BP in Azerbaijan Sustainability Report 2007
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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