The U.K. major
BP Plc
(
BP
) seems to have another battle ahead with the development of the
oilfield block Azeri-Chirag-Gunashli (ACG) in the Azerbaijani
sector of the Caspian Sea.
The woes at BP seem unending with the British major still trying to
settle criminal and civil liabilities with the U.S. Department of
Justice over the Gulf of Mexico (GoM) oil spill and also exit from
the controversial Russian joint venture, TNK-BNP. Presently, the
company has been sharply criticized by Azerbaijani President Ilham
Aliyev for lagging behind in production output from several Caspian
Sea oil fields.
The Azeri and Chirag fields have experienced declining output since
the last three years. In 2009, it produced 40.3 million tons of oil
against BP's forecast of 46.8 million tons. In 2010, the forecast
was cut to 42.1 million tons while production came in at 40.6
million tons. And last year the fields' production level dropped to
36 million tons, still down from the expected 40.2 million tons.
Current year production is estimated at 35.6 million tons but given
the production trends, the BP led consortium is not expected to
pump more than 33 million tons by the end of the year.
Lower-than-expected output has cost the Azerbaijan state an
estimated US$8.1billion in revenues.
In response to this broad criticism, BP informed that it is working
with the State Oil Company of Azerbaijan (SOCAR) to address the
production issues from the ACG block. BP has sizeable resources in
Azerbaijan that include stakes in the ACG offshore oil fields and
the vast Shah Deniz offshore gas field. It also partly owns and
operates the strategic Baku-Tbilisi-Ceyhan pipeline, the primary
export means for Azerbaijani oil.
The BP-led consortium has already expended $28.7 billion in the
Azeri and Chirag oil fields till now since the 1990s and made
revenue of $73 billion.
ACG oilfields are divided between the operator BP with 35.8% share
and
Chevron Corp.
(
CVX
), Inpex, SOCAR,
Statoil ASA
(
STO
),
ExxonMobil Corporation
(
XOM
), TPAO, Itocu and
Hess Corporation
(
HES
). On the other hand, the offshore Shah Deniz field is operated by
the British oil giant with a 25.5% share, with the other partners
being Statoil, NICO,
Total SA
(
TOT
), LukAgip, TPAO and SOCAR.
BP is one of the world's largest energy companies, providing
customers fuel for transportation, energy for heat and light,
retail services and petrochemical products. Although near-term
production hiccups remain in Azerbaijan, BP continues to focus on
operations for the long term and is in discussion with the country
on extending the contract and working on the fields after 2024.
BP has a Zacks #3 Rank, which is equivalent to a Hold rating for a
period of one to three months. We also maintain a Neutral rating on
BP ADRs for the long term and expect it to perform in line with the
broader market indices.
BP PLC (BP): Free Stock Analysis Report
CHEVRON CORP (CVX): Free Stock Analysis Report
HESS CORP (HES): Free Stock Analysis Report
STATOIL ASA-ADR (STO): Free Stock Analysis
Report
TOTAL FINA SA (TOT): Free Stock Analysis Report
EXXON MOBIL CRP (XOM): Free Stock Analysis
Report
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