG) fields in the Azerbaijani section of the Caspian Sea, an agreement originally dubbed the “Contract of the Century” in 1994.
Under the new deal, BP and its partners will run ACG, Azerbaijan’s biggest producing oil fields, until 2050. The original contract was due to expire in 2024.
Negotiations for a renewed deal had been ongoing all year and despite each side’s frustrations with the other, an agreement had always been likely.
At the signing ceremony in Baku, Bob Dudley, the BP CEO, said: “Over the past 23 years the ‘Contract of the Century’ has truly transformed Azerbaijan, energy supplies to Europe and all of us who have worked so hard to make it a success. Today’s contract is perhaps an even more important milestone in the history of Azerbaijan.”
SOCAR chairman Rovnag Abdullayev was equally exuberant.
“Today is a significant day for Azerbaijan,” he said. “Since the signing of the first PSA in 1994, ACG has benefited from $33bn of investment, producing around 440 million tonnes of oil, and delivering directly more than $125bn of net profit to our country.”
For Azerbaijan, this second operating agreement for ACG is much improved from the original. SOCAR, the Azerbaijan state oil and gas company, increased its stake in the project to 25% from 11.65%. The Azerbaijani government, strapped for cash in the midst of an economic downturn, will also receive a one-off $3.6b payment.
For BP, securing an extension to the agreement was vital. ACG forms a major part of its reserves and income. Its share in the project has been cut to 30.37% from 35.8%. Its partners, other than SOCAR, have also had to agree to an equity cut to secure a new deal on ACG.
Chevron now owns a 9.57% sake, Inpex 9.31%, Statoil 7.2%, ExxonMobil 6.79%, TPAO 5.73%, Itochu has 3.65% and ONGC Videsh holds 2.31%.
Relations between Azerbaijan and the BP-led coalition have become increasingly fraught over the past few years.
Azerbaijan has been frustrated that BP hasn’t been able to stem a drop in production at the site and BP executives have become increasingly exasperated at the negative headlines surrounding Azerbaijan, which has been accused by the West of clamping down on the media and of various corrupt practices.
ENDS
— This story was first published in issue 343 of The Conway Bulletin on Sept. 15 2017
