9.4 BP Current Developments - Six Major Contracts Signed for ACG

Winter 2001 (9.4)
Pages 84-85

BP Current Developments
Six Major Contracts Signed for ACG
by Tamam Bayatly

On November 30, 2001, AIOC signed six major contracts for Phase 1 construction activities in support of the Full Field Development of the Azeri, Chirag and deepwater portion of the Gunashli (ACG) fields in the Azerbaijan sector of the Caspian Sea. These include two contracts with McDermott Caspian Contractors Inc. for the fabrication of platform topsides and offshore pipelay. The other contracts are with Bouygues Offshore for jacket, piles and drilling template fabrication; Emtunga International for living quarters; Saipem for transport and installation activities; and Eiffel for the platform-drilling module.

AIOC selected these companies prior to the ACG Steering Committee's sanction for the construction stage of the Phase 1 of the Full Field Development project on August 30, 2001. The extensive, competitive tendering process spanned eight months and involved 16 companies. The November 30 contract award was preceded by a three-month interim award issued to the five international contractor companies in order to finalize contracts for construction activities. These contracts have a total value of $750 million.

Majid Karimov, Minister for Fuel and Energy, David Woodward, President of AIOC, Neil Show, AIOC Vice-President Phase 1, and George Siler, AIOC Vice-President AIOC also has a contract with Halliburton, whose subsidiary company Kellogg Brown & Root, based in London and Baku, is undertaking the Engineering and Procurement work for Phase 1. This contract was awarded in mid-1997. Two other existing contracts are with the UK company KCA for drilling facility engineering and with CDC, a joint SOCAR/Santa Fe company, for pre-drilling.

AIOC recently issued a Letter of Intent to award a contract to Azfen/Tekfen for the provision of preliminary civil works as part of the Sangachal Terminal Upgrade. Mobilization activities commenced in November 2001 to allow a start on site in January 2002. The work is scheduled to be completed in June 2002.

Taking media questions after the December 2001 Phase 1 contracts signing ceremony, are (from right to left): Majid Karimov, Minister for Fuel and Energy, David Woodward, President of AIOC, Neil Show, AIOC Vice-President Phase 1, and George Siler, AIOC Vice-President, Phases 2 and 3.

Tender submissions for the main construction activities and tank construction at the Terminal are under evaluation. Contracts for these activities are expected to be awarded within the next few months. In addition, a contract for the Compressor and Water Injection Platform (C&WP) topsides will be awarded in the third quarter of 2002. The contract values for Phase 1 will then total in excess of $1.05 billion.

Phase 1 Construction
The $3.4 billion Phase 1 project of Azeri-Chirag-Gunashli is expected to bring to Azerbaijan enormous long-term oil revenues and related tax revenues; upgraded infrastructure for use on both this project and other potential projects; renewed and enhanced skills, benefiting the oil and gas sector and other industries; world-class international contractors, bringing technology, know-how and investment; world-class health, safety and environmental standards; and an enhanced international reputation.

Niyamaddin Babayev Left: Niyamaddin Babayev, 13-year-old Grand Prize winner of AIOC's Sixth Children's Mugham Festival.

Many of the resources needed to bring Phase 1 to successful completion are already in Azerbaijan. Both the operator and the main contractors are working to ensure a significantly high level of utilization of Azerbaijan's facilities and involvement of local workers throughout the construction works.

An estimated 80 percent of the project work will be carried out by Azerbaijanis and more than 3,000 direct local construction jobs will be crated at peak production. Some $75 million will be invested to upgrade Azerbaijan's construction and marine facilities, which will be involved in the Phase 1 construction works.

It is in everyone's interest to increase Azerbaijan's participation. All partners to the project need cost-effective local suppliers, a strong and diverse local economy and political and economic stability to take their business forward. As in all the Production Sharing Agreements (PSAs), Azerbaijan's and the foreign oil companies' interests are aligned. The projects should focus on quality, cost and schedule. High quality ensures reliability, safety and environmental protection.
Phase 2 in Progress
Phase 2 of the ACG Full Field Development project has moved one step closer to reality by shifting from the Select Stage (Project Concept Selection) to the Define Stage (Detailed Engineering). Phase 2 is one of the largest projects within the framework of the PSA for the development of the ACG. The Phase 2 project will recover approximately 1.35 billion barrels of reserves from West and East Azeri fields, while also accelerating Phase 1 production, leading to a total recovery of 2.775 billion barrels from the Azeri field. First Oil is estimated in mid-2006 and mid-2007 for West and East Azeri respectively.

The First "Democratic Debate" Sangachal School

Left: The First "Democratic Debate" held in the BP-sponsored "Children's School of Parliament".

The AIOC and Shah Daniz consortia refurbished the school gym area in Sangachal, a town southwest of Baku where the companies' onshore terminal is located. The project is part of the companies' social investment program for Azerbaijan and was celebrated with the Sangachal communities, school teaching staff and students at the commencement of the new school year.

A local company carried out the refurbishment works. The contractor company's personnel were provided with safety training in which special attention was given to teaching BP's safe working practices.

By working together with the local Sangachal contractor and providing training for their personnel, AIOC and Shah Daniz consortia have helped them understand and achieve the companies' standards, especially with regard to Health, Safety and the Environment (HSE). The companies are keen to help build a local service industry in Azerbaijan, and this small project provided an ideal opportunity for the consortia to develop the capability of a local contractor such that they should be able to compete more effectively for further projects in the future.

Oil Spill Workshop
On November 19-21, 2001, the Azerbaijan government held its first workshop on National Oil Spill Preparedness, Response and Cooperation. The event was organized in Baku in collaboration with the International Maritime Organization (IMO), the United Nations' specialized agency that deals with oil spill preparedness, response and coordination planning. This important national effort was sponsored by BP, the European Bank of Reconstruction and Development (EBRD) and the United Nations Development Program (UNDP). The Caspian Environment Program facilitated the workshop.

Water for Shongar
In October 2001, BP and its partners in the Inam PSA inaugurated two new facilities in the Shongar village near Baku. The newly built sewage system facility, which is designed to international standards, provides a full cleaning of the wastewater from the village through biological treatment. The village, which did not previously have a sewage system, can now use the fully cleaned wastewater for agricultural purposes.

The second project sponsored by the Inam partners was designed to upgrade the water pumps based in the Mushfig settlement, through which the Shongar village is supplied with fresh Shollar water. The water supply equipment was completely upgraded, and the pipe within the water pump station was replaced by a new supply service and then combined with the pipeline that carries water to Shongar. The 18-km water pipeline between Mushfig and Shongar was fully inspected before combining it with the pump station. As a result, a 920-meter section of the pipeline was replaced and other parts were refurbished. The villagers now have an uninterrupted, healthy Shollar water supply system.

Baku Parliament School
A new information and education center called the Baku Parliament School opened through BP's sponsorship at the start of the 2001-2002 school year. BP undertook the funding of the office refurbishment and the purchase of equipment for the new center. The main goal of the Parliament School, which was founded by an initiative called Debates in Civil Society, is to support teaching staff and students of Baku's schools in their efforts to master the technique of conducting civil debates by making independent judgments and conclusions, justifying their own arguments and learning to respect others' views.

Jabbarli Prize
To honor the 100th Jubilee of Azerbaijani playwright Jafar Jabbarli, BP and the Jabbarli Home Museum decided to award a Jafar Jabbarli Prize on December 9 to Azerbaijan's best theatrical performance, best actor, best actress and best literary research book and publication. The jury, which included well-known poets, writers, literature and theatre critics, producers, actors and a BP representative, was chaired by the great dramatist's daughter, Gulara khanum, Director of the Jabbarli Museum. This jury worked throughout 2001 reading the books and other publications submitted for the competition and attending new theatrical productions and opera performances nominated for the Prize.

This first-ever Jabbarli Prize competition turned out to be one of the biggest theatrical events of the year. The main Jabbarli prizes were awarded to "Aydin", a new production of the National Drama Theater, and opera singers Azer Zeynalov and Zemfira Ismayilova for their main roles in the opera "Sevil" by composer Fikrat Amirov. The prize for best drama publication went to well-known philosopher and dramatist Firuz Mustafa for his book of plays called "Adsiz" (With No Name). In addition, all of the participants in the performance "Solgun Chikhaklar" (Faded Flowers) and the producer of this production were awarded consolation prizes for their love for the stage. This performance was an admirable contribution to the competition by a group of retired actors, some of them over 80, who have volunteered to set up a theatrical group called "Unfading Stars" at the initiative of Azerbaijan's Cultural Foundation.

____
From Azerbaijan International (9.4) Winter 2001.
© Azerbaijan International 2002. All rights reserved.