BP in Azerbaijan Sustainability Report 2007 About this report The 2007 BP in Azerbaijan Sustainability Report covers our business 1 Foreword by the president of BP performance, environmental record and wider role in Azerbaijan during 2007. Azerbaijan Strategic Performance This is our fifth Sustainability Report and it reflects feedback we received about Unit (SPU) previous reports. Our earlier publications are available at www.bp.com/caspian. 2 Country context By 'sustainability' we mean the capacity to endure as a commercial organisation by 3 Achievements and challenges 4 Report concept, scope and renewing assets and by creating and delivering better products and services so that process we meet the evolving needs of society, attract successive generations of employees, 5 BP Azerbaijan SPU interests contribute to a sustainable environment and retain the trust and support of our 6 Chapter 1 – BP in Azerbaijan: customers, shareholders and the communities in which we operate. our operations 7 BP in Azerbaijan at a glance References in this report to 'us', 'we' and 'our' relate to BP in Azerbaijan unless otherwise stated. Specific ref- 10 BP in Azerbaijan in perspective erences to 'BP' and the 'BP group' mean BP p.l.c., its subsidiaries and affiliates. Unless otherwise specified, 11 Dialogue and engagement the text does not distinguish between the operations and activities of BP p.l.c. and those of its subsidiaries 14 Our projects and operations and affiliates. 20 Operating responsibly: - HSE management system - Safety A message from Ernst & Young - Environment This report has been substantiated by Ernst & Young, the BP group auditors. The - Health primary purpose of the report substantiation process is to test that the asser- 32 Security and human rights tions, claims and data set out in the text regarding BP’s sustainability perform- 34 People, compliance and ethics ance can be supported by evidence. This process is intended to give assurance 41 Key statistics in chapter 1 about the report contents from an independent third party. Ernst & Young’s scope 42 Chapter 2 - BP in Azerbaijan: of work and their conclusions are provided on page 61. our role in society 43 Supporting sustainable development 2007 Azerbaijan Sustainability Report contains certain - Regional Development Initiative Local environmental impact forward-looking statements particularly relating to - Community investment recoverable volumes and resources, capital, operating - Environmental investment Progressive operator and other expenditures, and future projects. - Conservation of cultural heritage Actual results may differ from those expressed in 50 Revenue transparency Responsible operations such statements depending on a variety of factors 51 Local content development Legal including supply and demand developments, 54 Educational initiatives compliance pricing and operational issues and political, legal, 57 Key statistics in chapter 2 fiscal, commercial and social circumstances 58 Four year performance data This report is structured around BP's corporate 59 EITI reported data responsibility framework, which explains BP's 61 Independent assurance statement BP and development approach to sustainability. BP's activities are 62 Glossary described in terms of areas where we have direct 65 How to ... control (responsible operations) and areas where 66 Feedback we can have significant influence (local environmental 67 Further information impact and development).
On the cover Elnur Ismayilov, drilling engineer at Istiglal drilling rig. Foreword by the president of BP Azerbaijan Strategic Performance Unit (SPU)
The BP Azerbaijan Strategic Performance Unit (SPU) Against this background it is pleasing to note the recognition experienced a momentous year in 2007 during which our efforts received in 2007 from the BP group. We won two we recorded numerous achievements and reached many Helios awards for outstanding achievement and group chief important milestones. executive Tony Hayward praised the Azerbaijan SPU as a true A fuller account of the SPU's operations can be found example of how successful BP is when it has the right people elsewhere in this report. But some highlights deserve a delivering outstanding and safe performance. mention here. Our existing operations continued to perform It would be rash to claim that everything went smoothly in successfully. We installed two deepwater platforms, so 2007 or that the SPU is without challenges. In particular, we marking the end of offshore construction. The Shah Deniz can never afford to be complacent about safety. But 2007 was exploration team made a significant gas discovery from the a year with many moments that made me proud of what is deepest well ever drilled in the Caspian. being achieved by BP in Azerbaijan. This review describes A number of noteworthy safety milestones were attained these activities in greater detail. I hope you find it interesting including the integrated shutdown of our facilities in 2007. and informative. Our Onshore Operations team finished the year with zero Days Away From Work Case (DAFWC) incidents - a major achievement considering that it operates three pipelines across three countries as well as one of the biggest oil and gas processing terminals in the world. At the end of the year, the BTC team completed all the obligations undertaken at the time the BTC consortium took Bill Schrader out $1.6 billion in loans from financial institutions. Furthermore, President, BP Azerbaijan SPU the team achieved this six months ahead of schedule. We also accounted fully for more than $8 billion spent on our projects during 2004-06 as part of the biggest tax audit in our history and the biggest ever done in Azerbaijan. As we look forward our focus is on enhancing the capability of our assets through the recruitment and development of national staff and the increasing use of local content and local contractors. In 2007, we made good progress in these areas. We hired more than 200 new national staff. With our co-venturers, we spent more than $600 million with local companies. We launched a number of new programmes to promote enterprise and training in Azerbaijan. We also supported a wide range of other social investment programmes including educational initiatives. Overall, in 2007, our social investment in Azerbaijan was equal to $7.39 million. Country context
In 2007 growing oil and gas production, and increasing exports to world markets, contributed to Azerbaijan's growing prominence in the region.
The benefits of mounting oil and gas-generated revenues on the national economy began to be felt throughout society in 2007. Budget expenditure of around $7 billion was seven times higher than in 2003, with another large rise set for 2008 when state spending should reach $10 billion compared to just $1 billion five years earlier. In 2007 the revenues generated by BP-operated projects alone totalled almost $4.3 billion. Azerbaijan's gross domestic product (GDP) is expanding at around 25% a year and topped $29.4 billion in 2007. Inflation - 16.7% in 2007 - remains a strategy pursued since independence in remains challenging for the oil and gas major concern. Capacity constraints 1991 continues to attract foreign industry: in 2007, Transparency increasingly impact the economy as well. investors who have now committed International ranked Azerbaijan 150th out Official forecasts during 2007 predicted $30 billion to the country. Existing of 179 states in its corruption perception larger recoverable hydrocarbon infrastructure and human capital available index compared with a 2006 ranking of resources and higher future production, in the country, as well as prevailing 130 out of 163 statesa. along with intensifying efforts to secure political stability, provide international As a responsible investor in Azerbaijan, new markets and long term international companies with a real opportunity to BP strives in its activities to promote gas supply contracts. create and complete world class projects. transparency, uphold respect for Azerbaijan's free market resource However, the business environment human rights and play a positive role in the community by supporting improvement of the overall business 2007 Azerbaijan facts & figures environment, revenue transparency Item Estimate and community development. Areaa 86,600 sq km (33,774 sq miles) a Transparency international ranking: Population, total (millions)a 8.5 http://www.transparency.org/policy_research/sur- veys_indices/cpi/2007. Life expectancy at birth, female (years)a 75.1 Life expectancy at birth, male (years)a 69.7 Gross Domestic Product (GDP) (current US$) (billions)a 29.4 GDP growth (annual %)a 25 Non oil GDP (US$ billions)b 10.99 Non oil GDP (% of GDP)c 36.83% Inflation, consumer prices (annual %)a 16.70% Capital investment (% of GDP)c 26.85% a State Statistical Committee (SSC): http://www.azstat.org. b National Bank of Azerbaijan (NBA): http://www.nba.az. c Original data from NBA with our calculation.
2 BP in Azerbaijan Achievements and challenges
On this page we summarise the key achievements and challenges faced by BP in Azerbaijan in 2007, with emphasis on those most relevant to the sustainability of our business in the country.
Achievements Environmental management Shah Deniz alpha (TPG-500), East Azeri, Logistics, Operations We achieved an average daily Sangachal terminal (Shah Deniz section) production rate of 668,000 barrels of oil and Serenja were certified as compliant from the Azeri-Chirag-Deepwater with ISO 14001, - the leading international Gunashli (ACG) platforms at the end standard on environmental management of 2007. Throughput on the Baku-Tbilisi- (page 21). Ceyhan (BTC) oil pipeline averaged 600,000 barrels per day. The 300th Waste management Construction of a tanker was loaded with ACG oil at BP-exclusive non-hazardous solid waste the Ceyhan terminal. We recommenced landfill that is compliant with European exploration on Inam. Union standards was completed at Gas production at Shah Deniz (SD) Sumgayit (page 27). totalled 3.1 bcma - 11% above plan. We delivered about 2.4 billion standard Security The Government of Azerbaijan cubic metres of ACG gas to SOCAR. and the BP group signed a bilateral A major new gas discovery was made security protocol to govern the at SD. First gas was delivered to Turkey provision of security for BP-operated through the South Caucasus Pipeline. oil and gas projects in Azerbaijan. We completed our expansion project The protocol aims to promote at Sangachal, so allowing the terminal to respect for, and compliance with, process more than one million barrels of internationally recognized human oil per day (pages 16-17). rights principles (page 33).
Technology The world's first sub-sea, Our people At the end of 2007, 75% Waste management We faced a number expandable sand screen, downhole flow of our professional, and 100% of our of waste management challenges control, water injection completions non-professional staff were Azerbaijani during the year, particularly including the were installed in the Deepwater citizens. In 2007 we introduced a disposal of large volumes of produced Gunashli field. These completions retirement savings plan for BP water, prior to the availability of offshore reduce the number of development national employees (pages 34, 37-38). re-injection; and sewage treatment water injection wells needed, and by package failures at our offshore facilities running them sub sea, we avoid (pages 27-28). complex extended reach drilling from Challenges the platform. The completions help Workforce demobilization Following reservoir engineers to manage oil WREP shutdown The Western Route completion of our onshore and offshore depletion in an efficient manner, Export Pipeline (WREP) to Supsa was construction projects, a major improving the percentage of the original shutdown throughout 2007 to allow demobilization of labour took place oil that is ultimately recovered. completion of an extended repair and in 2007. We strove to ensure that this Appraisal well SDX-4 - the deepest replacement programme. The programme process ran as smoothly and as fairly drilled in the Caspian to date - was was completed in the first quarter of as possible (page 37). completed successfully at Shah Deniz. 2008 (page 18).
Sustainability Report 2007 3 Report concept, scope and process
BP in Azerbaijan Sustainability Report 2007 is intended to provide a clear, transparent account of our performance and the issues we faced in Azerbaijan during the year.
Milestones of 2007 assurance has been provided by the BP For more information on BP's approach group auditors, Ernst & Young, who are to sustainability reporting and sustain- This is the fifth Sustainability Report tasked with ensuring that every figure, ability reporting guidelines access produced by BP in Azerbaijan. It provides statement and assertion in this report is www.bp.com/sustainability or go to an integrated account of our activities in correct and can be supported by docu- www.accountability.org.uk or the country during 2007, including mentation and that the report generally www.globalreporting.org descriptions of our operational, social provides a balanced representation of and environmental performance. It is material issues surrounding our activities aimed at both internal and external in Azerbaijan. audiences including our staff and our co- Two chapters make up the framework venturers, government representatives, of the report in line with BP group the media, academics, NGOs, students sustainability reporting guidelines. and potential employees. The first concentrates on our Throughout the report we highlight performance in Azerbaijan during 2007. links to other sources of information The second covers our role in society about BP in Azerbaijan and the wider including our community and context of our operations. External environmental programmes.
4 BP in Azerbaijan BP Azerbaijan SPU interests
ACG BTC Shah Deniz / SCP
Inam Alov
NREP pipeline
WREP pipeline
Sangachal Baku Tbilisi terminal Ceyhan pipeline ACG South Caucasus oil production & pipeline development
Shah Deniz gas development
Inam Alov exploration exploration
Sustainability Report 2007 5 From left to right: Firdovsi Isayev, control room technician and IbragimTeregulov, production superintendent at combined control room at 1 Sangachal terminal.
BP in Azerbaijan: our operations 1.1 BP in Azerbaijan at a glance 1.6 Security and human rights 1.2 BP in Azerbaijan in perspective 1.7 People, compliance and ethics 1.3 Dialogue and engagement 1.8 Key statistics in chapter 1 1.4 Our projects and operations 1.5 Operating responsibly: - HSE management system - Safety - Environment - Health BP in Azerbaijan: our operations
1.1 BP in Azerbaijan at a glance
Our structure, organisation, assets and history
Legal structure BP operates within a number of legal entities in Azerbaijan reflecting its evolution in the country and the region since 1992. The principal legal entity is BP Exploration (Caspian Sea) Ltd.
BP Azerbaijan Strategic Performance Unit (SPU)a The BP Azerbaijan SPU is the BP organisational unit which operates in Azerbaijan, Georgia and Turkey. In Azerbaijan, BP operates under a number of production sharing agreements (PSAs) and host government agreements (HGAs) signed with the government of Azerbaijan. In Georgia and Turkey it operates under HGAs that cover export pipelines and terminals.
Business structure At the end of 2007 eight vice-presidents reported to the President of BP Azerbaijan SPU (see BP in Azerbaijan in Perspective section) (page 10).
Office headquarters The headquarters of BP Azerbaijan SPU are located at Villa Petrolea, 2 Neftchilar Prospekti (Bayil), Baku AZ1003, Azerbaijan. Telephone: + 994 12 497 9000. Fax: + 994 12 497 9602.
Employees At the end of 2007 the number of Azerbaijani citizens permanently employed by BP in Azerbaijan was 1,712.
Offshore production assets (1) Azeri-Chirag-Deepwater Gunashlib (ACG) is the largest oil field in the Azerbaijan sector of the Caspian Sea (2) Shah Deniz (SD) is a large offshore gas and condensate field.
Operational offshore facilities (end 2007) Chirag 1 platform; Central Azeri platform; Compression & Water Injection platform; West Azeri platform; East Azeri platform; Shah Deniz TPG 500; Deepwater Gunashli (DWG) - Drilling, Utilities and Quarters platform; DWG - Production, Compression, Water Injection and Utilities platform.
Transportation & capacity Transportation: Western Route Export Pipeline (WREP): an 830km pipeline linking Sangachal terminal to Supsa on Georgia's Black Sea coast. Northern Route Export Pipeline (NREP): a 231km pipeline linking Sangachal terminal to the Russia borderc. Sangachal terminal: an oil and gas processing terminal south of Baku. Baku-Tbilisi- Ceyhan pipeline (BTC): a 1,768km oil pipeline (443km in Azerbaijan) linking Sangachal terminal to Ceyhan marine terminal in Turkey. South Caucasus Pipeline (SCP): a 690km gas pipeline between Sangachal terminal and the Georgia/Turkey border. Capacity at year end 2007: Export pipelines: NREP- 115 thousand barrels a day (mbd); BTC - 1 mmbd; SCP - 22.08 mscm/d. Terminal: Sangachal - can process in excess of 1.2 million barrels of oil per day (162,000 tonnes/day ) and 1.25bcf/day (0.9 Shah Deniz and 0.35 DPCU) of gas. Crude oil storage capacity of 3 million barrels (405,000 tonnes).
Exploration activity Inam - a large geological structure south of SD; Araz-Alov-Sharg - a frontier exploration area.
Capital expenditure About $25 billion on the ACG, BTC, SD Stage 1 and SCP projects since inception.
Oil production AIOC 1997- 2007: 792 million barrels in total; 244 million barrels (2007).
Gas production BP Exploration Shah Deniz Limited 2006-2007: SD gas production 3.255 bscm in total and 3.14 bscm in 2007; SD gas condensate 7.04 million bbl.
a In this report when we refer to BP in Azerbaijan we refer to the SPU's activities in Azerbaijan only, while when we refer to BP Azerbaijan SPU we refer to SPU's activities in Azerbaijan, Georgia and Turkey. b Shallow water Gunashli is developed by the State Oil Company of the Azerbaijan Republic (SOCAR). c 'Transneft' operates the continuation of the Northern route to Novorossiysk. In early 2008, operatorship of Northern route was assumed by the State Oil Company of the Azerbaijan Republic (SOCAR).
Sustainability Report 2007 7 Leadership team of BP Azerbaijan SPU (end 2007)
Bill Schrader Paul Clyne President of BP Azerbaijan SPU Renewal vice president Bill has been leading BP Azerbaijan SPU since Paul is responsible for exploration and new November 2006. He has 27 years' experience in BP, development activities of BP Azerbaijan SPU. covering numerous leadership roles in BP chemicals, He has recent operational leadership experience in refining and marketing (R&M), marine, and exploration new developments such as Schiehallion, Andrew and production (E&P). He has worked in the USA, and Harding in the North Sea. He worked UK, the North Sea, Indonesia and Angola. previously in Alaska, Canada and Norway.
Bruce Luberski Mike Skitmore Major projects vice president Offshore operations vice president Bruce is responsible for delivery of the ACG project Mike is responsible for ACG and SD operations and future potential projects in the SD and ACG and logistics. In the past Mike has been a head fields. In a previous job he supervised the Mad of operations (Europe), E&P technology, where Dog project in the Deepwater Gulf of Mexico he contributed to improving operations (GoM). Bruce has a wealth of operations and organisational capability and in moving the projects experience in Alaska and the GoM. North Sea operations forward.
Rashid Javanshir Charles Proctor Onshore operations vice president Commercial vice president Rashid is responsible for onshore operations and Charles is responsible for planning and performance security in BP Azerbaijan SPU. Rashid has extensive management, joint venture management, leadership experience in exploration, operations, commercial operations, business development, group strategy and communications in the UK, finance and control, procurement and supply chain USA and Azerbaijan. He is a professor of geology management. He has worked in the UK, Europe, and geophysics. Angola, Indonesia and Russia.
Greg Mattson Sue Adlam-Hill Technical vice president Human resources vice president Greg is responsible for petro-technical, health safety Sue directs human resources (HR) in BP Azerbaijan and environmental agenda. He has 26 years' E&P SPU. She has degrees in experimental psychology experience with BP in engineering, projects, and personnel management and substantial operations, subsurface, commercial and leadership. experience in change management and HR management. She joined BP in 1989.
Clare Bebbington - Communications and external affairs vice president Clare was responsible for external and internal affairs and communications in the SPU in 2007. She has worked in this area for 19 years inside and outside BP. Most recently she was BTC communications manager based in London. (In January, 2008, Clare was appointed external affairs advisor for BP's E&P segment. She was succeeded by Seymour Khalilov - page 35).
8 BP in Azerbaijan BP in Azerbaijan: our operations History
September 1994
ACG production sharing agreement (PSA) signed by BP, its co-venturers February 1995 and the government of Azerbaijan to Formation of the AIOC develop Caspian offshore resources June 1996
Shah Deniz PSA signed November 1997
July 1998 First Oil produced from the Chirag field Inam and Araz-Alov-Sharg PSAs signed December 1998 August 2001 Western Route Export Pipeline starts operations ACG Phase 1 sanctioned September 2002 ACG Phase 2 sanctioned February 2003 April 2003 Shah Deniz Stage 1 sanctioned Construction of BTC pipeline begins September 2004
October 2004 ACG Phase 3 sanctioned
Construction of South Caucasus Pipeline begins February 2005
March 2005 Production at Central Azeri begins
Azeri crude oil exports commence May 2005 December 2005 Delivery of gas to Azerbaijan Deepwater Gunashli pre-drilling from Central Azeri starts; programme commences; Azerbaijan section of BTC West Azeri oil production begins pipeline inaugurated May 2006
First gas flows into the SCP June 2006
First tanker filled with Caspian oil at Ceyhan terminal; Record ACG July 2006 daily production rate of over 500,000 barrels per day Inauguration of the Turkish section of the BTC pipeline, the Ceyhan terminal and the BTC pipeline export system November 2006
East Azeri produces first revenue oil December 2006
March 2007 Gas production begins from Shah Deniz; South Caucasus Pipeline BTC one million bpd capacity operations commence achieved July 2007
First gas delivered from Shah Deniz November 2007 to Turkey
A large gas-condensate discovery made at Shah Deniz following drilling to a Caspian-record depth of more than 7,300 meters; Inam exploration drilling re-commenced
Sustainability Report 2007 9 1.2 BP in Azerbaijan in perspective
In Azerbaijan the company operates in line with BP group values, standards and structures based on detailed three and one-year plans.
Our vision We are committed to deliver eight vice-president-divisions, reporting high quality, low cost services and to to the president of BP Azerbaijan SPU: establish a sustainable and distinctive offshore operations; onshore operations; presence in the Caspian region by renewals; major projects; health, safety, enhancing workforce capability, generating environment and technical; human local content and building capacity. resources; finance; and communications We strive to create value by improving and external affairs. The first four groups facility efficiency, developing assets directly manage our business delivery, and maximizing recovery. while the four remaining groups At all times we are committed to contribute functional expertise and work safely, protect the environment support to the line teams and have and respect human rights. Our aim is strong relationships with the BP global to be a valued, trusted and long term functional teams around the world. partner in the development of Azerbaijan's hydrocarbon resources. Our business strategy Our strategy in Azerbaijan is a reflection of BP group Our values In Azerbaijan we aspire to strategy which seeks out large, world- a number of fundamental and enduring class oil and gas opportunities to qualities in our work that are common to develop for mutual advantage. As part the BP group as a whole. These include of this group strategy we are committed an unshakeable commitment to integrity, to operate safely, act responsibly, honest conduct, respect and dignity in respect human rights and promote dealing with others, mutual advantage diversity and inclusion in our workforce. in our business activities and making a Our priorities in Azerbaijan include responsible contribution to the society ensuring that our operations do no harm in which we operate. BP group corporate to people, enhancing workforce capabili- governance policies provide the framework ty, developing our assets in line with our within which management direction is commitments, accessing new Caspian set and performance monitored. region oil and gas opportunities and deepening relationships with the host Our management structure In 2007, the government and other key external Azerbaijan leadership structure comprised stakeholders.
10 BP in Azerbaijan BP in Azerbaijan: our operations
1.3 Dialogue and engagement
We believe that continuous dialogue and multi-level engagement are among the most effective ways of sustaining constructive and mutually beneficial relationships with our stakeholders in Azerbaijan.
Overview As one of the leading investors the Prime Minister of Turkey, the Agreements (PSAs) and Host in Azerbaijan, BP's interaction with various Prime Minister of Belarus, US Government Agreements (HGAs) stakeholders continued in 2007. We worked Senators, The Rt. Hon. Lord Howell of and other relevant agreements. on many different issues with state and Guildford, representatives from the • We held meetings with local local government, national and interna- Greek parliament and the French government representatives in tional non-governmental organizations Senate and officials from the Israeli Lenkoran and Neftchala to update (NGOs), academia, employees, local and Japanese foreign ministries. them about the next phase of communities, the media, students, multi- • We continued to engage with the exploration activities at the Inam lateral organizations and various inde- State Oil Fund of the Azerbaijan offshore field. pendent monitors of our activities. Republic (SOFAZ) on a macroeconomic • We met representatives of the Ministry Interaction took place in meetings, modelling project being managed by of Economic Development, the briefings, workshops and site visits. Oxford Economics. In 2007, this project Azerbaijan Investment Company and focused on improving the model and the Azerbaijan Export & Investment With government on building capacity within the Promotion Foundation throughout the Azerbaijani government. In December year to discuss future cooperation on • Several meetings took place with the a working group including representa- enterprise development. President of Azerbaijan and other senior tives of SOFAZ, Ministry of Finance, government officials to discuss our Ministry of Economic Development, With civil society operations. In April, August, October National Bank and the President's and December 2007, Andy Inglis, BP office made a study tour in the UK. • We conducted quarterly briefing and group chief executive of exploration • BP group economists engaged in dialogue sessions with civil society and production, met with President a dialogue with the Ministry of representatives to discuss BP's Ilham Aliyev. Inglis also held a separate Economic Development on building ongoing business developments in meeting with Rovnag Abdullayev macroeconomic policy-making Azerbaijan and to hear from NGO president of the State Oil Company capacity at the Ministry. representatives about their projects, of the Azerbaijan Republic (SOCAR). • We continued to co-operate with challenges and future directions. • In November 2007, the Azerbaijan SOFAZ on the implementation of • We gave a presentation to local government and BP in Azerbaijan the Extractive Industries Transparency NGOs and local journalists on the signed a bilateral security protocol. Initiative (EITI). mechanism of the profit oil split • Senior Azerbaijani and other • We continued to work with SOCAR according to the ACG PSA. governments' officials visited sites we on various issues of mutual interest • We held a feedback session with operate. In 2007, these visitors included as part of our Production Sharing external audiences, including
Sustainability Report 2007 11 students, on the 2006 Azerbaijan With communities and visits to our operational sites for Sustainability Report and on the BP local and international journalists. statistical review. • Following completion of the BTC and • We held three workshops for local SCP pipelines our seven community journalists about the structures and With employees liaison officers (CLOs) and a field mechanisms of the PSAs, the 2006 security advisor regularly visited 130 Sustainability Report and the • We held quarterly 'town hall' communities to keep residents enterprise development and meetings to discuss topical issues. informed and to hear their concerns. training programme. • We issued the staff magazine 'Compass' • We supported co-operation between • BP Azerbaijan SPU's leadership team nine times during 2007 in English and the CLOs, local security forces and held quarterly press briefings. Azerbaijani language versions. communities along the BTC/SCP • We issued 27 press releases in 2007 • We introduced a monthly pipelines (pages 32-33). covering all aspects of our business. e-newsletter from the President of BP • We maintained the official grievance • The communications manager led Azerbaijan SPU to enhance direct and mechanisms on the BTC/SCP route regular live 30-minute talks on BP's quick communication with employees. following completion of the pipelines. business on Azerbaijan's national • We held a number of family days for • We launched a new employee radio station AzRadio. employees and their relatives. The engagement programme. Eight • In collaboration with the British Caspian Energy Centre organised six projects were completed in the last Council and the Thomson Foundation, family day events attended by more three months of the year following we funded and implemented a business than 300 people. introduction of the programme involving journalism training programme for 12 • We maintained BP's employee- 38 employees of BP in Azerbaijan. We Azerbaijani journalists (page 56). focused compliance and ethics invested $13,740 in various community helpline, OpenTalk (page 39). projects, particularly focused on local With the other • We modernized and upgraded the schools and orphanages. interested parties intranet homepage of the BP Azerbaijan SPU to improve With the media Senior international delegations communication with our employees. • We hosted visits to our sites by • We supported the Fresh Thinkers • We arranged press days at our project senior representatives of NATO, Network (FTN) which is designed to construction sites where we provided Itochu, Mitsubishi Corporation UK give future leaders the opportunity briefings on project progress and PLC, Ukrtransnafta, Baker & to discuss business issues with top showed the sites to the press. We McKenzie, Hess, Total, TPAO, Statoil, management of BP in Azerbaijan. also arranged numerous interviews Inpex and Idemitsu Kosan Ltd.
12 BP in Azerbaijan BP in Azerbaijan: our operations
Students agreed categories as a result of work • We continued to run our summer scope completion received some student internship programme. This financial assistance. allowed three students to take part in community investment projects The Caspian Development Advisory managed by International Medical Panel (CDAP) Corps (IMC) and local NGOs Madad • In January, we received the last and Umid. The students participated in report from the CDAP. Both the report such activities as translation, drafting and our response may be viewed on: project documentation, visiting www.bp.com/caspian and communities, conducting surveys www.caspsea.com. and participating in other programme activities. The Azerbaijan Social Review • We engaged students through the intern Commission (ASRC) programme to give them on-job work • In early 2007, the ASRC was set up experience in various departments as a new independent advisory group in the BP Azerbaijan SPU. designed to help the company • We held sessions on the 2006 BP in recognize trends, challenges and Azerbaijan Sustainability Report to longer-term issues relevant to our keep the people of Azerbaijan gather student feedback. social performance in Azerbaijan. informed about the progress of • We supported various scholarship BP-operated oil and gas projects programmes (pages 55-56). General public and the role our company is playing • We supported the Azerbaijan-UK • We held open meetings in Baku in the region. alumni association (page 56). and Neftchala to inform the public about the next phase of exploration Trade unions activities for the Inam offshore field. • In 2007, we continued to engage with • We continue to maintain and SOCAR and trade unions to address constantly update our external labour issues related to the work of website: www.bp.com/caspian. our ACG contractors. As a result, we • We issued five ‘BP in Azerbaijan’ and were able to establish a project-wide one ‘BP in the Region’ TV programmes agreement that ensured that mutually that were aired on a local channel to
Sustainability Report 2007 13 1.4 Our projects and operations
2007 was marked by a number of achievements in our operations including increased production at Azeri-Chirag-Deepwater Gunashli oil field, a significant exploration discovery at Shah Deniz (SD) gas field and the successful completion of Sangachal terminal expansion programme.
Azeri-Chirag-Deepwater we anticipate daily ACG production 792 million barrels of oil (about 107 million Gunashli (ACG) of around one million barrels of oil. tonnes) have been produced from the ACG field (see 'ACG production' table). Summary ACG is the largest oil field Milestones of 2007 ACG production In 2007, we also delivered about 2.4 under development in the Azerbaijan averaged around 668,000 barrels of oil billion standard cubic metres of ACG sector of the Caspian basin. Lying about per day (bopd) against a plan of 708,000 associated gas to SOCAR which was 100 km east of Baku, it is operated by bopd. This reflected lower output at three almost twice as much as planned. BP on behalf of the Azerbaijan wells in Chirag due to unexpected water and As part of our construction activities International Operating Company (AIOC). sand production at those wells and a higher we undertook a major ACG shutdown in Production began in 1997 from the than predicted gas-to-oil ratio at East Azeri. September 2007. The shutdown was Chirag field. Phases 1 and 2 saw devel- The 668,000 barrels of oil p/d was made completed successfully without any opment of the Central, West and East up of approximately129,000 barrels from incident or injury. Azeri complex. Phase 3 - Deepwater Chirag, 244,000 barrels from Central Azeri, Over the course of the year we spent Gunashli - will follow and full scale 171,000 barrels from West Azeri and $445 million in operating expenditure ACG operations will start in the 124,000 barrels from East Azeri. and $2,822 million in capital expenditure second quarter of 2008. By 2009 Between 1997-2007 inclusive around on the ACG complex.
Outlook for 2008 We plan to produce an ACG production average of 840,000 barrels p/d for the full year from the four existing platforms and Oil produced from the newly-installed Deepwater Gunashli Start of Unit of the start of production 2007 actual 2008 planned (DWG) platform. Of this, 134,000 barrels production measurement to the end of 2007 production production p/d is expected from Chirag, 243,500 barrels Chirag November mln. bbl 429.15 47.13 49.16 p/d from Central Azeri, 235,300 barrels p/d 1997 mln. te 57.8 6.35 6.62 Central February mln. bbl 216.13 89.13 89.13 from West Azeri, 144,400 barrels p/d from Azeri 2005 mln. te 29.1 12.01 12.01 East Azeri and 82,800 barrels p/d from DWG. West December mln. bbl 97.6 62.53 86.12 In 2008, we plan to continue delivering Azeri 2005 mln. te 13.1 8.42 11.60 associated gas from ACG to SOCAR. East November mln. bbl 49.4 45.18 52.86 Over the course of the year we Azeri 2006 mln. te 6.7 6.09 7.12 plan to spend more than $600 million DWG April mln. bbl 30.31 in operating expenditure and around 2008 mln. te 4.13 $2,000 million in capital expenditure.
14 BP in Azerbaijan BP in Azerbaijan: our operations
A strategic hub for all BP operated assets in the Caspian
Existing Onshore ACG gas going SCP Potential to Azerbaijan
BTC HP-SD gas going LP gas going to Azerbaijan to Azerbaijan Western Export Route
Nothern Export Route
Third party export oil
Sangachal Third party terminal Offshore 24’’ oil from Chirag SD Phase 2 30’’ oil from Azeri
28’’ gas from ACG Alov Produced water pipeline 4’’ mono-ethylene Inam 12’’ 26’’ gas 30’’ Oil from Azeri glycol condensate
SD Phase 1
Further potential The potential ultimate pressured field 22km long with reservoir from the well data analysis subsequently recovery at ACG is estimated to be in thickness in excess of 1,000 metres. showed there is sufficient gas at SD to excess of 5 billion barrels of oil. Realisation BP is the operating company for SD. warrant second stage development. of this resource recovery will require us In total, in 2007, we spent $170 million to apply sophisticated reservoir management Milestones of 2007 During the year we in operating expenditures and $364 million techniques, the use of advanced seismic produced 3.1 bcma of gas against the in capital expenditures on SD development. data analysis, and high functionality drilling planned 2.8 bcma and 0.8 mmtpa of and completion technologies. Our experi- condensate. This higher than planned Outlook for 2008 In 2008, we plan to ence around the world, combined with output was due to improved well continue appraisal activities at Shah Deniz reservoir information gained during ACG performance and enhanced efficiency. by drilling a further appraisal well. Operating development, gives us confidence that Sales of SD gas began in February and expenditure will be around $120 million we can achieve this potential. first SD gas reached Turkey in July. and capital expenditure around $500 mil- A fourth appraisal well - SDX-04 - lion. It is likely that 7.7 bcma of gas will Shah Deniz (SD) was drilled to a Caspian-record depth be produced, and 1.9 mmtpa (around 16 of more than 7,300 metres. The drilling mmbbl) of condensate. Summary The Shah Deniz natural gas confirmed SD gas accumulation field was discovered in 1999. It is located extends to the south west. It also Further potential We anticipate that 70km offshore Azerbaijan beneath water discovered a new high pressure plateau production from Stage 1 of SD will depths ranging from 50 to 600 metres. reservoir in a deeper structure below be 8.6 billion cubic metres of gas per year A geologically-complex structure with the currently producing reservoir - and approximately 45,000 barrels of multiple reservoir 'horizons,' it is a highly potentially a significant find. Results condensate p/d. Total gas recovery of around 6.5 Tscf (approximately 180 bcm) is expected from the Stage 1 development. SD production Stage 2 development will focus on Gas produced from the remaining resource potential in the Start of Unit of the start of production 2007 actual 2008 planned production measurement to the end of 2007 production production currently producing reservoir intervals. a SD Production bscm 3.255 3.14 7.68 Estimations of gas initially in place in gas started Nov bncm 3.03 3.0 8.2 the Shah Deniz field are 1 Tcm. 24, 2006 boed 52.5 52.4 127.8 SD First gas mln. bbl 7.04 7.04 16.3 a condensate delivery Dec mln. te 0.8 0.8 1.9 Gas initially in place - is the 100% volume in the reservoir and indicates gas reservoir size unlimited 15, 2006 by technology required to exploit.
Sustainability Report 2007 15 Key Sangachal facts • Area: 542 hectares. • Location: 55 km south of Baku in Garadagh district. • Processing capacity: in excess of 1.2 million barrels of oil (162,000 tonnes) and 1.25 bcf/day (0.9 Shah Deniz and 0.35 DPCU) of gas. • Storage capacity: 3 million barrels (405,000 tonnes). • Operator: BP Azerbaijan SPU.
Sangachal terminal (ST) In 2007 three of BP's top 10 gross producing wells worldwide were in the SD field and four in the ACG field. Summary Sangachal terminal is a processing hub terminal where hydrocarbons from offshore Caspian are a BP’s top 10 gross hydrocarbon producers, December 2007 processed before export. It is designed to treat production from all BP's operated Shah Deniz A SDA-01 assets in the Caspian and to allow future expansion. It includes oil and gas Shah Deniz A SDA-03 processing facilities, the BTC pipeline's b Mango (Trinidad) MAN1-A01 first pump station and the SCP compressor. Third party pipelines Azeri Central B07 are linked to its operations.
Azeri West C06 Sangachal is a combined terminal where each element can be operated c Cannonball (Trinidad) CC01B03 independently. Core utilities are shared and were built by a single management Azeri Central B10 team (the Sangachal terminal expansion
Shah Deniz A SDA-02 project - STEP) and by a single main contractor, Tekfen-Azfen Alliance, which Azeri East D07 included Tekfen from Turkey and the
d SOCAR-established joint venture Azfen. Angola (Partner Op) By building a combined terminal large cost savings have been made by 0 10,000 20,000 30,000 40,000 50,000 all the projects. Gross oil rate (bpd or gas equivalent) Gas rate equivalent (mscfd)/5.8 Liquids rate bpd Milestones of 2007 Commissioning of Trains 5 and 6 for ACG Phase 3 was completed in October, and the facilities a This graph does not include the Australian Woodside wells as no data is currently available. were handed over to operations. This b Mango gas field is located in Trinidad and operated by BP. c Cannonball gas field is located in Trinidad and operated by BP. marked the successful completion of d Oil fields in Angola are partner-operated. STEP allowing the terminal's total oil
16 BP in Azerbaijan BP in Azerbaijan: our operations
Pipeline inspection gauges protect the BTC pipeline
A pipeline inspection gauge (PIG) is a special tool used to inspect the internal conditions of a pipeline, capture and record the geometry and reveal any corrosion information related to the pipelines. This information is then downloaded to a computer when the PIG is removed from the pipe to enable engineers to 'see' inside the line. This process is known as Intelligent Pigging (IP). Starting from the Sangachal terminal and going all the way to the Ceyhan terminal in Turkey, the BTC pipeline is divided into 11 pigging stages. Two types of IPs are currently in use - a Geometry Pig (GP) and a Corrosion Detection Pig (CDP). The GP detects mechanical changes, such as dents (even minor ones), in the pipe's diameter and records the location of each defect along the pipe. Later, this information is cross-referenced with the initial (as built) weld data to make sure that the welds on the pipe have not deteriorated. The CDP can detect any minor metal loss on the pipe including both internal and/or external corrosion of the metal. CDP can also help pinpoint illegal taps into the pipe. Due to variations in the diameter of the pipe, different-sized pigs are used in different sectors although they all record similar data. The first IP began on BTC in April 2007 and will be repeated every five years, or more often, should circumstances require.
processing capacity to rise to over one Outlook for 2008 Construction work at Outlook for 2008 In 2008, we plan to spend million barrels of oil per day. In 2007, the the terminal in 2008 will focus on the $87 million in capital expenditures for BTC. highest daily export rate achieved was main produced water facilities. We hope 991,276 barrels of oil on December 21st. to start up the new facilities during the South Caucasus Late in the year we commissioned an fourth quarter of 2008. Other develop- gas pipeline (SCP) interim produced water project at the ments planned for 2008 at the terminal terminal. We expect to use this facility include work associated with a seventh Summary SCP is a 690 km pipeline to until the main produced water facilities oil heater and a new dew point control the Georgia/Turkish border through are commissioned by the end of 2008. unit (DPCU). These are major installations which gas from SD is delivered to the to process oil (oil heater) and associated Georgian and Turkish markets. gas (DPCU). 2007 BP group net share of liquids production a Baku-Tbilisi-Ceyhan (BTC) pipeline 16% 26% Summary A 1,768 km pipeline across three countries (Azerbaijan 443km, Georgia 249km, Turkey 1,076km), BTC links Sangachal terminal on the shore of the Caspian Sea to Ceyhan on the Turkish Mediterranean coast. It carries both oil from ACG and condensate from 19% 39% SD. At Ceyhan product is loaded on tankers and shipped to world markets. At the end of 2007, BTC had Azerbaijan UK & Rest of Europe Milestones of 2007 In March 2007, the • Capacity equal to 1 million bpd. b US Other one million bpd design capacity of the • Average throughput equal to pipeline was commissioned. During the approximately 600 mbd. a Total 2007 BP group net share of liquids production year, BTC's average throughput was 600 For further key facts on BTC refer 1,304 thousand barrels per day (excluding equity accounted entities) includes crude oil, NGL mbd. On occasion the pipeline reached its to page 20 of the 2006 BP in and condensate. design capacity. We spent $154 million Azerbaijan Sustainability Report. b Includes Angola, Australia, Canada, Colombia, Egypt, Trinidad&Tobago, Venezuela and others. in capital expenditure on BTC during 2007.
Sustainability Report 2007 17 At actual 2007 prices, Azerbaijan was the seventh highest BP net producing SPU (excluding production from TNK-BP). We anticipate that ACG full field development will result in the production of about one million barrels of oil per day by 2009.
BP was responsible for construction of Western route export delivery to European markets. the pipeline and is its technical operator. pipeline (WREP) In 2007, its capacity was 115,000 barrels of oil p/d. During the year, AIOC was Milestones of 2007 At the end of 2007, Summary The WREP was constructed the operator from Sangachal to a SCP’s capacity was equal to 8.06 bcma. in 1998 along an existing pipeline metering station at Shirvanovka on During the year, the average throughput route that carried oil from the Caspian the Russian border. In early 2008, of SCP was equal to 8.970 mmscm/d. Sea to Supsa on the Georgian Black SOCAR (State Oil Company of the This includes associated low pressure Sea coast. Azerbaijan Republic) became operator. Azeri gas provided to SOCAR. In 2007, Throughout 2007 WREP was the maximum single day delivery was shutdown to permit an extensive 21.645 mmscm/d and was reached in repair and replacement work to 2007 BP group net share of December. We spent $64 million in capital take place. The programme included gas production a expenditure on SCP during the year. section replacements in Georgia (Zestaphoni re-route) and Azerbaijan Outlook We expect to spend $35 million (Kura river, West crossing). The work 30% in capital expenditure for SCP in 2008. was completed in the first quarter With substantial new investment we of 2008. During the shutdown we believe the capacity of SCP can be used other routes to deliver oil expanded to 20 bcma. to world markets, so ensuring there was no impact on demand or ACG production. 58% 11%
At the end of 2007, SCP had: 1% Outlook A full re-commissioning • Capacity equal to 8.06 bcma. programme for WREP will be Azerbaijan UK & Rest of Europe • Average throughput equal undertaken in 2008, once we are to 8.970 mmscm/d. Other b US fully satisfied that it is safe to do so. • Throughput at peak equal to 21.645 mmscm/d. Northern route export For further key facts on SCP refer to pipeline (NREP) a Total 2007 BP group net natural gas production - page 21 of the 2006 BP in Azerbaijan 7,222 million cubic feet per day (excluding equity accounted entities). Sustainability Report. Summary NREP carries Azerbaijani oil b ‘Other’ includes Australia, Canada, China, Egypt, to the Russian port of Novorossiysk for Indonesia, Sharjah, Trinidad & Tobago, other.
18 BP in Azerbaijan BP in Azerbaijan: our operations
2007 BP Azerbaijan SPU offshore facilities Potential future
Sangachal
Sangachal
ACG Phase 3 Chirag West Azeri East Azeri Central Chirag West Azeri ACG Phase 3 East Azeri Azeri & CWP Central Azeri
Shah Deniz 1
Shah Deniz Stage 1
Shah Deniz Stage 2 Inam Alov
Exploration Alov, Araz, Sharg Technical studies BP lubricants in Azerbaijan Petrochem and sub-surface evaluation continued group is an official supplier of lubricant Summary We are committed to search in 2007. However, the BP group has products, including BP and Castrol for new, large hydrocarbon resources no plans for on-site work in the brands, for all BP projects in Azerbaijan. in the Caspian region that offer Alov contract area until Caspian In 2007, approximately 2.175 million liters development potential. littoral states reach an agreement of lubricants were delivered to BP and on offshore demarcation of the sea. its contractors in Azerbaijan. In addition, Inam In 2007 the focus of our BP/Castrol lubricants were supplied to exploration activities was on the Inam Other business most oilfield services contractors active PSA. In November, we started drilling in Azerbaijan. activities on the INX-2 exploration Integrated Supply and Trading (IST) well. The contract area covers 225 BP Azerbaijan SPU markets its equity square kilometres about 140 km crude oil through BP's Integrated south of Baku. Water depths vary Supply and Trading (IST) group based between 45 - 200 metres. in London. It is one of the world's 'Inam Bank' in the central part of largest energy traders with substantial the area has a minimum water depth scale and geographic spread. of four metres.
BP Azerbaijan SPU interests
PSA/HGA Operating company Corresponding BP legal entity ACG Azerbaijan International Operating Company (AIOC) BP Exploration (Caspian Sea) Limited / Amoco Caspian Sea Petroleum Limited BTC Baku-Tbilisi-Ceyhan Pipeline Company BP Pipelines (BTC) Limited SD BP Exploration Shah Deniz Limited BP Exploration (Azerbaijan) Limited SCP South Caucasus Pipeline Company Limited BP Pipelines (SCP) Limited Inam BP Amoco Exploration (Inam) Limited Amoco Inam Petroleum Company Alov BP Exploration (Alov) Limited BP Exploration (Azerbaijan) Limited
Sustainability Report 2007 19 1.5 Operating responsibly
During 2007, we integrated most of our operational facilities in Azerbaijan into a single health, safety, security, environmental and social (HSSE&S) management system. Compliance auditing was conducted at several sites.
HSSE&S management increased rapidly. In line with this to compile, document and implement system and associated growth, our management systems have processes that support the SPU to consis- programmes also developed and adapted. tently manage HSSE&S risks and oppor- In 2005 we began to replace the existing tunities and deliver legislative compliance, We made progress towards the BP environmental management system together with any BP group requirements. group goal of industry leadership in (established for the Early Oil Project In the longer term the current process safety management. phase of the ACG development) with a management system will need to evolve new integrated HSSE&S management to take into consideration the newly HSSE&S management system Since the system. The new system is based on a developed Operating Management signing of the ACG production sharing multi-level tier system of procedures System (OMS) expectations that will agreement in 1994, the size and diversity reflecting the organizational structure of apply to all BP operations. of BP's operations in Azerbaijan have the BP Azerbaijan SPU. Its main objective is The change from separate asset management systems to an integrated HSSE&S management system has taken BP Azerbaijan SPU HSSE&S management system tier structure place as the separate assets move from project stage to operation. Level Business unit Description By the end of 2007, the following Tier 1 BP corporate, SPU, Key BP group policy, standards and regulations operational facilities in Azerbaijan had regional, head of country which govern the AzSPU activities integrated into the HSSE&S management system and achieved ISO 14001 certifica- Tier 2 Strategic Key AzSPU policy, standards and regulation tion (the leading international standard performance unit elements which govern the AzSPU activities on environmental management): • Sangachal terminal - early oil project, Tier 3 Performance unit Management plans and processes under Phase 1 and 2 expansions and AzSPU MS manual, common procedures Shah Deniz. • NREP, WREP and Supsa. Tier 4 Assets/sites Assets/site specific working documentation • Offshore facilities - Chirag 1, Central and operational controls Azeri and C&WP, East Azeri, West Azeri and Shah Deniz alpha platforms. Tier 5 Facilities or country Facilities/country specific working • Support facilities - logistics documentation and operational controls and Serenja hazardous waste management facility.
20 BP in Azerbaijan BP in Azerbaijan: our operations
Safety and operations integrity audit
In August 2007, an audit was carried out of our offshore and onshore performance units, as part of the BP group's 2007 safety and operations integrity audit. These audits are an integral part of the Six Point Plan. A total of 21 auditors were involved. The majority came from oil and chemical companies (although the team did include an astronaut and a nuclear engineer). Half of them were external to the BP group. Teams visited the West Azeri platform, Chirag platform, Sangachal terminal, and the offshore supply base and waste treatment storage area. Lead auditor Colin Logan praised the SPU's overall performance and stressed the good organisation of maintenance work processes, emergency response proce- dures, safety management and effective communications. He concluded that the SPU is a 'well operated and managed asset.' Subsequently all the audit findings were shared with our onshore and offshore teams and corrective action plans developed, along with deadlines for completion. Verification auditors will return to Baku to check on progress during 2008.
Effective implementation of the management processes to be used by since been used to improve our compli- HSSE&S MS is verified through regular BP businesses worldwide. ance processes and to identify the inspections, reviews and audits. Corrective Gap analysis of existing BP Azerbaijan actions and resources required. action is taken where necessary and SPU compliance processes, outputs and As part of this initiative, considerable subsequently reviewed for effectiveness. controls was carried out during the year work was carried out inputting data into In 2007, internal management system against the requirements of this frame- a compliance task manager software tool. audits were carried out in April and August work. Results from the analysis have This database, which will be activated in by BP employees, with external supervision. In addition, compliance auditing against HSSE legal requirements was carried out ISO 14001 certification table at selected sites. These audits provided valuable performance information prior Assets Planned certification Certified to the subsequent external audits. WREP Az 2000 External ISO 14001 audits were car- BTC Az Planned for May 2008 - ried out in May and November by Moody SCP Az Planned for May 2008 - Sangachal terminal- EOP 2000 International Certification Group. Only Sangachal terminal- ACG Phase 1 2005 one corrective action was identified (con- Sangachal terminal- ACG Phase 2 2007 cerning inadequate documentation of Sangachal terminal- ACG Phase 3 Planned for May 2009 - the annual HSSE management review Sangachal terminal- Shah Deniz 2007 meeting). This was resolved during the Sangachal terminal- BTC / SCP Planned for May 2008 - November audit. WREP Georgia 2000 Supsa terminal 2000 Compliance management BP businesses BTC Georgia Planned for May 2008 - must comply with a variety of HSSE SCP Georgia Planned for May 2008 - requirements including international Chirag 1 platform 2000 treaties and conventions, national laws DWG Planned for May 2009 - CA /CWP 2005 and regulations, lender agreements, WA Platform 2006 industry commitments and BP standards. EA Platform 2007 To help BP businesses reduce the risk of Shah Deniz alpha platform 2007 non-compliance and create an enhanced Dada Gorgud drilling ops Planned for November 2008 - culture of integrity, a Global HSSE com- Istiglal drilling ops Planned for November 2008 - pliance framework (Project Emerald) was Logistics 2007 introduced in 2007. This details the mini- Serenja HWMF 2007 mum requirements for HSSE compliance CWAAs Planned for May 2009
Sustainability Report 2007 21 2008, will manage compliance tasks and to deliver our goal of industry leadership requirements were introduced for will serve as the basis for monitoring in process safety management. The main occupied portable buildings (OPBs). compliance performance across the BP vehicle for this is implementation of the In response to this, the BP Azerbaijan Azerbaijan SPU. BP group's 'Six Point Plan' which applies SPU completed a register of all such across BP. facilities and identified a small number Six Point plan delivery In March 2007, we of onshore OPBs (eight in Azerbaijan marked the two year anniversary of the During 2007, the SPU made progress on and Georgia) in high risk areas. Texas City refinery incident with two each of the Six Points: These have since been removed, minutes of silence throughout BP • Point 1 - deliver on post-Texas City or unmanned and locked to prevent offices. This provided an opportunity for recommendations. Soon after Texas re-occupation. In addition, BP requested all of us to reflect on safety and the City all trailers and temporary all SPUs categorise their cold atmos- responsibility that we have to ensure accommodations in close proximity pheric vents based on risk. In that lessons learned are implemented. to operational sites in Azerbaijan were response to this, the BP Azerbaijan The BP Azerbaijan SPU remains fully removed, or otherwise controlled to SPU cold vent register was updated and committed to sustain the effort needed prevent use. In 2005/2006, additional signed off. No high risk vents (according to BP group definitions) were identified as a result of this assessment. • Point 2 - carry out major accident A new HSSE policy statement risk assessments. All outstanding In March 2007, our HSSE policy statement, which all employees are required high priority major accident risk to comply with, was revised and formally re-issued. actions were completed in Azerbaijan The BP group's basic commitment of 'no accidents, no harm to people and no during the year including implementa- damage to the environment' remains in place and unchanged. However, the revised tion of an integrated ship collision and policy also includes a requirement to manage HSSE performance in line with newly traffic management plan by logistics. developed BP group standards (e.g. integrity management standard, control of • Point 3 - roll out Integrity work standard) and practices (e.g. environmental requirements for new projects). Management (IM) and the The policy has also been expanded to incorporate the BP 'Six-Point-Plan'. Control of Work (CoW) standards. HSSE Policy is communicated to employees and contractors on an ongoing The BP Azerbaijan SPU CoW policy basis through training, staff and toolbox meetings, posters, videos and via the and CoW procedure were issued in intranet of BP Azerbaijan SPU. The policy is available to the public and is posted 2007 to assist with implementation of at BP and contractor locations. the standard. Progress with the IM standard is discussed below.
22 BP in Azerbaijan BP in Azerbaijan: our operations
Safety leadership forum
In October 2007, a safety leadership forum was held in Baku. This is an annual event hosted by the BP Azerbaijan SPU where we, our contractors and partners join together to share experience and ideas and talk about achievements, progress, and issues in safety. The theme for 2007 was 'moving forward together.' About 140 people from 60 different companies participated in the event. One of the highlights of the forum was a series of presentations on best practice and lessons learned given by the contractor community. Topics included control of work, golden rules of safety and management systems. The forum also put the spotlight on ways of measuring HSE performance with a new safety scorecard, developed by both contractor and BP representatives, presented to the audience.
• Point 4 - enhance processes for com- included incidents/releases, inspection and annual performance reviews. pliance with laws and regulations. As management, maintenance management In 2007, audits were carried out at a stated earlier, compliance task devel- and corrosion and chemical management. number of contractor-run facilities opment is well underway with the In parallel with this monitoring, the BP including waste treatment, recycling, compliance task manager tool sched- Azerbaijan SPU established an incident storage and disposal sites (as well as uled for activation in 2008. investigation and learning network with waste transportation), chemical storage • Point 5 - close out past audit findings. the aim of reducing the number, severity yards, environmental laboratories, resi- All high and medium severity actions and likelihood of future incidents by ana- dences and offices. are regularly reviewed and resolved lyzing the causes and sharing findings In October, we held a safety leadership using the SPU action tracking system. across the organisation. forum attended by our major contractor In addition the Azerbaijan Leadership In the field, the SPU began the first companies to provide an opportunity for Team reviews actions on a monthly baseline inspection of the entire length knowledge transfer. In addition, a number basis to ensure closure. of the 1,768 km BTC pipeline during of contractor assurance documents were • Point 6 - build competency in safety. 2007, in accordance with BP engineering prepared including one describing the BP Azerbaijan SPU is currently in the technical practices. Inspection of the minimum obligations of contractors with process of conducting baseline pipeline through Azerbaijan was completed respect to SPU HSE expectations and competency assessments and successfully, with analysis of the results principles and a contractor HSE auditing creating development plans for ongoing. Inspection of the SCP gas line procedure. key operational leaders. is also underway. IM awareness campaigns were con- Safety Integrity management At the start of ducted throughout 2007 and IM-related 2006, the BP group issued a new presentations and a discussion took Summary We made a major effort in Integrity management (IM) standard. place at the regional conference HSE 2007 to embed the principles of the All operational facilities of BP in forum in January and the SPU BP group's Six Point plan in our activities. Azerbaijan now have a three year rolling operations conference in May. As part of this drive, our safety specialists IM plan in place and are expected to be conducted rigorous investigations into in full compliance with the BP group Contractor management The health, safety the root causes of incidents and the standard by the end of 2008. and environmental performance of our potential for incidents in different areas In order to measure the effectiveness major contractors is evaluated regularly of the business. of our IM plans, a number of different through inspection and audit of contractor key performance indicators were sites and facilities, monthly meetings Milestones of 2007 There were no fatalities monitored throughout 2007. These with contractor management and quarterly in 2007 at any of our facilities in Azerbaijan.
Sustainability Report 2007 23 One of the main contributory factors awareness, offshore training, incident was the close attention paid to 'lessons investigation, hazardous materials, con- 2007 safety highlights learned' from an incident in 2006 when trol of work, Safety Observations and • No fatalities. a contractor-welder died during construction Conversations (SOCs), waste manage- • DAFWCs: WREP achieved activities at Sangachal terminal. Specific ment, first aid, and induction training. eight years without a DAFWC, follow-up actions were taken which, we A large proportion of HSSE training Istiglal rig achieved over four believe, paid off. was conducted in-house. This accounts years without a DAFWC, and Our safety culture is based on contin- for the large increase in training man Sangachal terminal achieved uously assessing risks of injury or incident hours, with only an associated small three and a half years without from our activities and mitigating to increase in training expenditure. a DAFWC. acceptable levels. In 2007, we experienced Monthly safety training sessions were • Professional drivers from BP in a small increase in high potential inci- held covering different safety topics Azerbaijan took part in the BP dents compared to 2006. We believe this including cold stress, driving safety, International Driving Championship, rise is an indication of the increased manual handling, office and home safety, Regional Championship in Dubai, focus on reporting and investigation of behavioural conversations at work sites, where they won four prizes. Two all incidents, particularly high potential risk assessment and hazard prevention, of the representatives went on to incidents and near misses. In addition participate in the grand finals in SPU activities are shifting from project the United States in October. phase to operation phase with conse- BP Azerbaijan SPU HSSE safety training quent changes to risk profiles. courses in Azerbaijan and Georgiaa
Safety training and awareness In 2007, Man hours USD emergency preparedness, electrical 148,105 hours of HSSE and operations 2006 43,786 5,994,675 safety, ergonomics and human fatigue, 2007 148,105 6,884,812 training were undertaken by BP and con- substance abuse and winter driving. tractor staff in Azerbaijan and Georgia. a As in 2006 the totals include HSSE and operations Analysis of safety accident statistics Courses included basic fire fighting, training. Information cannot be presented for in 2006 showed that hands and fingers Azerbaijan only as the system data was collected emergency response, oil spill response/ from BP Azerbaijan SPU as one site. were the most frequently injured parts
BP Azerbaijan SPU 2005-2007 safety performancea 2006-2007 safety performance of BP in Azerbaijan Actual 2005 Actual 2006 Actual 2007 Target 2008 2006 2007 Fatalitiesb 2100Fatalitiesb 10 HiPO(f)c 0.005 0.03 0.05 0.05 HiPO (f)c 0.04 0.06 DAFWC(f)d 0.01 0.03 0.04 0.05 DAFWC(f)d 0.02 0.05 RI(f)e 0.33 0.25 0.31 0.33 RI(f)e 0.32 0.35 TVARf 0.49 0.71 1.29 1.2 TVARf 0.99 1.54 ASA(f)/SOC(f)g 937 983 934 600 ASA(f)/SOC(f)g 988 998 STOP(f)h 3,659 5,923 4,574 3,000 STOP (f)h 6,255 4,200 Safety training(f)i 4,537 6,241 5,601 4,000 Safety training (f)i 5,740 5,485 Kilometres driven (millions) 59.24 46.46 39.65 n/a Kilometres driven (millions) 28.28 27.96 Hours worked (millions) 44.09 31.18 26.29 n/a Hours worked (millions) 21.83 21.66
a The table shows information for BP Azerbaijan SPU. It does not include project-only data and it includes BP recordable/control sphere figures. BP's injury and illness definitions are the U.S. Occupational Health and Safety Administration (OSHA) definitions and their subsequent interpretation. b Reported fatality figures do not include project-only work. c HiPO is an abbreviation for High Potential incident. d Days Away from Work Case (DAFWC) is a work-related injury or illness that causes the injured person to be away from work for at least one normal shift after the shift on which the injury occurred, because the person is unfit to perform any duties. DAFWC frequency (DAFWC(f)) is expressed as the number of reported injuries or illnesses that result in a person (employee or contractor) being unable to work for a day (shift) or more per 200,000 hours worked. DAFWC(f) is based on two DAFWC in 2005, five in 2006 and five in 2007. e Recordable injury (RI) is the number of all reported work-related injuries above first aid, that is medical treatment, restricted work/job transfer, days away from work case and fatality. The RI frequency (RI(f)) is expressed as the number of reported recordable injuries per 200,000 hours worked. There was a slight rise in the RI(f) from 2006. This was the result of a large drop in project hours worked and a similar number of RIs in 2007 compared to 2006 due to a change to operational activity associated with the impact of commissioning plant and increase in marine related works. f Total Vehicle Accident Rate (TVAR) is the number of reported road accidents per million vehicle kilometres travelled. g The Advanced Safety Audit (ASA) / Safety Observations and Conversations (SOC) frequencies are based on the number of reported ASAs / SOCs per 200,000 labour hours. h Safety Training Observations Programme (STOP) frequencies are based on the number of reported STOP observations per 200,000 labour hours. i Safety training frequency is the number of safety training hours taken by employees per 200,000 labour hours.
24 BP in Azerbaijan BP in Azerbaijan: our operations
of the body. Based on this information, (emissions released for every thousand at the end of 2006 and increased an SPU hand protection awareness barrels of oil and gas produced) fell 24% offshore oil and gas production. workshop was held in June 2007, in from 11.8 te/mboe in 2006 to 8.97 • Azeri offshore platforms: This reflected order to increase hazard awareness and te/mboe in 2007. East Azeri becoming operational at the knowledge on the subject. Following The main sources of increased GHG end of 2006, as well as a planned the workshop, all information was emissions were: shutdown of this facility in September communicated across the workforce, • Sangachal terminal: This was with associated flaring, and increased including contractors. due to the Shah Deniz portion of fuel gas use at Central Azeri to power the terminal becoming operational the additional platform. Driving safety A number of new driving safety initiatives were implemented in 2007. Among them, the BP Azerbaijan SPU driving training school, located BP Azerbaijan SPU GHG emissions in Azerbaijan (net) Actual 2007 Actual 2007 close to Sangachal terminal, became Azerbaijan only Actual 2006 (old assumptions) (new assumptions)a fully operational. An updated training Operational net GHG emissions kte/pa 612.67 729.06 634.64 package for SPU drivers was Normalised operational GHG emissions te/mboe 11.8 8.97 7.99 implemented and the SPU seat belt a Please note that as of 3Q 2007 methodology for calculating net GHG emissions changed. Prior to this it was campaign continued. More than 1,000 based on participating interest. Now it is based on production entitlement share. Calculation methodology for employees and contractors attended predrill, renewals, export pipelines and terminal remained the same. sessions at different BP facilities where the effects of controlled vehicle BP Azerbaijan SPU net GHG emissions 2006-2007 per asset in Azerbaijan (kte) collisions were demonstrated. 2007 2007 A number of contractor driving 2006 (old assumptions) (new assumptions)a audits were carried out in 2006 and ACG predrill 3.2 4.0 4.0 2007 and the results were used to ACG Sangachal terminal 142.0 180.6 180.6 compile a driving gap analysis outlining Shah Deniz Sangachal terminal n/a 67.1 67.1 the root cause of driving incidents. Shah Deniz OPS offshore 11.4 16.9 14.7 This has led to proposed additional Shah Deniz exploration drilling n/a 4.6 4.6 Azeri offshore 250.2 357.6 278.7 driver training and required reporting BTC Azerbaijan 2.4 13.7 13.7 procedures/processes (including a Chirag 196.7 83.0 69.6 driving disciplinary code). Inam 0 0.5 0.5 Despite this all-round focus, BP's total NREP 0.08 0.12 0.12 vehicle accident rate in Azerbaijan rose SCP Azerbaijan 0.08 0.02 0.02 55% from 0.99 in 2006 to 1.54 in 2007. WREP Azerbaijan 6.6 0.9 0.9 This was largely due to the increase a Please note that as of 3Q 2007 methodology for calculating net GHG emissions changed. Prior to this it was in traffic on Azerbaijan's roads and based on participating interest. Now it is based on production entitlement share. Calculation methodology for the fact that heavy goods vehicles predrill, renewals, export pipelines and terminal remained the same. had been allowed access to Baku city for construction purposes. Even more rigorous efforts will be required to BP Azerbaijan SPU direct CO2 emissions in Azerbaijan 2007 2007 reinforce driving safety in 2008. 2006 (old assumptions) (new assumptions)a Direct carbon dioxide (100%) (kte) 1,686.5 1,980.1 1,980.1 Environment Net direct carbon dioxide (kte) 571.8 650.1 582.8
Summary In 2007, our flaring totals a Please note that as of 3Q 2007 methodology for calculating net of direct CO2 emissions changed. Prior significantly reduced. We continued with to this it was based on participating interest. Now it is based on production entitlement share. Calculation our proactive environmental monitoring methodology for predrill, renewals, export pipelines and terminal remained the same. programme. Sewage treatment on our offshore platforms remained an issue. BP Azerbaijan SPU non-GHG emissions - SOx and NOx in Azerbaijan 2006 2007 Greenhouse gases Total net greenhouse 2006 (old assumptions) (new assumptions)a gas (GHG) emissions by the BP Azerbaijan Oxides of sulphur (SOx) (te) 237 249 795 SPU increased 18.9% in 2007 to 729 kte Oxides of nitrogen (NOx) (te) 3,711 3,953 3,786 (from 613 kte in 2006). However, our a Please note that as of 3Q 2007 methodology for calculating SOx and NOx emissions changed and they now normalised operational GHG emissions are calculated using new emission factors that reflect usage of actual field data rather than guideline assumptions.
Sustainability Report 2007 25 • BTC Pipeline: Resulting from Azeri C&WP allowing an average of 2.3 kte Energy consumption Consumption of fuel operational ramp up and commissioning of gas per day to be routed to the C&WP gas increased by 154 kte (54.1%) in 2007 of Pump Station 2 (PSA2). for injection and export, thus reducing the while consumption of diesel decreased Chirag flare to minimum operational rates. by 5.6 kte (23.1%). New operating Flaring In 2007, 281 kte of hydrocarbon Chirag is now in line with the BP group facilities such as the Shah Deniz portion were flared by BP in Azerbaijan, a 15.6% policy of no routine flaring for production, of Sangachal terminal and the offshore reduction in comparison to 2006. while simultaneously allowing for enhanced East Azeri platform were the main factors Flaring minimization measures imple- reservoir recovery in the ACG field. behind the increase in fuel gas mented in mid-2006 at Chirag platform Chirag also maintained its export route consumption. Diesel use fell slightly due proved successful. A subsea gas export to the Oil Rocks gas terminal providing to the temporary closure of the WREP. pipeline now links Chirag to the Central additional gas supplies to Azerbaijan Hydrocarbon spills In 2007, the SPU recorded 71 hydrocarbon spills, compared BP Azerbaijan SPU flaring 2005-2007 in Azerbaijan (net by asset) with 41 in 2006. Of these, five spills were greater than one barrel, compared to six in 2006. Thorough spill clean-ups Flaring (kte) 2005 2006 2007 Azeri asset 94.5 140.1 124.3a were carried out, where appropriate, Chirag 260.4 151.4 44.2 and actions taken to prevent reoccurrence. Sangachal terminal (ACG) 93.3 36 51.6 Out of 4,534 litres of product spilled Sangachal terminal (SD) 0 0 58.5 in 2007 about 74% (3,342 litres) Shah Deniz 0 5.1b 2.3c were recovered. BP in Azerbaijan 448.2 332.6 280.9 Detailed internal and external process- es are in place for reporting hydrocarbon a b c Includes ACG predrill, Upstream, Exploration drilling. spills in Azerbaijan. All spills are reported to the Ministry of Ecology and Natural Resources (MENR) and the State Oil BP Azerbaijan SPU energy consumption 2006-2007 in Azerbaijan Company of the Azerbaijan Republic (SOCAR). Any BTC spills are also 2006 2007 reported to the BTC Lender Group. Fuel gas (kte) 284.2 438.0 Diesel (kte) 24.2 18.6 Discharges to water - drill cuttings In 2007, Electricity import (MWh) 5.5 4.8 23,995 tonnes of drilling cuttings and
26 BP in Azerbaijan BP in Azerbaijan: our operations
Sumgayit non-hazardous waste landfill
In September 2006, we began construction of a BP-exclusive non-hazardous solid waste landfill at Sumgayit. Design and construction was carried out by a local company, Tehlukheli Tullantilar LLC, who engaged the technical expertise of an experienced international contractor, Containment Quality Associates, to provide supervision and training. The resulting facility, which comprises a landfill cell with a capacity of 54,000 cubic metres, a waste handling pad, a weighbridge and a wheel wash area, is fully compliant with European Union standards. The landfill cell has a composite liner system of compacted clay, a high density polyethylene geomembrane and a geotextile liner. There is also a network of pipes on the cell floor to collect any resulting leachate (liquid produced as part of the natural decomposition process in landfills). Gas vent installation, for the collection of landfill gas, is planned for the future. Construction of the site was completed in the summer of 2007 and the first trial waste delivery took place in November. We expect the landfill site to be fully operational in 2008, and be sufficient for BP needs in Azerbaijan for the following five years.
associated fluids (adhered drill mud) In the third quarter of 2007, a cuttings the best practicable environmental option. were discharged to the Caspian Sea. dryer was installed on Chirag platform. In 2007, we recorded a total of 48,663 This represents a 52% increase An indirect benefit of this system is a tonnes of waste from our operations - compared to 2006 reflecting increased reduction in the total amount of SBM 40,713 tonnes of hazardous waste, and drilling activity on Chirag platform (total required for the drilling operations. 7,950 tonnes of non-hazardous waste. drilled interval of 13,931m in 2007 Chirag personnel are currently working In addition, a total of 88,947 tonnes of compared to 3,873m in 2006). on understanding and optimising sewage waste and 84,970 tonnes of BP in Azerbaijan uses both water performance of the system. Drilling produced water were generated. based mud (WBM) and synthetic based of wells since the introduction of the Approximately 50% of the non-haz- mud (SBM) for its drilling operations. cuttings dryer indicate an SBM ardous waste generated was recycled, More than half (56%) of our drill cuttings recovery rate ranging from 18-76%. or reused. The remainder of the waste discharged in 2007 contained low (hazardous and non-hazardous) was either: toxicity WBM - the most commonly used Waste management Our aim is to manage • treated and disposed through properly drilling mud in the world. The remaining hazardous and non-hazardous wastes in assessed and accepted routes; 44% contained SBMs which were Azerbaijan in line with BP group policies and • temporarily stored at Serenja Hazardous released solely from the Chirag platform. international best practices, consistent with Waste Management Facility (HWMF); or These discharges are in compliance with the availability of local infrastructure. • landfilled in a BP dedicated cell operated the ACG PSA and the early oil project We aspire in the long term to comply with by Azerbaijan Deutschland Ecological environmental impact assessment Europian Union standards and this will be Service (ADES) Azerbaijan - Germany JV. requirements. implemented, wherever possible, based on Central Waste Accumulation Areas (CWAAs) continued to operate under contract to BP at Sangachal terminal and BP Azerbaijan SPU drill cuttings discharged to water in Azerbaijan at the SPS yard. All wastes from offshore activities are received by the SPS facility Drill cuttings Drill cuttings Total drill cuttings (with the exception of drill cuttings). with WBM discharged with SBM discharged discharged to Asset / Facility to water, te 2007 to water, te 2007 water, te 2007 Waste generated by the various pipelines Chirag 0 6,811 6,811 and Sangachal terminal are managed at Azeri offshore 3,750 0 3,750 Sangachal CWAA. ACG predrill 11,812 0 11,812 Serenja HWMF, the operational corner- Shah Deniz exploration drilling 737 0 737 stone for the SPU's drill cutting treatment Inam exploration drilling 885 0 885 and interim hazardous waste storage, Total 17,184 6,811 23,995 attained ISO 14001 certification of the
Sustainability Report 2007 27 Local company assists BP with recycling A major achievement during 2007 was the establishment of a paint recycling route in partnership with a local company 'Karvan-L'. The company has since treated 210 tonnes of paint and similar coatings for resale as paint and varnish. The recycled product is suitable for both industrial and domestic use. Previously, in the absence of a suitable treatment route, large quantities of unused paint and protective coatings were stored temporarily at Serenja HWMF.
environmental portion of its HSSE&S This resulted in the recovery of 1,126 A significant milestone was the management system in 2007. tonnes of base oil, which was subse- completion of a 14 inch pipeline • Drill cuttings In 2007, a total of 23,010 quently returned to the chemical sup- from Sangachal terminal to the tonnes of raw (that is, untreated) drill plier for re-use. In addition to ITD, Central Azeri C&WP (where the pro- cuttings were received at Serenja bioremediation accounted for 3,500 duced water ultimately will be HWMF from offshore drilling opera- tonnes of the raw drill cuttings treatment. re-injected back into the reservoir). tions on the Dada Gorgud and Istiglal Onboard the Azeri platforms drill cut- Work in 2008 will focus on completion mobile drilling rigs and Chirag and tings re-injection (DCRI) continued, with of a new produced water tank and Shah Deniz Alpha platforms. 19,918 tonnes of hazardous waste onshore treatment facilities. Until the Approximately 14,922 tonnes of SBM disposed of using this process in long-term solution is operational, drill cuttings were processed via the 2007. DCRI is a significant step produced water will continue to be indirect thermal desorption (ITD) process. towards the reduction of cuttings managed through MENR permitted volumes requiring shipment to shore disposal locations. for further storage and treatment. • Hazardous liquid wastes A local Cuttings treatment in 2007 - Serenja HWMFa • Sewage Sewage treatment unit failures company, RT Services, licensed by on our offshore platforms continued MENR to provide industrial waste to be an issue in 2007. A total of 29 utilisation services, treated 10,971 releases of untreated sewage to the tonnes of contaminated brine Caspian Sea were recorded, com- (compared with 9,439 tonnes in 2006) 38% pared to 10 releases in 2006. The and 13,532 tonnes of produced water 50% majority of these were recorded on filtration waste during 2007. the West Azeri platform (15 releases). MENR and SOCAR were notified in Environmental monitoring An Integrated writing following each release. Environmental Monitoring Programme 12% In 2008, removal and replacement of (IEMP) covers our activities in Azerbaijan. underperforming sewage treatment The IEMP was developed in response Processed via ITD units will be considered in more detail to professional opinion regarding the need Bioremediation as an alternative solution. to improve understanding and interpreta- Storage • Produced water Construction activi- tion of our environmental surveys. It is ties designed to produce a long-term designed to provide a consistent long-term a Takes into account the 6,838 tonnes of cuttings disposal solution for produced water data set, with the aim of ensuring that held in storage at Serenja at the end of 2006. continued throughout in 2007. we are able to maintain a clear and accu-
28 BP in Azerbaijan BP in Azerbaijan: our operations
rate picture of the impacts of our activities Summary of 2004-2006 marine environmental survey trends on the surrounding environment. By the end of 2007, the IEMP had Issue 2004-2005 2005-2006 Significance for BP operations completed a total of 41 monitoring Biological Disappearance of Large reduction in Not related to operations. studies over four years. Out of the 11 change previously dominant diversity of shrimp- Demonstrates the potential for surveys conducted in 2007, a total of in offshore species across like amphipods very large 'natural' changes, five were offshore marine surveys and areas ACG contract area. and gastropod and also shows that there is no six were onshore terrestrial surveys. snails across fixed baseline against which No nearshore studies were conducted ACG contract area. changes can be assessed. in 2007, although fish and seagrass Underlines the importance of monitoring surveys are planned for periodic, regional monitoring. 2008 in Sangachal bay. Data from the 2007 studies is still Appearance Present at Chirag Increased abundance Nereis appears to have become being analysed. Interpretation of off- of Nereis and all new platforms. and presence established and may eventually shore monitoring reports for 2004-2006 worm at Not abundant but around platforms. become dominant. Although has led to the identification of a number offshore centred on platforms. No corresponding there is no direct evidence that of distinctive trends. The majority are not platform increase at regional this is due to BP's activities, thought to be associated with our activi- locations survey stations. there is no plausible 'natural' ties. However, in one instance it appears hypothesis to explain the possible that an observed change might presence of this organism only be associated with platform installation at platform locations offshore. or drilling activities - the appearance of the Nereis diversicolor worm around offshore platforms. Previously this worm Impact Little evidence of Little evidence In general, the installation and had only been recorded in shallow, of platform impact at Central of impact at early operation of platforms has nearshore waters. installation Azeri, West Azeri East Azeri. had only very minor ecological Onshore much time and effort was and and Shah Deniz impact. Modest biological devoted to environmental monitoring in subsequent alpha. footprint only evident at Chirag-1 drilling where synthetic based mud the vicinity of Sangachal terminal. and cuttings continue to be Vegetation and soil stability monitoring discharged. surveys were carried out in spring and autumn, in line with the twice yearly
Sustainability Report 2007 29 Ambient air quality monitoring was biological contactors) and reed bed carried out in the vicinity of the terminal filter systems have been commis- during a period of maintenance shut-down sioned to improve effluent quality, and during post operational start-up. and will be fully operational in 2008. The aim was to collect baseline air quali- In the meantime, effluent continues ty data and information on the to be discharged off-site at municipal contribution of terminal operations. sewage treatment works. Unfortunately data interpretation was We continued to monitor the flawed due to lack of accurate site-spe- recovery of the BTC/SCP right of way cific meteorological data. A revised mon- following reinstatement work. itoring plan will be implemented in 2008 This involved assessing vegetation using a real-time air quality monitoring cover, species diversity and tree and station and taking account of new third shrub survival; satellite monitoring surveys carried out in previous years. party emission sources in the area and ground truthing to provide high- So far the results suggest that the around Sangachal. level vegetation cover information; terrestrial environment has not been Water quality monitoring of terminal and landscape monitoring through impacted significantly by terminal and flood protection channel run-off was annual photographic surveys. Rare operations, although there are clear initiated during the latter part of 2007 species monitoring of Iris acutiloba signs of grazing pressure and impact and will continue at approximately six was also carried out to determine from other land users. weekly intervals in 2008. translocation survival rates. A breeding bird survey was conducted In addition to the IEMP, the Azerbaijan in the spring within a five kilometre export pipelines environmental monitoring Environmental requirements for new projects radius of the terminal, following similar programme continued throughout 2007. In 2006, the BP group introduced its surveys in 2004 and 2005. A number of environmental requirements for new physical impacts on habitats were Activities included: projects (ERNP) - a full life-cycle observed, such as infilling of wetlands • Ambient air monitoring at BTC inter- environmental management process and clearing of shrubs. None appear to mediate pigging station IPA1 and BTC which aims to deliver consistency of be related to terminal construction and pump station PSA2 using passive project environmental performance infrastructure development. sampling techniques. This will be across the company. continued throughout 2008 to establish New projects are now required to annual mean data and determine comply with the following minimum compliance with BTC Environmental requirements: screening and categorisation; 2007 environmental highlights and social action plan (ESAP) standards. compliance with the environmental • The BP Azerbaijan SPU moved • Stack emissions monitoring at the impact assessment process requirements closer to becoming fully ISO PSA2 turbines, at the same time as appropriate to the project category; and 14001 certified. Shah Deniz alpha ambient monitoring, to compare air compliance with environmental platform, East Azeri platform, quality at source and at the surround- performance requirements. logistics, Sangachal ing receptors. Existing operations are also encouraged terminal (Shah Deniz section) • Environmental noise monitoring in the to apply the practice in order to support and Serenja hazardous waste vicinity of PSA2 and around one BTC our commitment to continuous management facility all block valve at the nearest community improvement of the company's overall achieved ISO 14001 receptors. All the results of this environmental performance. certification in November. monitoring were compliant with During the year, all operational facili- • Construction of the BP-exclusive ESAP standards. ties in Azerbaijan, and proposed future non-hazardous solid waste landfill at • Surface water monitoring at IPA1, projects, conducted a gap analysis Sumgayit was completed. The landfill PSA2, and groundwater monitoring in against the requirements of ERNP. is compliant with EU standards. the vicinity of PSA2 and within the • A paint recycling route established Karayazi sensitive aquifer area. Health with the local company Karvan-L. As in previous years the results • A 15.6% reduction in flaring demonstrated compliance with Summary Food safety and industrial achieved due to Chirag platform ESAP standards and baseline results. hygiene were dominant themes of flaring minimisation measures. • Effluent quality monitoring at IPA1 our health activities during 2007. Our • New sewage treatment units and PSA2 and WREP Pump Stations employees were encouraged to take part installed at BTC IPA1 and PSA2. 2, 5 and 8. At IPA1 and PSA2 new in internationally-sponsored health sewage treatment units (rotating awareness campaigns.
30 BP in Azerbaijan BP in Azerbaijan: our operations
Occupational hygiene safety training
Throughout 2007 efforts were made to fill a perceived international gap in industrial hygiene skills. Working with the British Occupational Hygiene Society (BOHS), the BP group adapted its proven training and certification programme to develop a new cadre of industrial hygiene professionals and technicians. By completing six modules, and sitting an additional oral examination, a student is able to achieve official BOHS certification as an industrial hygiene technician. If required he or she may then continue studying via a number of options, including distance learning, until they are ready to sit an examination for the BOHS Occupational Hygiene Diploma - the globally recognised qualification for an industrial hygiene professional. Two modules were conducted successfully in Baku during the year - 'Measurement of Hazardous Substances' and 'Thermal Environment'. About 20 BP employees including HSE advisors, occupational health and industrial hygiene specialists and medics from different facilities attended. According to Mike Taylor (a BP industrial hygiene coach), "the industrial hygiene module series gives employees an excellent opportunity to build valuable, marketable HSE skills. Our goal is to enable employees to master the subjects they choose for the benefit of their career and for the success of BP globally".
Health training Health training for BP and strengthen prevention and control. employees concentrated on two critical As part of the BP Azerbaijan SPU's 2007 health highlights areas in 2007 - food safety and industrial 'Avian Flu awareness campaign', posters • Health surveillance programme hygiene (see case study), with BP-specific and booklets were distributed through- introduced. programmes delivered in Azerbaijan. out the SPU including platforms, drilling • Food safety and industrial hygiene A health network meeting was held in rigs, boats, terminals, yards and pump capability training implemented. Baku, attended by representatives from stations. Educational material was also • Secondary care clinic reconstruc- Azerbaijan, Georgia and Turkey (including sent to community centres along the tion completed. contractors and medical providers). pipeline route, the International School of • Noise monitoring surveys held. Health information was shared between Azerbaijan and to all employee residen- the participants and countries, strength- tial complexes. ening the knowledge base of the region. Reconstruction of a backup secondary HSE staff from BP Azerbaijan SPU also care facility was completed at Shelf attended the BP group Global HSSE Project Stroy (SPS) yard. This clinic is forum in Orlando, Florida, where they designed and equipped for the provision were presented with an award for their of emergency medical support in the work on the BTC regional emergency event of an infectious disease outbreak medical plan. or other large-scale medical incident.
Health campaigns Our employees were Health performance We continued our encouraged to take part in several inter- food hygiene audits of all our catering nationally-sponsored health awareness facilities at onshore and offshore opera- campaigns in 2007. In May, 'World no tional sites in Azerbaijan on a quarterly tobacco day' was marked in the BP and annual basis. Audits of SPU medical Azerbaijan SPU with awareness presen- facilities were undertaken to determine tations (attended by more than 500 staff) levels of medical preparedness and and the distribution of carbon monoxide make recommendations to improve the monitoring and quit kits. In November, service. As part of our industrial hygiene around 650 employees took part in programme workplace exposure 'World diabetes day' activities (attending assessments were initiated. Noise presentations and wellness assess- monitoring surveys were also held at ments) in order to promote surveillance, all operational sites and a personal noise encourage prevention, raise awareness dosimetry programme developed.
Sustainability Report 2007 31 1.6 Security and human rights
We enhanced the security of BP-operated assets in Azerbaijan in 2007 by broadening cooperation with government agencies, local communities and specialist organisations.
Overview Wherever the BP group and assets; and ensure that security, operates, the provision of security is the like safety, is everyone's responsibility. responsibility of the host government. This approach has been supported by In Azerbaijan pipeline security is provided the voluntary principles on security and by the Export Pipelines Protection human rights, which provides a frame- Department (EPPD)a, while offshore work of standards guiding security planning protection is provided by the Azerbaijan for the pipelines and were incorporated navy and the Azerbaijan coast guard. in the legal regime surrounding the BP in Azerbaijan is responsible for projects. In November 2007, we signed maintaining the security of people and a bilateral security protocol with the facilities within BP-controlled or operated government of Azerbaijan (see below). sites. Until 2007, unarmed protection 'behind the fence' at our onshore facilitiesb was Working with communities Communities provided by the staff of BP in Azerbaijan and close to our operations are key elements a private Azerbaijani security contractor, in the provision of security to our facili- Grievance resolution We continued to Titan D Ltd. In 2007 BP in Azerbaijan ties and we have constantly sought to operate a local grievance mechanism decided to fully outsource its security create strong and enduring links with our along the BTC/SCP pipelines' route in needs to Titan D Ltd. By the end of the neighbours as well as with local and 2007 following the end of construction. year, the hand-over had been completed national government agencies. Seven Community Liason Officers successfully. To ensure that Titan D's In 2007, we continued to support the (CLOs) employed by BP in Azerbaijan security guards have proper training, we Inter-Agency Security Committee (IASC) provided a foundation course and training forum, the goal of which is to facilitate in bomb threat calls, vehicle inspection, dialogue between BP in Azerbaijan, com- residential security and x-ray inspection. munity members and government secu- ‘I feel like a very important Our role in pipeline security is built on rity providers - including local police and part in protecting this four main principles - work closely with the EPPD. The IASC held 115 meetings community members; cooperate effec- in all Azerbaijani communities along the pipeline.’ tively with host governments and their pipelines' right of way during 2007 in all Seymur Alizadeh, who patrols the security agencies; protect our people transited 13 regions. BTC route on his chestnut-brown mare six days a week. a EPPD (Export Pipelines Protection Department) is a department of SSPS - Special State Protection Service. b This primarily involves control of entry to and exit from the sites and prevention of loss of company property.
32 BP in Azerbaijan BP in Azerbaijan: our operations
were involved directly as well as pipeline remained unresolved at the end of 2006. and ACG fields. technicians and a field security advisor. Thirty-three of these outstanding The protocol defines standards and The CLOs provided a consistent, familiar complaints were resolved by end 2007. procedures on the use of force and face to local communities as well as The two outstanding complaints involve firearms, hiring and training security facilitating day-to-day communication. infrastructure damage. personnel, consultation and exchange of During the year we received 40 com- Five additional complaints (beyond information and monitoring compliance. plaints from land owners and users the 40 mentioned above) were received It reflects international agreements such along the pipelines' right-of-way corridor from settlements close to Sangachal as the United Nations basic principles on in Azerbaijan. Subjects included irrigation terminal. These related to flaring, noise, the use of force and firearms by law (25%), damage to property (22.5%), loss of livestock, livelihood impacts and enforcement officials and the voluntary compensation issues (20%), land rein- quality issues regarding particular principles on security and human rights. statement (7.5%), damage to infrastruc- community investment projects. At the ture (7.5%), road access (2.5%), land use end of 2007, two of the five complaints Independent monitoring During 2007, we (10%) and orphan land casesa (5%). By remained outstanding. published a report by an independent the end of 2007, 85% of these com- In 2007, we planned to set up a telephone monitor that assessed our compliance plaints had been resolved. The outstand- hotline to give people affected by our with the voluntary principles for the year ing six complaints relate to compensa- onshore operations an additional way to 2006. The auditor, Foley Hoag Limited tion issues (5) and property damage (1). raise security-related concerns. The process Liability Partnership found that we Three out of the 40 complaints regis- took longer than expected and we hope 'continued to demonstrate both good tered in 2007 related to EPPD activities. to implement this initiative in 2008. faith and exceptional leadership in seeking These were addressed with the coopera- to meet commitments under the tion of EPPD officials and by following Interacting with public and private security voluntary principles'. Foley Hoag also the same Azerbaijan pipelines complaints In November 2007, we signed a bilateral noted that the BTC/SCP projects took management procedure used to manage security protocol with the government of 'important steps during the course of grievances related to our own activities. Azerbaijan. It covered the provision of 2006 to address ongoing challenges All these complaints were resolved to security for facilities and installations related to the nexus of human rights and the satisfaction of the complainants. operated by BP in Azerbaijan including security.' The human rights and security We also considered 21 outstanding the BTC/SCP pipelines, WREP, NREP, external monitoring assessment of the complaints received in 2006 and 14 from Sangachal terminal and installations pipeline projects in Azerbaijan may be previous years (2004-2005), which associated with the offshore Shah Deniz read on www.bp.com/caspian. a This is land that, for instance, has become too small to be farmed economically following the construction of ancillary BTC/SCP facilities such as block valves.
Sustainability Report 2007 33 1.7 People, compliance and ethics
BP in Azerbaijan is committed to increasing the number of national staff in senior posts and reducing the number of expatriates in order to create a local company run by qualified national staff.
People We have established measures to Recruitmenta Recruitment of Azerbaijani monitor progress in our employment nationals continued in 2007. In total, 226 Milestones of 2007 Target staffing levels commitments. Apart from internal feedback Azerbaijani nationals were recruited of under our Production Sharing Agreements gained through BP people assurance sur- whom 75% were male and 25% female. for 2007 were met for both our veys we study external auditing of our We hired 47 university graduates professional and non-professional staff. activities. An example in 2007 was the (Challengers) through the annual recruit- The BP Azerbaijan SPU's own targets for Azerbaijan Social Review Commission ment programme, 41 experienced the year 2007 were more than 75% report, published in June (page 13). The national employees in professional roles report commended our programme for a A detailed explanation of the recruitment process and 100% in non-professional roles. Both dealing with de-manning in the construc- (step by step) was described in 2006 BP in these targets were achieved or exceeded tion yards, funding for re-training and the Azerbaijan Sustainability Report (page 40) and therefore will not be repeated in here. as we reached 77% for national profes- assistance we provided to find new jobs sionals and 100% for non-professionals. for affected contract workers.
Professional staff of BP Azerbaijan SPUa
Category Number of people % of total workforce BP Azerbaijan SPU national professional staff 1,664 77% BP Azerbaijan SPU expatriatesb 511 23% Total 2,175 a This includes professional staff of BP Azerbaijan SPU in Azerbaijan, Georgia and Turkey. b Includes all Azerbaijani expats on overseas development assignments.
Professional staff of BP in Azerbaijana
Category Number of people % of total workforce National staff National professional staff 1,462 75% At the end of 2007, BP Azerbaijan BP expatriates 487 25% SPU had 77% national professional Total 1,949 staff against a target of 75%. a This includes national professional staff of BP in Azerbaijan only.
34 BP in Azerbaijan BP in Azerbaijan: our operations
Seymour Khalilov - a high flyer
Seymour Khalilov - since January 2008 BP in Azerbaijan's vice president for communications and external affairs - has made a habit of achieving firsts in life. In 1996, while a student at the Azerbaijan State Institute of Languages (ASIL), he was one of four winners out of 3,600 applicants for a US government scholarship that allowed the winners a year of paid study at an American university. He went to the University of Missouri, St. Louis. A year later, in 1997, Seymour graduated first in a class of 60 from ASIL. Going to work in the US embassy in Baku as a commercial specialist, he won a Meritorious Service Award within three years. On becoming Executive Director of the US-Azerbaijan Chamber of Commerce (USACC) in 2002, he facilitated the entry of more than 50 multinational corporations into Azerbaijan. Fluent in four languages and conversant in a fifth, Seymour, now 32, has always had a strong business bias. In his spare time Seymour enjoys travelling and reading. At one stage he organised a 20,000 volume book drive from US public libraries to help universities in Azerbaijan. In his role he also completed fundraising for a $1 million USACC-Kennedy School of Government fellowship programme for graduate students from the Azerbaijani public sector. In May 2006, Seymour Khalilov joined BP in Azerbaijan as external affairs and policy forum manager. In this role he led the company's relationships with governments and international NGOs and developed and implemented BP's approach to revenue management in the Caspian region. Now, as only the second national vice president in BP Azerbaijan SPU, his wide ranging, high profile role seems sure to see him achieving more firsts.
professionals and 106 operations and We completed an internal project to Career development BP's challenger maintenance trainee technicians. The review and strengthen BP Azerbaijan programme met its targets for training remaining 32 newcomers joined the SPU's recruitment processes. We com- and development in 2007. In addition, 14 company through ad hoc recruitment mitted to developing clearer channels to Azerbaijani challengers went on one year procedures. In 2007, we hired more enable national candidates in the market early development overseas assignments. experienced professionals than originally to apply more easily for positions. A We also established a development planned. This reflects our support of process was established to advertise our tool called 'step-up' to better support localisation at leadership levels. externally available vacancies on the our significant post-challenge At the end of 2007, 155 challengers were careers page of the BP Caspian intranet working for BP in Azerbaijan including site. We also completed BP group's a A detailed description of internship programme was 137 Azerbaijani nationals (82% strategic resource planning process. provided in 2006 Azerbaijan Sustainability Report male/18% female) and 18 expatriates We had another successful summer (page 41). (78% male/22% female). 55 challengers internship programmea, experienced (82% male/18% female) graduated from by 71 students (79% male/21% female) the programme during the year including in a range of disciplines from finance Did you know? 50 Azerbaijani nationals. to engineering. • At the end of 2007, 225 of Azerbaijani citizens were in middle and senior management grades Permanent employees of BP in Azerbaijan (170 in 2006); 69 were in senior
Category Total Male Female management grades (40 in 2006). National permanent employeesa 1,712 1,348 364 • Out of them 22% (50 of 225) Expatriates 487 433 54 were women. Total 2,199 1,781 418 • A second Azerbaijani citizen was appointed as vice-president of BP a Number of national permanent employees includes professional and non-professional permanent staff. Azerbaijan SPU. • Thirteen Azerbaijani citizens were in Agency contract employees of BP in Azerbaijan senior management grades and Category Total Male Female eight in middle management Agency contract national employees 266 126 140 grades in BP global organization Agency contract expatriate employees 619 588 31 outside of Azerbaijan. Total 885 714 171
Sustainability Report 2007 35 Annual recruitment in Azerbaijan in 2007 professional population. Our 'step-up' development offer is a structured Graduates by disciplines Total Male Female Surface engineering 17 17 0 competency-based programme for HSE (Health, safety and environment) 6 4 2 all graduates of professional disciplines HR (Human resources) 1 0 1 that helps participants to make the most D&C (Drilling and completions) 7 6 1 of on-the-job learning experiences, deepen FC&A (Financial control and accounting) 4 4 0 their discipline professionalism and position Commercial 3 2 1 themselves for roles of increasing Subsurface 9 8 1 responsibility. The offer ties together all Total 47 41 6 the common BP tools into a discipline- focused pathway to support progression. Ad hoc and experienced recruitment in Azerbaijan in 2007 Forty-one posts were localized in the BP Azerbaijan SPU in 2007. A National Experienced hires by disciplines Total Male Female Progression Programme (NPP) identifies Admin 14 1 13 C&EA (Communications and external affairs) 4 4 0 and accelerates the development of local Commercial 5 2 3 leaders. At the end of 2007, our NPP D&C 3 3 0 population numbered more than 100 DCT (Digital and communications technology) 3 3 0 national staff. Each of these employees FC&A 24 13 11 had a development assessment panel HR 4 0 4 meeting with senior leaders to focus HSE 15 13 2 their career plans. Legal 2 1 1 Logistics 10 7 3 Overseas development assignments OPMS (Office properties management and services) 1 0 1 In 2007, 43 Azerbaijani employees were Projects 2 2 0 working overseas either in the BP PSCM (Procurement and supply chain management) 6 4 2 Security 2 2 0 Azerbaijan SPU or in other business Subsurface 10 7 3 units within the BP group. Out of Surface-Engineering 10 7 3 them 30% were female and 70% male. Surface-Operations 7 4 3 Surface-Technicians 102 96 6 Contractor workforce At the end of 2007, Tax 2 1 1 the ACG project employed about 4,000 Total 226 170 56 contractors of whom 74% were Azerbaijani
36 BP in Azerbaijan BP in Azerbaijan: our operations
nationals. At Sangachal terminal more than all permanent employees. This includes 1,500 people were employed of whom medical insurance, dental insurance, some 72% were Azerbaijani nationals. recreation facilities, accident insurance and family support payments. Labour relations The year saw the Local employees also participate in completion of several major offshore key BP group global reward programs construction projects at Baku's main such as Sharematch, variable pay fabrication yards without any significant plan (annual incentive bonus) and labour disruption. Appropriate severance performance share plan. packages were agreed across all sites. The benefits package was expanded Where possible, assistance was offered in 2007 with the introduction of a to help workers find new jobs. retirement savings plan, one of the very first private retirement programmes in Reward We continued to provide a com- the region. This new benefit package petitive package of non-cash benefits to reflects the company's long term
Good employee relations BP in Azerbaijan 2008 national professional recruitment targets ‘Good employee relations are about constant, effective two-way Recruitment plan Graduate Hires Experienced Hires Trainee Technicians communication between manager Operations 13 62 150 and employee. This establishes an HSSE (Health, safety, security and environment) 212 0 environment of mutual trust, helps D&C 8 4 0 Technicians 44 13 0 to encourage employee participation Projects 4 14 0 in management decisions and SS&W (Subsurface and wells) 10 5 0 enhances a sense of fairness. PSCM 1 2 0 It also boosts relationships within Commercial 3 0 0 a team and creates a healthy work DCT 0 1 0 environment.’ C&EA 2 14 0 Vugar Ibrahimov, Leaders 0 0 0 Employee relations manager Admin support 0 10 0 Total 87 137 150
Sustainability Report 2007 37 Elkhan Mamedov is after training and development
As offshore operations engineer for the Chirag offshore production facility, Elkhan Mamedov manages multiple business activities and is one of BP's senior operations leaders in the Caspian. On graduation from the Azerbaijan State Oil Academy as a system engineer Elkhan worked for the Azerbaijan airline company AZAL for five years in a number of engineering-related roles. He moved to BP in Azerbaijan in 2001. An early graduate of the Caspian Technical Training Center (CTTC), he joined the offshore operations team as an instrument technician on the Chirag platform in March 2002. Looking back, he remembers that period as great learning experience working with a team of professionals. Subsequently he worked overseas as an instrument technician on BP's Miller platform in the North Sea before returning to the Central Azeri team in May 2004. This team successfully completed all stages of platform construction/ commissioning /first oil production and became one of the three finalists that won the 2005 BP Paul Martin's award. Elkhan was among the BP Azerbaijan SPU operations team proud to accept an award at a ceremony in Vancouver, Canada. Elkhan was soon promoted again and became a maintenance supervisor before moving on to his present role as offshore operations engineer on the Chirag platform. Here he focuses on the delivery of performance targets and identifies training and development needs for his crew as well as managing budget issues. Thanks to the support of the Chirag platform team he passed the MME (Managing Major Emergencies) exam in August 2007, and joined the NPP.
commitment to employees. All employees Training spend We offer a full curriculum needs of operating a large and growing participate in the package and 30% of of training, both technical and behavioural, oil and gas business in Azerbaijana. employees elected to make additional to support national development. This CTTC delivers foundational technical skills voluntary contributions with added company investment exceeded $20 million in 2007. to technicians and also provides learning matching funds to significantly enhance experiences in HSE, English language their future retirement benefit. The number Technical training By the end of 2007 the and behavioural subjects. In 2007, 106 of people signed up for the share match Caspian Technical Training Centre (CTTC) technicians graduated from the foundation offer reached 1,104 by 2007, representing had provided training for more than 1,000 programme to join the BP Azerbaijan SPU 66% of the total national staff. BP and agency technicians to meet the (compared to 100 in 2006).
Incoming expatriates 2007 (Azerbaijan only) Outgoing expatriates 2007 (Azerbaijan only)
Discipline Total Male Female Discipline Total Male Female Commercial 5 4 1 C&EA 2 1 1 D&C 20 18 2 Commercial 5 4 1 FC&A 4 4 0 D&C 10 9 1 HR 4 0 4 DCT 1 1 0 HSE 9 8 1 FC&A 3 2 1 Legal 1 0 1 HR 5 5 0 OPMS 1 1 0 HSE 3 3 0 Other 1 0 1 Legal 3 3 0 Projects 5 5 0 Logistics 1 0 1 PSCM 4 3 1 Projects 8 8 0 Subsurface 10 9 1 PSCM 2 2 0 Surface-Engineering 10 8 2 Subsurface 11 9 2 Surface-Operations 23 19 4 Surface-Engineering 16 14 2 Surface-Technicians 9 8 1 Surface-Operations 13 11 2 Tax 1 1 0 Surface-Technicians 16 13 3 Tax 1 1 0 Total 107 88 19 Total 100 86 14 a http://www.caspianttc.com/index.htm.
38 BP in Azerbaijan BP in Azerbaijan: our operations
Fresh thinkers network The Fresh thinkers network started in the BP Azerbaijan SPU in 2005 as a way for professional staff to get together with senior leadership and provide input and feedback on important ongoing business issues across all disciplines and nationalities. To keep it fresh, membership rotates each year. In 2007, the network helped leadership in areas from designing a national long service award programme to support for nationalisation of the workforce.
Professional training We supported more Compliance and ethics Total training spend in than 100 employees in their professional BP Azerbaijan SPU in 2007 education studies during 2007 in such All employees of the BP group, wherev- fields as personnel, accountancy, er they work, are obliged to observe and management, project management and uphold the BP Code of Conduct (CoC). $3 mln. public relations. For instance, 32 people This group-wide Code operates along- from human resource are studying for a side local laws or regulations covering qualification with the UK Chartered similar matters and has been drawn up Institute of Personnel and Development. to define and achieve high standards Fourteen of them will graduate in 2008. of probity and behaviour throughout We also have 53 students enrolled into the company. Failure to follow the the Heriot Watt Petroleum Engineering Code is taken very seriously and may $25 mln. MSc degree programme. It has been result in disciplinary action up to and incorporated with the D&C early including dismissal. Professional training development programme, here in BP The CoC makes it clear that the high- Safety training Azerbaijan SPU and in other regions, to est standard of behaviour must always ensure that our challengers have a solid prevail if there are circumstances where engineering foundation. First graduates differences exist between the Code and have greater potential to occur within are expected in 2008. local customs, laws or regulations. our operations. These are primarily in Various provisions in the CoC prohibit contract and supplier selection, contract Society of petroleum engineers (SPE) illegal, corrupt or unethical practices. administration, conflict of interest and We continued to support the SPE in Others underline the BP group's world- gift and entertainment processes. 2007, which brings together oil and gas wide policy of making no corporate polit- All employees of BP in Azerbaijan are professionals to share knowledge and ical contributions whether in cash or in encouraged to raise any ethical concerns promote the attractions of the petroleum kind. The CoC also provides detailed they may have with management direct- engineering discipline. Azerbaijan SPE guidance on the giving and receiving of ly or through the company compliance remains one of the fastest growing chapters gifts and entertainment, conflicts of and ethics helpline known as OpenTalk. of the SPE, with some 400 student interest, bribery, competition, trade Under this initiative BP pledges that any members and 100 professional members. restrictions, money laundering and work- concerns reported on Open Talk will be The annual programme in Baku includes ing with suppliers. properly reviewed and, if appropriate, a lecture series, as well as student-focused BP in Azerbaijan has identified particu- will be investigated in a confidential events and support for local universities. lar areas where fraud and ethical risks manner and acted upon.
Sustainability Report 2007 39 Vugar Mammadov is recognised by the IMechE
Vugar Mammadov, a member of the Chirag Deep Water Gunashli Performance Unit, oper- ations team joined BP in 2006 as a mechanical engineer. Vugar holds a PhD in Material Science in Mechanical Engineering from Azerbaijan State Oil Academy. He has published 25 research papers in national and international journals. In 2007 he became the second national employee in the BP Azerbaijan SPU to become a chartered engineer and join the UK-based Institution of Mechanical Engineers (IMechE) IMechE, a prestigious worldwide organization chaired in 2007 by the BP group's direc- tor of engineering John Baxter, brings together professional engineers from different com- panies and countries around the world.
Milestones of 2007 To minimise risks in management in a compliance report Contractors and ethics Most of our the areas previously mentioned, we signed by the president of the BP business in Azerbaijan is undertaken undertook a number of actions in 2007 Azerbaijan SPU. We completed our most in co-operation with external, local including development of a third parties recent annual compliance and ethics cer- contractors. BP's processes are risk assessment model, quarterly com- tification in November 2007. designed to choose contractors carefully munication to staff on ethics, communi- As part of this process we received and on merit, with a particular emphasis cation on registering potential conflicts personal attestations that specifically on avoiding conflicts of interest and inap- of interest and reminders of key code addressed gifts and entertainment and propriate gifts and entertainment. We issues. In addition, the compliance & conflict of interest declarations. All expect contractors to comply with all ethics network, representing compliance employees of BP in Azerbaijan were legal requirements. It is our intention and ethics contacts departments, asked to confirm in writing that their only to do business with contractors promoted ethical issues and we activities in 2007 were in compliance who perform in line with the Code of continued to hold induction sessions with the CoC. During the 2007 certification Conduct. for all newcomers. process more than 600 individual issues During the year, a number of employ- were raised against 400 in 2006. ees and contractor staff working in These issues were distilled down to Azerbaijan were dismissed for non-com- 83 potential ethical concerns against pliance with applicable laws, regulations 65 in 2006. Of the 83 concerns, the or the CoC. Examples of non-compliance majority were addressed immediately. included substance abuse, inappropriate The remaining issues were all subject safety behaviour, misuse of company to remedial interventions that will be assets, fraud and theft. carried out during 2008. Each year a key indicator of the extent We intend to build on the certification to which the BP Azerbaijan SPU is results in 2008 and use them to contin- complying with the CoC and applicable ue our efforts to foster a higher level of laws and regulations is provided by the awareness of business conduct expecta- annual BP group-wide compliance and tions among our staff in Azerbaijan. ethics certification process. This enables Measures planned include putting a us in Azerbaijan to identify potential risks spotlight on low value contracts and and concerns and to take action where reviewing inductions and compliance appropriate. Any highlighted risks and with policies and procedures across concerns are reported to BP group the SPU.
40 BP in Azerbaijan BP in Azerbaijan: our operations
a 1.9 Key statistics in chapter 1
Operating emissions (emissions released for People every thousand barrels of oil and gas • Oil production from Chirag 1, Central produced) decreased by 24% from • At the end of 2007, BP Azerbaijan Azeri, West Azeri and East Azeri 11.8 te/mboe in 2006 to 8.97 te/mboe SPU had 77% national professional platforms averaged 668,000 barrels in 2007. staff against a target of 75%. a day by year-end (129,000 barrels • Total gas flared decreased by 15.6% • Total staff employed in Azerbaijan came from Chirag, 244,000 barrels on 2006 from 333 kte to 281 kte. increased by 7% from 2,048 year-end from Central Azeri [CA], 171,000 • Fuel-gas-use increased by 54.1% 2006 to 2,199 year-end 2007. barrels from West Azeri [WA] and from 284.2 kte in 2006 to 438.0 kte • New national staff recruited 124,000 barrels from the East Azeri in 2007. decreased by 25% from 303 in 2006 [EA] platform). • Diesel used decreased from 23.1% from to 226 in 2007. • Gas production at Shah Deniz (SD) 24.2 kte in 2006 to 18.6 kte in 2007. • Recruitment of experienced national totalled 3.1 bcma - 11% above plan. • Electricity import decreased by 14.6% professionals through the annual • We delivered 2.4 billion standard from 5.5 MWh in 2006 to 4.8 MWh recruitment programme increased by cubic metres of ACG gas to SOCAR. in 2007. 64% from 25 in 2006 to 41 in 2007. • Drill cuttings to sea rose by 52% from • Number of Azerbaijani citizens in mid- 15,811 tonnes in 2006 to 23,995 dle and senior management grades Financial tonnes in 2007. rose by 32% from 170 in 2006 to 225 • Hazardous waste generated increased in 2007. Number of Azerbaijani citi- • Capital expenditure (with co- by 14% from 35,683 tonnes in 2006 zens in senior management grades venturers) on ACG development to 40,713 tonnes in 2007. rose by 72.5% from 40 in 2006 to 69 totalled $2.822 billion. • The number of hydrocarbon spills in 2007. • Capital expenditure (with co-venturers) increased by 74% from 41 in 2006 to • Spending on training decreased by on SD development totalled 71 in 2007. 8% from $30.3 million in 2006 to $28 $364 million. • The volume of oil hydrocarbon million in 2007. • Capital expenditure (with co- released decreased by 46% from 8,396 venturers) on BTC construction litres in 2006 to 4,534 litres in 2007. totalled $154 million. • Capital expenditure (with co-venturers) on SD/SCP construction totalled Safety $64 million. • Operating expenditure (with co-venturers) • No fatalities during 2007 related to on ACG/SD totalled $615 million. our operations in Azerbaijan. • Total vehicle accident frequency rate increased by 55.6% from 0.99 to Environmental 1.54 in Azerbaijan. • The number of HSSE & Operations • Net GHG emissions increased by training hours delivered to BP 18.9% from 613 kte in 2006 to Azerbaijan SPU employees increased 729 kte in 2007. by 238% from 43,786 in 2006 to • Net normalised operational GHG 148,105 in 2007. a Unless otherwise stated, data relates to 2007 performance of BP Azerbaijan SPU.
Sustainability Report 2007 41 Children from Yevlakh region visiting 2 Caspian Energy Centre.
BP in Azerbaijan: our role in society 2.1 Supporting sustainable development - Regional Development Initiative - Community investment - Environmental investment - Conservation of cultural heritage 2.2 Revenue transparency 2.3 Local content development 2.4 Educational initiatives 2.5 Key statistics in chapter 2
42 BP in Azerbaijan 2.1 Supporting sustainable development
In 2007 BP and its co-venturers invested $7.39 million in socio-economic development projects in Azerbaijan.
Regional Development centre (ABTC). It was set up to create • Private public partnership project (PPP): Initiative (RDI) a training/consultancy capability in This project to develop suppliers was ABTC so that the centre would be completed by German Technical The RDI is a long-term programme that able to provide high quality, affordable Cooperation (GTZ) in 2007. It was implements large-scale, country-wide business training to the SME sector designed to deliver tailored technical and where possible cross-regional projects on a commercially sustainable basis. assistance to local oil and gas sector to enhance local enterprise development, Between 2004 and 2007 ABTC companies. The total cost was access to energy and effective governance. developed 42 new courses. Some approximately 625,000 of which RDI In 2007 it was implemented in 1,178 representatives of local contributed 200,000. Azerbaijan, Georgia and Turkey. business received training, including Over three years, the project provided In Azerbaijan the programme focuses 52 in 2007. technical assistances to 17 local compa- on local enterprise development. Around Later in the year in a competitive nies. Seven were subsequently able $3.7 million was spent during the year tender, ABTC won a service contract to meet BP's pre-qualification tender on various RDI projects in the country. from the BP Azerbaijan SPU to requirements and two of them - provide business training to the AzMETCO (in 2005) and Debet Milestones of 2007 In 2007 we completed staff of BP in Azerbaijan. Uniform Ltd (in 2007) - were some projects, continued others and This development project was successful bidders. As a result of this signed contracts to implement new ones: co-funded by the International Finance project, BP in Azerbaijan localized two Corporation (IFC) and RDI, which key areas of the supply chain • Strengthening business services for small contributed about $0.24 million. The provision of metering, and personal and medium-sized enterprises (SMEs): Enterprise Centre supported by BP protective equipment. This three-year business services and our co-venturers was involved • Enterprise development and training development project was completed actively in supporting this project programme (EDTP): This three year in 2007 by Azerbaijan bank training and will be continuing this work. initiative to support local business
How Debet has flourished
When the supplier development project was launched in 2004 Debet Uniform Ltd. was looking for ways to grow. Three years later Debet Uniform won a three-year, $6 million contract to supply personal protective equipment to BP in Azerbaijan and Georgia. This happened after input from the Enterprise Centre helped the company gain the skills necessary to meet international standards. The company currently employs 117 people. According to Ibrahim Ismayilov, RDI manager in Azerbaijan, 'the success of Debet Uniform is the positive outcome of our local enterprise development strategy.' Adds Asad Nasrullayev, general director of Debet Uniform: 'The contract with BP will allow us, in a short period of time, to open a lot of new work places. Our quality management, health, safety and environmental systems are constantly developing and the BP contract will encourage this process.' In January 2008, Debet's development efforts paid off, with a major award of loan financing from the supplier finance facility.
Sustainability Report 2007 43 development was launched and • Microfinance lending programmes: At progressed well in 2007. A multi-million the end of 2006, BP in Azerbaijan, dollar programme designed and on behalf of its co-venturers, signed financed through RDI, it is managed a three-year agreement with the by the Enterprise Centre and imple- European Bank for Reconstruction mented by international non-profit and Development (EBRD) to development organization agricultural encourage more effective access cooperative development international to commercial finance for small local and volunteers in overseas cooperative businesses and entrepreneurs. assistance (ACDI/VOCA). It is part of Under this agreement, BP Azerbaijan our drive to increase the local content SPU and its co-venturers are To the left: Andrey Sdobnov, engineer-metrologist of our contracts in Azerbaijan. contributing $6 million for loans AzMETCO. To the right: Shukur Agazade, general director of AzMETCO - the first Azerbaijani company EDTP complements a $15 million to private sector development in to receive SFF loan. supply finance facility which BP and Azerbaijan and Georgia. its co-venturers launched with the IFC The programme is implemented and Micro-Finance Bank of Azerbaijan by the EBRD through separate regions. This project will enable the (MFBA) late in 2006. It includes agreements with a number of local Micro Finance Bank of Azerbaijan identification of potential local suppliers, financial institutions active in the (MFBA) to expand its branch network workshops for local companies and, microfinancing sector. to the towns of Mingechevir and where appropriate, the creation and In November 2007, we on behalf of Gazakh by opening one new branch in implementation of a development plan. ourselves and our co-venturers signed each town as well as improving the Three workshops were held in 2007 a separate $1 million grant agreement services of its Ganja branch. The initia- for 36 participants representing 30 with the IFC to widen access to tive was matched by $2.3 million organizations from sectors including finance for micro and small enterpris- grants by IFC and MFBA under a sep- catering, translation and engineering. es (MSE) in Azerbaijan's western arate agreement.
Social spend in Azerbaijan, Georgia and Turkey in 2007
Azerbaijan Georgia Turkey Total Gross spend by BP and co-venturers $7,386,192 $8,724,588 $4,992,513 $21,103,293 Net spend by BP only $2,581,673 $3,845,208 $1,502,746 $7,929,627
44 BP in Azerbaijan • Supplier finance facility (SFF): In May lion funded by BP and its co- • Microfinance benchmarking survey: This 2007, the second phase of the suppli- venturers, $6 million by IFC and study, implemented by the Azerbaijan er finance facility (SFF) was launched. $3 million by MFBA. microfinance association (AMFA), This facility is intended to give In 2007, a number of activities were aimed to enhance transparency in Azerbaijan's local oil and gas industry implemented under the SFF banner Azerbaijan's microfinance sector so as supplier and service enterprises easi- including the signing of a credit line to improve institutional performance er access to finance. It is established agreement with MFBA and and widen access to diversified sources by BP on behalf of its co-venturers completion of SFF competitive of funding. It was co-sponsored by and the IFC, and is implemented analysis based on Azerbaijan's RDI, the UN Development Programme by MFBA. financial market data and integration (UNDP), the Eurasia Foundation and Phase two offers access to $15 mil- of the Enterprise Centre's local AMFA. Two benchmarking reports in lion to BP Azerbaijan SPU's local con- content development plan into three languages have been produced. tractors. This amount includes $6 mil- the SFF 2008 plan. The project also financed a summer internship program in 2007 with nine competitively selected students in Azerbaijan attending loan officer train- Spreading her wings ing sessions run by AMFA at the Enterprise Centre. Interns were later Intizar Rzayeva, 54, operates a small business in offered permanent jobs in the microfi- Baku, which mainly sells clothing and garments to nance sector. the public. Her business had been growing steadily so in 2007 she decided to seek extra financing to Community investment expand it further. Intizar was able to secure a loan through FINCA in Azerbaijan, a local non- Summary We continued to invest in bank financial institution serving the needs of entrepreneurs and micro and communities in Azerbaijan in 2007 within small companies that is supported by BP and its co-venturers through the RDI. the framework of our Community Investment Her case exemplifies how thousands of local entrepreneurs and businesses Programme (CIP), BP sponsorship and throughout Azerbaijan are now benefiting from financial products made avail- the employee matching fund programme. able through the joint lending programme established by the RDI and EBRD. The loan enabled Intizar to open another outlet in Sahil shopping center and so Community Investment Programme increase her trading volumes. Our community investment projects in Azerbaijan reflect an ongoing support to
Sustainability Report 2007 45 Helping find future paths
As a child, Niyaz Mammadov always had an interest in dismantling and reassembling electrical devices and, as he grew older, this developed into repairing them. While in the Army, his dexterity was noticed and he was assigned to work as a telephone line supervisor. Completing his service, he resolved to become a competent mobile phone repairman but he knew he had to receive suitable training. After learning about employment apprenticeship courses, 23-year-old Niyaz enrolled in a vocational training scheme in Sahil settlement being delivered through the BP-sponsored Save the Children's living university concept programme in partnership with a local NGO, Umid. Here he was able to focus on mobile phone repair, so changing the direction of his career, towards his dream. From day one on the course, Niyaz showed enthusiasm to learn all he could. After graduating, he found a job with Sahil's Style mobile phone repair centre as a repairman. There was one problem - the equipment he had was not sufficient to do the job. But because of the dedication he had shown on the apprenticeship programme, Save the Children/Umid was able to give him a small grant to buy the remaining tools he needed. Today Niyaz continues to work hard as a mobile phone repairman, helping people with broken phones in the Sahil community. None of this would have been possible before the vocational training courses began to be offered in Sahil.
positive social and community development a community-to-community partner- In 2007, 2,750 farmers received advice for people living near our facilities. In ship, where successful communities in these centres on various topics. 2007, the CIP was implemented in 60 pass on their development experience • Water purification programme: In 2006, communities. The year was marked by and expertise to recently mobilised or one water purification facility was installed close cooperation with municipalities, ‘nascent’ communities; a vocational at each of six communities in the local authorities and businesses. In all, apprenticeship component for youth; Kurdamir, Ujar and Agdash regions BP and co-venturers spent $2.7 million and an agricultural component imple- (along the BTC/SCP pipeline route) on the CIP in 2007. mented through the establishment of that had previously been affected by agricultural service centres (ASC). lack of potable water. In 2007, the CIP Milestones of 2007 ASCs are based on a network of 20 implementing partner UMID NGO • The living university concept agriculture extension agents in each worked on construction of additional programme: Set up in 2005, this project centre who ran 13 demonstration five water purification facilities in Kurdamir invested in 24 communities in 2007, farms and provided advice to and Ujar communities incorporating focusing on the regions of Hajicabul, approximately 900 farmers. low-tech, locally available technologies. Kurdamir, Ujar, Agdash and Yevlakh. In 2007, five 'star' communities men- • Zykh community development initiative: The programme works with those tored and coached 15 'nascent' com- Various development projects were communities that have demonstrated munities; 36 apprentices were trained implemented by UMID through this a strong commitment to sustainable and seven of them ended up with rel- programme, which ended in June development partnerships. Project evant jobs. Nine participants received 2007. The NGO created business plans sustainability is strengthened through small grants to establish their own for 40 businesses, 126 people were the establishment of lasting links between businesses. linked to credit institutes and received communities and local government. Two ASCs opened in Kurdamir and credits, 156 young people participated The programme was implemented Ujar regions in 2007, while the ASCs in apprenticeship courses and 31 of for us by Save the Children in established in Samukh (Servet) and them launched their own businesses. partnership with national NGOs Agstafa (Bereketli Torpaq) in 2006 con- Different types of infrastructure were Umid and agro information centre. tinued their activities in 2007. rehabilitated. In all, we and our co-ven- In 2007, we and our co-venturers Computer and English language cours- turers spent around $650,000 on the spent around $1.3 million on activities es were conducted in the centres. project in 2004 - 2007 in addition to in the programme. The programme Trainers from the ASC 'Bereketli community contributions. will run until 2009. Torpag' conducted business training for • Economic opportunities programme The living university concept pro- 60 individuals while Servet specialists (EcOP): Launched in 2007, this program gramme has three major components: provided agro training for 160 farmers. supports economic development and
46 BP in Azerbaijan job-creation in 17 communities in co-venturers and United States You can find more information about Azerbaijan following the demobilization Agency for International Development. them on pages 54-56 of our major construction projects. Four • Educational initiatives: We, either with elements have been linked to form an our co-venturers or independently, Employees' support to communities: We integrated development tool: access supported a number of educational encourage our employees to support to finance by foundation for interna- projects including the school connectivity communities around the country through tional community assistance - committed and global citizenship programme and gift, effort and time-matching schemes. $423,000; apprenticeship programme by the rural inclusive education programme. These contributions are matched UMID - committed $189,000; economics and business training by Junior Achievement Azerbaijan - committed $151,000; and an information and Little bit helps communications technology (ICT) programme run by Madad - As winter advanced in 2007, two employees committed $142,000. of BP in Azerbaijan - Ekaterina Golovina and • Emergency medicine development Ramal Guliyev - decided to do something to initiative (EMDI): This initiative focuses help Azerbaijan's Internally Displaced on improving the effectiveness of pre- Persons (IDPs). With the Rotaract Club of hospital ambulatory care and in-hospital Baku International (both are members), they emergency medical services. The launched and ran a campaign in initiative provided emergency medical November/December 2007, to provide winter clothes to the refugees along equipment to emergency departments with sports supplies for a newly constructed school in the Fizuli region. in Kurdamir, Shamkir, and Yevlakh and Working flat out, the pair collected about ten full boxes of clothes which were 220 individuals (physicians, then driven to Fizuli and distributed to the people of Bala Behmenli, a commu- rheumatologists, ambulance staff, nity of 2,000 including many IDPs who fled from Nagorno-Karabakh in1992-93. nurses and first responders such as On completing this project Ekaterina and Ramal, together with Majid policemen and firemen) from Ganja, Samadov who helped to move the clothes from Baku to Fizuli, requested a Kurdamir, Shamkir, and Yevlakh matching time grant from BP for the work they had done. All the money raised received training in emergency this way was later spent on repair works at orphanage #3 (for children with medicine. Due to end in 2008, EMDI hearing and speaking impairments) located in Nizami district of Baku. is implemented by the International Medical Corps and funded by BP, our
Sustainability Report 2007 47 through the employee matching fund charge to schools and educational cen- Other initiatives in 2007 (EMF) managed by the BP group. Our tres across Azerbaijan. • Biodiversity competition: In 2007, we third-party administrator - Charities Aid Green Pack content was approved by and our co-venturers organised the Foundation (CAF) - maintains and updates Azerbaijan's Ministry of Education and sixth annual biodiversity competition a list of local organizations eligible to receive the Ministry of Ecology and Natural in Azerbaijan. Some 80 applications matching donations from the global EMF. Resources. Following this, the pack were received from 44 organizations. In 2007, eight BP Azerbaijan SPU employ- was included officially in the national In the best 'biodiversity project' ees contributed around $5,000a in gifts and educational curriculum. category, the main prize - valued at efforts. These funds were matched by In 2007, 741 teachers received exten- $19,120 - was awarded to local NGO identical amounts from BP matching sive training on how best to present Ecostyle-Azerbaijan for a project funds to local charities in Azerbaijan. the pack to school students. The proj- aimed at creating a seed bank of To further encourage employee work ect was implemented by the Regional rare and endangered plants of the in local communities, BP Azerbaijan Environment Centre for Central and Absheron peninsula as well as SPU decided to localize time matching Eastern Europe - REC (Hungary) in col- biodiversity awareness campaigns by launching the employee engagement laboration with the Azerbaijani NGO with participation of the students of programme (EEP) in 2007. Unlike the For Sustainable Development Society Azerbaijan Cooperation University. EMF, the budget of the EEP is managed (FSDS). The total cost of the project In the category 'best environment by BP Azerbaijan SPU. Under this was slightly more than $400,000, of awareness project' the main prize - programme, volunteers spend free time which $300,000 was contributed by valued at $9,356 - was won by the outside business hours with any BP and its co-venturers in BTC/SCP. youth development public association recognised organization or community The balance was provided by the ‘Brilliance of Youngsters’ for its and request BP in Azerbaijan to match OSCE office in Baku. proposal to conduct the following their time spent - with money. During • Support to environmental and energy activities: opinion surveys in five the year, 38 employees participated in initiatives: Local NGO UMID complet- regions of Azerbaijan on ecological eight EEP programmes contributing 822 ed this project at the end of 2007. problems and ways to solve them, volunteer hours. BP in Azerbaijan con- During the year, the project delivered a youth training on solution of tributed $13,740a to match these hours. some 13 pilot micro-projects with ecological problems, photo energy, safety and environmental exhibition, and other activities. Environmental responsibility themes. The micro-projects included In 2007, two books were published installation of solar collectors, solar by previous winners of the biodiversity- Environment investment programme (EIP) water heaters, biogas units and competition. The books were In 2007, the EIP focused on the protec- photovoltaic devices in 11 communi- 'Waterfowl in the Azerbaijan sector tion of biodiversity and environment ties along the BTC/SCP route in of the Caspian Sea' and ‘Natural around BP-operated assets and in the Azerbaijan. Monuments of Absheron peninsula’. regions where we are represented. With In addition, UMID conducted demon- • BP conservation leadership programme our co-venturers, we spent a total of strations and consultations on alterna- (CLP): A team from the Azerbaijan $288,500 on the programme during 2007. tive energy in communities and Ornithological Society (AOS) received schools. The NGO also organised a grant of $24,700 from the BP group Milestones of 2007 drawing and article contests among programme to enable it to determine • Green Pack: The year was noteworthy school children. the condition of the imperial eagle and for the successful completion of the In total, 10,124 community members the lesser kestrel. Green Pack project - the culmination of benefited from this project. The AOS team was among 26 teams almost three years' intensive work • Tugay forest rehabilitation project: from 19 countries who shared with local and international partners. The BP flagship Tugay forest $502,500 distributed by BP under the Green Pack is a multimedia, interactive rehabilitation project continued in CLP in 2007. The main goal of this pro- educational tool designed to enhance 2007. This project included the following gramme is to promote biodiversity environmental knowledge among activities: tree planting, construction and nurture the careers of young con- school teachers and 1st to 11th grade of a forester house and installation of servationists worldwide. BP imple- pupils. The pack contains a teacher's irrigation facilities on a 12 hectare land ments the CLP in partnership with handbook, a textbook for children, a plot in the region of Agstafa. BirdLife International, Fauna & Flora DVD film collection, a CD-ROM and a Rehabilitation measures were accom- International, Conservation dilemma game. One thousand packs plished in an adjoining 150 hectare International and the Wildlife were produced and distributed free of forest area. Conservation Society. a This is in addition to $7.39 million of social investments made by BP in Azerbaijan and co-venturers.
48 BP in Azerbaijan A dream come true in Eyvazlilar
Achieving regular supply of gas as well as hot water are among the most crucial issues facing a majority of homes in remote rural communities in Azerbaijan. One answer is the installation of solar water heaters. As part of support for environmental and energy initiatives, UMID has so far installed 12 solar water heaters and a biogas unit with a solar panel on a community farm at Eyvazlilar - chosen as an optimal site for implementation of this project because it accommodates about 50 people working on the farm and around 100 cattle on the land. Thanks to the project the farmers of Eyvazlilar can now take a hot shower at the end of a hard day in the fields and cook a meal using environmentally-friendly 'BIOgas'. Yahya Mamedov, a member of the community (located in the Goranboy region) says: "In the past, in order to get hot water, we had to use electricity or firewood, which resulted in huge energy expenses. This project is a success, as it allows us to utilize alternative energy that uses locally available inexpensive resources".
Conservation of logical conservation techniques, proce- cultural heritage dures and ethics. Five IoAE archaeologists took part in 27 hours of training. Activities involving the processing During the year we on behalf of analysis, reporting and conservation ourselves and our co-venturers signed of artefacts excavated on the BTC a memorandum of understanding with route were ongoing throughout in 2007. Gobustan State Historical Artistic Reserve (GSHAR) to provide internships Milestones of 2007 To enhance the to four GHSAR guides at the BP- capacity of the Azerbaijan Institute of operated Caspian Energy Centre (CEC). Archaeology and Ethnography (IoAE), BP The internships started in December in Azerbaijan and its co-venturers initiated 2007. During the internship the guides the BTC conservation programme in learned to make interactive presenta- 2006 (implemented by URS Corporation tions to schoolchildren, visitor services Ltd.). The goals of this programme are: procedures and developed information (1) to treat and stabilize objects leaflets for school visits to the GHSAR. recovered during BTC excavations (2) Work on an archaeological exhibition to establish a conservation laboratory in the CEC began in 2007, and is for the IoAE and (3) to train IoAE staff planned to open at the end of 2008. in basic archaeological conservation Towards the end of 2007 we on behalf techniques, procedures, and ethics. of ourselves and our co-venturers In 2007, IoAE worked with URS on finalised, and in February 2008 signed a reporting, logging and laboratory work two-year grant agreement with the US related to artefacts unearthed along the based Smithsonian Institution to BTC/SCP pipeline route in Azerbaijan. implement a major cultural heritage A conservation laboratory was set programme. The Smithsonian has begun up for IoAE use in 2007. Twenty one work that will include capacity building archaeological objects excavated during for the Gobustan national state reserve, BTC/SCP construction underwent special the IoAE and the Georgian national conservation treatment. An American museum; and public outreach on the conservator provided monthly on-the-job BTC/SCP archaeological findings. training for IoAE staff in basic archaeo-
Sustainability Report 2007 49 2.2 Revenue transparency
We cooperated with government, civil society and extractive industry companies in 2007 to promote greater revenue transparency.We also underwent the biggest tax audit in our history.
Transparency and good governance Azerbaijan's efforts in EITI were recog- reflect the BP group's values and our nized in September when it was among commitment to generate mutual advan- 15 countries nominated to be an EITI tage and ensure that the wealth created candidate country. The presentation took by hydrocarbon development is used place during the 7th global forum on rein- effectively and for the widest benefit. venting government. Once Azerbaijan's We support international initiatives EITI implementation process is validated, designed to promote the transparency of it will be considered EITI-compliant. revenues paid to government by extrac- Throughout the year, we continued to tive industries. Over the years, we have support SOFAZ in its work with Oxford expressed consistent support for a vol- Economics to develop a macro-economic untary, consensus-building approach and model of Azerbaijan's economy and build believe there are many valuable things capacity within SOFAZ and in the work- In June, SOFAZ won a UN public service we can facilitate. ing group (comprising experts from award in the category of 'improving In 2007, we continued to cooperate SOFAZ, Ministry of Economic transparency, accountability and respon- with the State Oil Fund of the Azerbaijan Development, Ministry of Finance, siveness in the public service'. The state Republic (SOFAZ) and a coalition of local National Bank of Azerbaijan, the oil fund is a first governmental agency and international non-governmental President's Office). In 2007, the second from a former eastern bloc/CIS country organizations (NGOs) on implementation phase of this project concentrated on to win this award. of the Extractive Industries Transparency improving the model with additional data In other initiatives we conducted a Initiative (EITI). In October, we submitted and designing options for various scenar- presentation on the PSA revenue and tax our 7th EITI report covering January- ios unique to Azerbaijan's economy. structure to journalists and members of June 2007, to the independent aggrega- In a related initiative, BP group econo- the EITI NGO coalition to raise their tors. In December, the aggregated mists engaged in a dialogue with the awareness and understanding on how extractive industry companies' report Ministry of Economic Development in the revenue split works under the PSA. was posted on the SOFAZ website. 2007 on building macro-economic policy- In 2007, we successfully underwent We continue to disclose our own dis- making capacity at the ministry and the biggest tax audit in our history and aggregated EITI data in this publication, widening relationships with leading eco- the largest ever done in Azerbaijan. Our including a table summarizing our previ- nomic research and capacity-building tax team spent almost six challenging ous reports. Our 8th EITI report covering institutions in Azerbaijan. months and reviewed more than eight the data for the 2007 calendar year can In 2007, Azerbaijan's efforts in trans- billion dollars that we spent on different be read on the page 59 of this report. parency began to win wider recognition. projects from 2004 to 2006.
50 BP in Azerbaijan 2.3 Local content development
In 2007, we stepped up our efforts to encourage local content development in Azerbaijan.
Two major challenges confronted development, working with procurement business development plans tailored to our enterprise development efforts in and supply chain management (PSCM) our needs. While developing the strategy, Azerbaijan in 2007 - a mismatch contract holders and the Regional the EC also considered the longer-term between local market conditions and Development Initiative (RDI) team. implications of the new approach on BP's desire to introduce progressive This strategy involved identifying con- sustainable local content development. technologies; and a growing need to align tract opportunities for local companies In parallel, we introduced changes to BP's local content plans with sustainable based on their competencies and the each step of the procurement process to economic progress in the country. business needs of BP in Azerbaijan. EC make it easier for small, local firms to In response we implemented new ini- staff evaluated our specific technical compete with international suppliers. The tiatives through the Enterprise Centre requirements and demand profiles for changes included breaking up contract (EC) to facilitate local content develop- each priority sector of spend. By doing scopes into more manageable activities; ment for projects being undertaken by this it was able to help identify potential introducing mandatory local content eval- BP and its co-venturers in Azerbaijan. new entrants to the BP's supplier net- uation criteria across all sectors; and The EC concentrated on sector strategy work in Azerbaijan and to design specific revising pre-qualification and tender
Young entrepreneur of the year
Eyvaz Mirzoyev, 28, owns and manages Munasib Senaye Techizat (MST) Ltd., a business specialising in the provision of industrial supply, electrical supply and services to the region. He began his career in Azerbaijan's energy sector in 1996 when he joined an oil and gas service company. After more than six years in the business, he decided to branch out on his own and in 2004 set up a company in Baku. After a dynamic sales debut that year, Eyvaz expanded the MST supply chain into Georgia and Kazakhstan. Meantime at home he nurtured strong business relationships, signing key distributorship agreements with reputable suppliers in the UK, Norway and US. Being named 'young entrepreneur of the year' will reinforce MST's growing reputation, Eyvaz believes: "the 'best of business award' will give us the impetus for further development of our business inside and outside Azerbaijan". He says: "It will increase international confidence in our reliability".
Sustainability Report 2007 51 JIS, owned by Jeyhun Imanov (2006 young entrepreneur of the year) was granted accredited agency status by the BP group brand centre in 2007 for designing avian flu posters and booklets for distribution across the SPU.
provisions and evaluating the commit- Our spend in Azerbaijan In 2007, BP and The changes in expenditure patterns ment of foreign contractors to local con- its co-venturers' in-country spend (opera- over the years reflect the evolving nature tent. EC works with PSCM contract tions and projects) totalled $1,494 mil- of our business in Azerbaijan as projects holders to ensure that local content lion. This broke down as: direct spend move from the construction to opera- requirements are properly applied. with SMEs $111 million (up 44% on tional phase. At present we are focusing As mentioned in the RDI section of this 2006); state-owned spend $43 million our efforts on development of SMEs. report (page 44), the enterprise develop- (down 28%); joint ventures spend $ 450 ment and training programme (EDTP), million (down 13%); indirect local spend launched in 2006, also moved ahead. The through foreign suppliers working in EDTP is a three-year multi-million dollar Azerbaijan $891 million (up 8%). initiative to support local business devel- opment. The EC plays a core role in man- Our sustainable in-country spend with aging this programme and specifically in local suppliers (operations spend only i.e. ensuring that there are strong links a longer term spend) totalled $953 mil- between BP business objectives and lion in 2007, up 4% on 2006. This includ- local content development in Azerbaijan. ed direct spend with SMEs $102 million BP also held discussions with Azerbaijani (up 51% on 2006); state owned spend government departments and agencies $21 million (down 40%); joint ventures to explore potential avenues of cooperation spend $320 million (down 8%); indirect Growing local commitments in entrepreneurship-related ventures. spend $511 million (up 14%). Eight local companies won new long term contracts with BP in Azerbaijan in 2007: The 2007 best of business award winners • Dalgich Award category Winner • Azertunelsutikiniti Health, safety and environment performance award Caspian Drilling Company (CDC) • Rapid Solutions Young entrepreneur of the year Eyvaz Mirzoyev • Debet Employer of the year ITS Testing Services Company of the year Encotec • ABTC Community entrepreneur of the Year The Community Business • English Services Direct Organisation, the Human • EKOL Development and Sustainable • SOCAR Ecology Division Income Generation Public Union
52 BP in Azerbaijan In total, BP and its co-venturers did development of Azerbaijan. business with 2,637 companies in 2007. We believe that our local content Of these companies 472 (17.9%) were development initiatives in Azerbaijan local suppliers. In 2007, 161 local entities should contribute to the sustainable received training at the EC including 67 development of the country. local SMEs. During the year we announced the winners of the second 'best of business award'. This is an annual initiative which recognises BP contractors for their contributions to the economic
Company of the year
Encotec was founded in 2000. Seven years later it is a multi-discipline engineering company providing design-engineering services, project management and supervision for construction, installation and commissioning to Azerbaijan's oil and gas industry. Nowadays the company's expertise extends well beyond the hydrocarbon sector and embraces civil engineering and other engineering fields. Encotec, for example, provided minor engineering, modifications and design services in support of the ACG development, the SD development, and the BTC and SCP facilities. In the business community Encotec has become well known for its flexibility and prides itself on being able to handle a large number of small projects in an efficient manner. The 2007 judging panel was particularly impressed by its consistent record of successful delivery and the high quality of its engineering-design works. Continuous employee training is also encouraged. "We are proud to have been awarded the 'company of the year' award,’ says Faig Rzayev, manager of Encotec. "For us this award serves as a strong motivation for even harder work".
Sustainability Report 2007 53 2.4 Educational initiatives
Our educational initiatives in Azerbaijan are intended to enhance knowledge of the energy industry, improve skills in the national workforce, promote business training and advance learning.
In 2007, we implemented a number of School economic and business education educational initiatives in Azerbaijan: programme In June, BP and its co-ven- turers agreed a new grant to Junior Caspian Energy Centre (CEC) The centre Achievement Azerbaijan (JAA). The grant continued to attract attention in 2007 will enable JAA to expand its activities when 8,478 visitors toured the facility and provide students and teachers in 15 including 5,855 children. BP and its schools in the Khatai, Sabayil and Garadagh co-venturers spent $1.039 million to districts with economic and business support CEC in 2007. education and training. The project is Several new projects were undertaken. part of the economic opportunities pro- In March, a science workshop ‘Energy in gramme described on pages 46-47. our lives’ was organised with the British Council and overseen by the specialist of Community economics education UK-based, the Floating Point Science programme (COMEEP) This programme Theatre and the Creative Science provides economic and business training Consultancy Ltd. More than 200 children to mainly LLC representatives created local NGO Umid and designed to adapt from four schools and Gizil Dash with the support of BP and co-venturers, apprenticeship programmes to youth- orphanage participated. local business people and members of identified needs. This project is also CEC also produced an informative the community who want to strengthen part of the economic opportunities educational pack on energy for secondary their commercial acumen, market eco- programme (pages 46-47). school children. Distribution to local nomic knowledge, business ethics and schools started in November 2007. possibly start their own businesses. The School connectivity and global citizenship After winning the 3rd Azerbaijan national programme is implemented by Junior programme We continued to support lego robotics competition in 2006, Achievement Azerbaijan in nine commu- the spread of Information and Lokbatan-CEC team travelled to the UK nity centres in Yevlakh, Samukh, Agstafa, Communication Technology (ICT)-based in January 2007 to take part in the UK Ujar, Kurdamir, and Agdash. In 2007, 42 learning in rural schools along the Robotics championship finals at the entrepreneurs were supported and BTC/SCP and WREP pipelines and in University of Birmingham. The team took $133,000 spent on the programme. selected schools. In 2007, $147,000 was 5th place out of 28 teams. CEC contin- spent on this programme by BP and its ued its support in 2007 by sponsoring Youth employment and economic opportu- co-venturers. A separate agreement training and the 4th Azerbaijan national nities expansion initiative This project, signed in August extends the project to lego robotics competition for local schools. launched in 2007, is implemented by cover 15 schools around Sangachal terminal,
54 BP in Azerbaijan Zykh and Bailovo in the Baku Corridor. International Medical Corps), and 12 BP in Azerbaijan scholarships We Some $100,000 was spent on the new were integrated into mainstream supported, wholly or in part, three project over the remainder of 2007. classes. Twelve teachers received scholarship programmes in Azerbaijan: training on child-centred learning • Bursary programme: This new initiative Rural inclusive education programme techniques. Educational material about helps students interested in pursuing (RIEP) During the year, many children inclusive education was developed and oil and gas-related studies in with special needs received assistance distributed in Baku, Sumgayit, Azerbaijan. In 2007, 50 university stu- through RIEP (implemented by Mingechavir and Yevlakh. dents specializing in petroleum engi-
Impact of community economic education
Gorkhmaz Abdulrahimov joined COMEEP in March 2007 as one of the programme's regional trainers, and passed a separate train the trainer course prior to starting the actual coaching. "I believed my basic business skills would improve and also that I'd be able to pass on any knowledge I gained to the staff of my own company". Gorkhmaz's business - one of nine formed as a result of water purification projects sponsored by BP and its co-venturers in recent years - sells affordable drinking water to rural communities. But because of unclear marketing strategies, the company - known as Kahriz-L - had been languishing, with low sales volumes. Gorkhmaz and a colleague, soon joined by some of his own company staff and a large number of fellow residents in Agdash's Orta Leki village, got to work absorbing the course concepts. "We quickly learned some basic market research skills which we used to do a demand analysis of our company's production. This made us think more in-depth about product promotion. Towards the end of the three month course we learned how to write a business plan. By then we had a complete picture of our business and how it was operating". The results were dramatic as Kahriz-L grew rapidly, attracting new customers from neighbouring villages and boosting water sales 12 times to 72 tons in just five months. The company also began to work with a Turkish firm, delivering water to its offices and sites. Looking ahead, Gorkhmaz plans to continue his involvement with COMEEP training. "Business literacy is essential in the development of our society", he says. "As a manager I'm planning to expand my business by attracting additional capital".
Sustainability Report 2007 55 A successful BP scholarship recipient
One of the first individuals selected to take part in UK-based post-graduate study turned out to be working with BP - Chingiz Orujov, then economic development and agro-business adviser for BP in Azerbaijan's Community Investment Programme team. Chingiz linked up with BP in 2006. Before that he worked as a community liaison officer for Petrofac (an oil construction company) and as deputy country director for Seacor (an oil spill response company) in Yevlakh district. "That's where I developed affection for field trips and face-to-face interaction", he says. An economist by training, Chingiz graduated from Azerbaijan State Economic University and decided to specialise in such areas as transitional economic policy and the effect environmental change has on an economy. The BP scholarship was his chance. In the autumn of 2007, he left for UK to become the only Azerbaijani student at York University. He plans to return to Baku and focus on development issues. "We (the generation of Azerbaijanis aged 25-35) are the ones (who will) determine whether Azerbaijan will prosper or be doomed by the so-called oil curse", he remarks. "I hope the BP scholarship programme will be a positive model and a good source for methodology in future bigger-scale projects all over the country".
neering and the geosciences and 15 Known as the Business Journalism students from the society of Course, it is run by BP, the British Azerbaijan young specialists develop- Council and the Thomson Foundation ers received one time stipend, in and builds on past programmes. Twelve amount equivalent to $1,000 each, to Azerbaijani journalists working for local support their education. media outlets took part in 2007. • Azerbaijani oil and gas scholarship pro- Towards the end of 2007, we finalized gramme: This programme enables planning for two new educational proj- Azerbaijani students to pursue ects. The first one will be implemented undergraduate and post-graduate in cooperation with Azerbaijan National studies in engineering and the geo- Academy of Sciences (ANAS). Based on sciences at universities in the US, UK, the memorandum of understanding Turkey, Russia and Azerbaijan. Ninety signed by BP in Azerbaijan and ANAS in three BSc and 11 MSc students were early 2008, the company will help ANAS supported in 2007. to build academic capability and knowl- • Post graduate scholarship programme: edge. The project is aimed at supporting This initiative allows Azerbaijani the next generation of geoscientists, and professionals to undertake advanced will be implemented through a number study in the United Kingdom. Eight of activities including basin modeling and individuals were selected in 2007 a feasibility study for launching a from 71 applicants and seven of them petroleum geology master of science accepted scholarship to pursue MBA, at the academy. MPA or MSc courses at leading The second project, called BP-British British universities. Council interactive science project, was launched in April 2008 and is intended to Other educational activities We main- offer a well-tested teacher training model tained support for the Azerbaijan-UK initiating active teaching and learning Alumni Association (AUKAA). This is a approaches in three subjects - physics, network of young professionals who chemistry and biology. studied in UK and assists its members in their professional development. Another initiative involved training for journalists.
56 BP in Azerbaijan 2.5 Key statistics in chapter 2
Regional Local content development Development Initiative • Eight local companies won new long • Spend on RDI projects in Azerbaijan in term contracts with BP in Azerbaijan 2007 - $3.7 million. in 2007. • Amount allocated for enterprise • Our spend with local small and medi- development & training programme um-sized enterprises (SMEs) reached to boost local content - $5.2 million. $111 million, a 44% increase com- • A $1 million agreement signed with pared to 2006. IFC to widen access to micro finance • Five local companies were awarded in Azerbaijan's western regions. best of business awards for outstand- ing performance in 2007. • In-country spend by BP in Azerbaijan and its co-venturers totalled $1.495 bil- Community lion, up 1% on 2006. Investment Programme
• We and our co-venturers spent $2.7 million in 2007 on various community investment projects in Azerbaijan. • We and our co-venturers spent $300,000 in 2007 on the "Green Pack" environmental awareness campaign. • Our employees contributed $5,173 to local charities and matched by BP funds. • In 2007, 10,124 community members benefited from alternative energy projects.
Educational initiatives
• In 2007, 8,478 people visited the Caspian Energy Centre, including 5,855 children. • In 2007, $1.039 million was spent on Caspian Energy Centre. • In 2007, 175 Azerbaijani nationals participated in BP-funded scholarship programmes.
Sustainability Report 2007 57 Four year performance dataa
2004 2005 2006 2007
Operating Total hydrocarbons produced (thousand barrels of oil a day on average) 132.2 261.0 472.0 668.0
Financialb OPEX – total gross spend ($thousand) 157,668 213,983 254,000 615,000 CAPEX – total gross spend ($thousand) 5,122,678 5,160,705 4,437,000 3,404,000
Safetyc Fatalities – employees 0 0 0 0 Fatalities – contractors 2 2 1 0 Days away from work cases (DAFWC) – workforce 8 3 5 5 Days away from work case frequencies (DAFWC(f)) – workforce 0.03 0.01 0.03 0.04 Recordable incidents (RI) – workforce 113 73 39 41 Recordable incident frequencies (RI(f)) workforce 0.44 0.33 0.25 0.31 Hours worked – employees (million hours)d 3.5 3.85 5.73 11.53 Hours worked – contractors (million hours)e 48.22 40.24 25.45 14.76
Environment
Direct gross carbon dioxide (CO2) (kilo tonnes) 946.7 1,649.2 1,686.5 1,980.1
Indirect gross carbon dioxide (CO2) (kilo tonnes) 0 0.5 0.4 0.3
Direct gross methane (CH4) (kilo tonnes) 4.6 6.7 5.7 9.4 Direct gross greenhouse gas (GHG)
(thousand tonnes CO2 equivalent) Azerbaijan 1,042.8 1,789.5 1,806.5 2,176.2 Flaring net (exploration and production) (tonnes) 283,953 448,279 332,641 280,774 Sulphur gross dioxide (SOx) (tonnes) 59 814 237 249f Nitrogen gross oxides (NOx) (tonnes) 1,621 3,538 3,711 3,953f Non-methane hydrocarbons gross (tonnes) 1,327 3,229 7,562 3,014 Number of crude oil spills 20 54 41 71 Volume of product spilled (litres) 21,376 24,410 8,396 4,534 Volume of product unrecovered (litres) 3,061 1,024 1,100 1,192 Discharges to water – drill cuttings with synthetic-based mud (tonnes) 6,077 3,315 1,563 6,811
Employees Number of permanent employees of BP in Azerbaijan 1,505 1,741 2,048 2,199
Social spend Total for BP Azerbaijan SPU and co-venturers - gross spend ($million) 34.25 25.45 17.12g 21.10h a Unless otherwise stated, performance data relates to BP in Azerbaijan only. b BP Azerbaijan SPU and its coventurers. c Cumulative data for BP Azerbaijan SPU. d Hours worked by employees - are identified as hours worked by individuals who have a contract of employment with BP Azerbaijan SPU; this definition is consistent with BP's group definition. e Hours worked by contractors - are identified as hours worked by contractors under the sphere of our control; this definition is consistent with BP's group definition. f For comparability this number is reported using 2006 (vs. 2007) assumptions. g Instead of $13.31 million indicated erroneously in the 2006 BP in Azerbaijan Sustainability Report. h This is the cash out number; as in previous years BTC grant and BP pledge of Georgia are excluded.
58 BP in Azerbaijan BP Azerbaijan EITI reported data (2007)
Sustainability Report 2007 59 Gas nm3 (natural, associated) 2,295,332, 277.863 Oil boe mln. 2007 10.360 US 0.615 mln. January1-December 31 January1-December dollar 0.277 0.000 0.450 12.750 799.735 Gas nm3 (natural, associated) 2,191,730, 873.711 Volume Value Volume Oil 2006 boe mln. January1-December 31 January1-December US mln. 1.214 dollar 4.212 Value 472.032 Gas nm3 (natural, 1,778, 570,000 associated) Volume Oil 2005 boe mln. January1-December 31 January1-December US 4.45 0.45 0.81 mln. dollar Value Gas nm3 (natural, associated) 948,576,000 Volume Oil 2004 2.29 4.89 6.498 boe mln. January1-December 31 January1-December US mln. 3.95 0.45 dollar Value Gas nm3 (natural, associated) Volume Oil 2003 2.26 boe mln. January1-December 31 January1-December US 0.05 0.07 3.80 0.45 mln. dollar Value (SOCAR) a - in kind - in cash foreign company to company foreign host state-owned com- pany 2a) Host state-owned production company's entitlement in foreign Production company's Stream foreign company to company foreign host government 1a) Host Government's production entitlement in foreign company's Stream Production - in kind (SOFAZ) - in kind (SOFAZ) - in cash Profit taxProfit 1. Payments/allocations of Payments/allocations 1. 2. Payments/allocations of 2. Payments/allocations Other payments, including: Other payments, (SOCAR) a) transportation tariff b) associated gas Signing bonuses and other bonuses including: Other payments, a)(SOFAZ) tariff transportation (SOFAZ) b) acreage fee BP as the operator of AIOC, reports the total gross number for associated gas delivered to SOCAR, within BP's template. AIOC, reports the total associated gas delivered gross number for BP as the operator of a BP in Azerbaijan EITI reported data EITI (2003-2007)Azerbaijan BP in
60 BP in Azerbaijan Independent assurance statement to BP management
The BP Azerbaijan Sustainability Report 1. Reviewed a selection of external media 2. Are the data and statements 2007 (the Report) has been prepared by reports and internal documents relating regarding BP Azerbaijan's the management of BP Azerbaijan, who to the sustainability performance of BP sustainability performance are responsible for the collection and in Azerbaijan in 2007, including risk contained within the Report sup- presentation of information within it. assessments, ethics certificates and ported by evidence or explanation? Our responsibility, in accordance with stakeholder feedback. We are not aware of any BP management's instructions, is to 2. Reviewed the outcome of BP misstatements in the assertions and carry out a limited assurance Azerbaijan's own process for determin- data presented by BP management engagement on the Report as ing the key issues to be included in the within the Report regarding BP outlined below, in order to provide Report. Azerbaijan's sustainability conclusions on the claims, data and 3. Reviewed information or explanation performance. coverage of issues within it. about the Report's sustainability per- Our responsibility in performing our formance data and statements. Whilst Our independence assurance activities is to the manage- we reviewed documentation to support ment of BP p.l.c. only and in accordance the sustainability data contained within As auditors to BP p.l.c., Ernst & Young with the terms of reference agreed with the Report, we did not test the are required to comply with the them. We do not therefore accept or processes for gathering, collating and independence requirements set out in assume any responsibility for any other reporting data at country or site level. the Institute of Chartered Accountants in purpose or to any other person or organi- England & Wales (ICAEW) Guide to sation. Any reliance that any such third Level of assurance Professional Ethics. Ernst & Young's party may place on the Report is entirely independence policies, which address at its own risk. Our evidence gathering procedures have and in certain places exceed the been designed to obtain a limited level of requirements of the ICAEW, apply to What we did to form assurance on which to base our conclu- the firm, partners and professional staff. our conclusions sions. The extent of evidence gathering These policies prohibit any financial procedures performed is less than that of interests in our clients that would or Our assurance engagement has been a reasonable assurance engagement might be seen to impair independence. planned and performed in accordance (such as a financial audit) and therefore a Each year, partners and staff are required with the International Federation of lower level of assurance is provided. to confirm their compliance with the Accountants' ISAE3000a. firm's policies. The Report has been evaluated We confirm annually to BP whether against the following criteria: Our conclusions there have been any events including • Whether the Report covers the key the provision of prohibited services that sustainability issues relevant to BP in On the basis of our review and in could impair our independence or Azerbaijan in 2007 which were raised accordance with the terms of objectivity. There were no such events in the media, BP Azerbaijan's own reference for our work we provide the or services in 2007. review of material sustainability following conclusions on the Report. issues, and selected internal Our conclusions should be read in documentation. conjunction with the above section on • Whether sustainability claims made 'What we did to form our conclusions'. in the Report are consistent with the Ernst & Young LLP explanation and evidence provided 1. Does the Report cover the key London by relevant BP managers. issues? June 2008 • Whether the sustainability data Based on our review of media, presented in the Report are consistent selected internal documents, and BP with the relevant business unit level Azerbaijan's process for determining data records. key issues, we are not aware of any In order to form our conclusions we key sustainability issues that have been undertook the steps outlined below. excluded from the Report. a International Federation of Accountants’ International Standard for Assurance Engagements other than audits or reviews of historical financial information (ISAE3000).
Sustainability Report 2007 61 Glossary
ABTC Azerbaijan Bank Training Centre DAFWC(f) Days away from work case frequency
ACDI/VOCA Agricultural Cooperative DevelopmentDevelopment InternationalInternational andand DC Drill cuttings Volunteers in Overseas Cooperative Assistance Volunteers in Overseas Cooperative Assistance DCRI Drill cuttings re-injection
ACG Azeri-Chirag-Deepwater Gunashli DCT Digital & communications technology
AIOC Azerbaijan International Oil company DPCU Dewpoint control unit
AMFA Azerbaijan Microfinance Association DWG Deep-water Gunashli
ANAS Azerbaijan National Academy of Sciences E&P Exploration and production
AOS Azerbaijan Ornithological Society EA East Azeri
ASA Advanced safety audit EBRD European Bank for Reconstruction and Development
ASC Agricultural service centre EC Enterprise Centre
ASIL Azerbaijan State Institute of Languages EcOP Economic opportunities programme
ASRC Azerbaijan Social Review Commission EDTP Enterprise Development and Training Programme
AUKAA Azerbaijan-UK Alumni Association EEP Employee engagement programme
AZAL Azerbaijan Airlines EIP Environmental Investment programme
BOHS British Occupational Hygiene Society EITI Extractive Industries Transparency Initiative
BTC Baku-Tbilisi-Ceyhan EMDI Emergency Medicine Development Initiative
C&EA Communications & external affairs EMF Employee matching fund
C&WP Compressor & water injection platform EOP Early Oil Project
CAF Charities Aid Foundation EPPD Export Pipelines Protection Department
CDAP Caspian Development Advisory Panel ERNP Environmental requirements for new projects
CDP Corrosion detection pig ESAP Environmental and social action plan
CEC Caspian Energy Centre EU European Union
CIP Community Investment programme FC&A Financial control & accounting
CIPD Chartered Institute of Personnel and Development FINCA The Foundation for International Community Assistance
CIS Commonwealth of Independent States FSDS The Azerbaijani NGO For Sustainable Development Society
CLO Community liaison officer FTN Fresh thinkers network
CLP Conservation leadership programme GDP Gross domestic product
CoC Code of conduct Ge Georgia
COMEEP Community economic education programme GHG Greenhouse gas
CoW Control of work GoM Gulf of Mexico
CQA Containment quality associates GP Geometry pig
CTTC Caspian Technical Training Centre GSHAR Gobustan State Historical Artistic Reserve
CWAA Central waste accumulation area GTZ German Technical Cooperation
D&C Drilling & completions HGA Host government agreement
DAFWC Day away from work case HiPO High potential incident
62 BP in Azerbaijan HP-SD gas High pressure Shah Deniz gas NREP Northern route export pipeline
HR Human resources OMS Operating management system
HSE Health, safety and environment OPB Occupied portable buildings
HSSE Health, safety, security and environment OPMS Office properties management & services
HSSE&S MS Health, safety, security, environment and social OSCE The Organization for Security and Co-operation in Europe management system p/d Per day
HWMF Hazardous waste management facility PIG Pipeline inspection gauge
IASC Inter-agency security committee PPP Private public partnership
ICT Information and communications technology PSA Production sharing agreement
IDPs Internally displaced persons PSA Pump station in Azerbaijan
IEMP Integrated environmental monitoring programme PSCM Procurement & supply chain management
IFC International Finance Corporation PU Performance unit
IMC International Medical Corps R&M Refining and marketing
IMechE Institution of Mechanical Engineers RDI Regional Development Initiative
IMS Integrity management standard REC Regional Environment Centre for Central and
INX-2 Inam exploration well Eastern Europe
IoAE Azerbaijan Institute of Archaeology and Ethnography RI Recordable injury
IP Intelligent pigging RI (f) Recordable injury (frequency)
IPA Intermediate pigging station Azerbaijan RIEP Rural inclusive education programme
ISO International Organization for Standardization ROW Right of way
IST Integrated Supply and Trading SBM Synthetic based mud
ITD Indirect thermal desorption SCP South Caucasus pipeline
LP gas Low pressure gas SD Shah Deniz
MBA Master of business administration SDX-4 Shah Deniz exploration well
MENR Ministry of Ecology and Natural Resources SFF Supplier Finance Facility
MFBA Micro-Finance Bank of Azerbaijan SMEs Small and medium sized enterprises
MME Managing major emergencies SOC Safety observations and conversations
MPA Master of public administration SOCAR State Oil Company of the Azerbaijan Republic
MS Management system SOFAZ State Oil Fund of the Azerbaijan Republic
MSE Micro and small enterprises SOx Sulphurous oxides n/a Not applicable SPE Society of Petroleum Engineers
NGL Natural gas liquid(s) SPS Shelf Project Stroy
NGO Non-governmental organisation SPU Strategic performance unit
NOx Nitrous oxides SR Sustainability report
NPP National progression programme SS&W Subsurface & wells
Sustainability Report 2007 63 STEP Sangachal terminal expansion project MWh Mega Watt per hour
STOP Safety training observations programme tcf trillion cubic feet
TkAz Tekfen-Azfen Alliance te tonnes
TNK Tyumenneftegaz, Nizhnevartovskneftegaz, te/mboe tonnes per million barrels of oil equivalent Kaluganefteprodukt
TVAR Total vehicle accident rate
UK United Kingdom
UN United Nations
UNDP UN Development Programme
US United States
USACC US-Azerbaijan Chamber of Commerce
USAID United States Agency for International Development
WA West Azeri
WBM Water based mud
WREP Western route export pipeline
Units
euro
$ US dollar bbl barrels bcma billion cubic metres per annum bncm billion normal cubic metres boepd barrels of oil equivalent per day bopd barrels of oil per day bscm billion standard cubic metres km kilometre kte kilo tonnes kte/pa kilo tonnes per annum mbd thousand barrels a day mboe thousand barrels of oil equivalent m metre mln million mmbbl million barrels mmscm/d million standard cubic metres per day mmtpa million tones per annum
64 BP in Azerbaijan How to ...
... visit the CEC ... apply for CIP/EIP grants
All potential visitors should contact the Centre to book For inquiries regarding grants from the Community a date and time for their visit. We require three days notice Investment Programme or the Environmental to accommodate a request for a free of charge visit. Investment Programme please contact: Schoolchildren should be accompanied by their parents or teachers and their visits should be arranged in advance. Villa Petrolea, 3rd floor, 315 room, 2 Neftchilar prospekti, Baku, AZ1003, Azerbaijan Phone: (+994 12) 447 02 55/ 447 17 19/ 447 17 29 Phone: (+994 12) 497 90 00 Email: [email protected]; Website: www.cec.az Fax: (+994 12) 497 96 02 Address: Garadag district, AZ1082, BP operated Email: [email protected] Sangachal terminal, Salyan highway. Due to security restrictions, visits must be pre-arranged.
... get a contract ... apply for a job
To learn about business opportunities with BP and its • Advertisements for experienced hires, internships, co-venturers please contact: annual recruitment programme are placed online at http://www.bp.com/caspian/careers/ Enterprise Centre 99, Mirza Mansur Str., Note: annual recruitment programme starts in (Old City) AZ1004 November and is announced in local newspapers. Baku, Azerbaijan Phone: (+994 12) 497 96 24 Fax: (+994 12) 497 96 54 E-mail: [email protected] Website: www.ecbaku.com
... raise a difficult issue ... raise a grievance/concern, request information
OpenTalk 24-hour phone numbers: You may contact us to express your grievances/ concerns/interest in information/other mater through: Azerbaijan (+994 12) 497 98 88 CLO contacts: International Collect (+1 704) 540 2242 Garadagh, Absheron, Hajigabul, Agsu, Kurdamir Fax: (+1 704) 556 0732 Phone: (+994 50) 225 02 51/ 225 02 45 Email: [email protected] Ujar, Agdash, Yevlakh, Goranboy Letter: OpenTalk, 13950 Ballantyne Corporate Place, Phone: (+994 50) 225 02 57/ 225 02 45 PMB 3767, Charlotte, NC28277, USA Samukh, Shamkir, Tovuz, Agstafa Intranet: http://baku.bpweb. bp.com/dep/ethics Phone: (+994 50) 225 01 75/ 225 02 60 /opentalk/compliance.asp Further queries about OpenTalk should be Project Information Centers' numbers: referred to BP in Azerbaijan Kurdamir (+994 145) 6 64 08; Yevlkah (+994 166) 6 58 84; Tovuz (+994 231) 5 50 99 http://www.bp.com/caspian/contactus
Sustainability Report 2007 65 Feedback
Summary The 2006 BP in Azerbaijan University of Languages took part The civil society view Sustainability Report received a gener- in feedback sessions. ally positive response from students, • As in previous years, participants were • There was much less engagement educational institutions and the media most interested in recruitment-related and feedback from NGOs than in Azerbaijan. The report was distrib- issues. Other areas of in interest previously. uted externally, and an electronic ver- included BP scholarships and the future • Investigation suggested this reflected sion was also available. of BP in Azerbaijan. BP's openness to NGOs in Azerbaijan More than 100 individuals participat- and the amount of information readily ed in engagement sessions on the The media view available to them. 2006 report including students, profes- • Some NGOs expressed an interest in sors, NGO and media representatives, • Media representatives were generally telling their own story about BP- professionals and alumni of various positive about the report and felt sponsored projects they have been educational programmes. that the 2006 version was more involved in. Positive responses highlighted the comprehensive and informative than comprehensiveness of the 2006 report. previous reports. Negative reactions concentrated on the • The major concern raised involved the timeliness of the publication. publication date in July/August. For the media, this schedule diminishes The student view the report's news value and usefulness. • The Azerbaijani language version of • Students and alumni from the Technical the report and the technical terms University, AAA, Baku State University, used in it raised some questions. Qafgaz University, AUKAA and
made and have adjusted this 2007 report mation on how much we pay individual in some important respects. We have: employees/contractors as this is a confi- dential and personal matter. • Tried to advance our publication date. Nor will we disclose revenues earned Production of a sustainability report is by BP in this country as this constitutes a complex process. But we recognise market-sensitive information. However, there is a demand for the report to be the aggregated report on BP group's rev- available earlier in the year. enues and expenditures can be found in • Taken steps to widen distribution of BP's 2007 Annual Report at: the report. http://www.bp.com/annualreview If you have feedback on this report, we Our response In the 2007 report we have continued will welcome it. Please get in touch with to stakeholders’ feedback: our practice of disclosing information us through the contact details printed on about our tax payments to the the last page of the report. Each year the BP in Azerbaijan government of Azerbaijan (pages 59-60), Sustainability Report allows us to widen our local spend (page 52), initiatives to and deepen our engagement with enhance revenue transparency in Azerbaijani society by reporting perform- Azerbaijan (page 50), our recruitment ance as openly as possible, meeting our practices (pages 34-35) and our safety stakeholders and receiving feedback that and environmental performance helps us to refocus our activities. (pages 20-30). Aydin Gashimov Last year we conducted seven feed- Some information cannot be disclosed Stakeholder investment and back sessions on the 2006 report. for commercial or ethical reasons. To give reporting manager Subsequently we reviewed the comments one example, we will not provide infor-
66 BP in Azerbaijan Further information
Much information about BP's energy Reports and other documents. The site its reports 2004-07 and responses of BP projects in the Caspian/Caucasus region is multi-lingual and is updated regularly. in Azerbaijan, details of panel members is available online. The main sites are: and the CDAP terms of reference. www.bp.com www.bp.com/caspian This site contains information about the www.ecbaku.com This is the main information source about BP group including detail of its policies Carries information about the work and our Caspian region energy projects. and values, reports on its activities and services provided by the Azerbaijan It includes project details, news items, operations in the Caspian and Caucasus Enterprise Centre in Baku. ESIAs, legal agreements (including PSAs, regions and the group's Sustainability HGAs and IGAs) which govern the proj- reports. ects, lenders' reports, NGO monitoring reports and BP's responses, ASRC letter www.caspsea.com of recommendations and our responses, The site of the Caspian Development earlier BP in Azerbaijan Sustainability Advisory Panel. It includes the full text of
Contact us Design and layout
Aydin Gashimov Design and layout by Stakeholder investment and Jeyhun Imanov Studio reporting manager
Tamam Bayatly Communications manager
BP Azerbaijan SPU, Villa Petrolea, 2 Neftchilar Prospekti (Bayil), Baku, Azerbaijan.
Online feedback may be sent through www.bp.com/caspian/sr
To leave your feedback or to ask questions, call the communications and external affairs department at (+994 12) 497 92 72.
Sustainability Report 2007 67 68 BP in Azerbaijan