Azerbaijan Strategic Performance Unit

Presentation

March 2008 Azerbaijan Country Context

•Area 86,600 km2 •Population 8.5 million

Strengths: Commitment to macroeconomic stability: - stable exchange rate - low external debt Promising future for oil and gas sectors Strong adherence to PSAs, State Oil Fund established Continued development of democratic institutions

Oil history – Famous Azerbaijan Oil Firsts: GDP by Origin, % of Total

Agriculture • First oil well in the world was drilled (not dug by Oil and Gas 9,2% hand) in 1848 in Baku in Bibi Heybat oil field 38,5% • In 1900 Azerbaijan produced more than 50% of world’s oil = 11.4 million tons • In 1897-1907 the 1st largest oil pipeline in the world Construction was built from Baku to Batumi = 883 km x 200mm 10% • About 80% of oil production during 2nd world war in former USSR was made in Baku (peak production – 23,5 million tons in 1941) Transport • First offshore oil production in the world started in 5,8% Azerbaijan (1924 – Bibi Heybat beach, 1947 – Oily Wholesale & Rocks - in open sea) Other Retail 27,9% Telecom 6.3% 2,3%

Azerbaijan Offshore PSAs

• 15 offshore ASHRAFI PSAs signed since 1994 KARABAKH • 16 exploration OGUZ wells drilled AZERI- SHAH CHIRAG- during 1998- DENIZ GUNESHLI 2004:

• 3 dry holes ABSHERON • 5 oil and gas YANAN TAVA

shows NAKHCHIVAN • 7 non- commercial oil and gas KURDASHI ZAFAR MASHAL ALOV • 1 commercial INAM gas discovery (Shah Deniz) LANKARAN

CURRENT

LERIK RELINQUISHED DRY HOLE BP and Partners Interests in Azerbaijan Projects

ACG BTC Inam

Itochu Amerada Hess 8.9% Chevron Devon 3.9% 2.7% BP Itochu 3.4% 8.7% Statoil KNOC 5.6% 2.5% ConocoPhillips 25% 20% TPAO BP 6.7% 34.1% 6.5% TPAO SHELL ExxonMobil SOCAR 25% 8.0% 5% Total 5%

5% Eni Statoil 8.6% 2.5% Inpex Amerada Hess 2.4% Chevron SOCAR 10.0% Inpex 10.3% SOCAR BP 30.1% 10.0% 50%

Shah Deniz SCPC Alov

BP Statoil BP Statoil BP 15% 25.5% 25.5% 25.5% 25.5% SOCAR 40% Statoil 15%

TPAO TPAO SOCAR SOCAR 9.0% 9.0% 10.0% 10.0%

NICO NICO ExxonMobil LUKOil LUKOil EnCana 10.0% Total 10.0% TPAO 15% 10.0% Total 10.0% 5% 10.0% 10.0% 10% ACG Early Oil Project

First oil Nov 1997 2007 production forecast 160 mbd gross 2006 Lifting and transportation cost ~$2.55/bbl Total investment ~$2.2bn

RUSSIA Chirag platform Northern Route Chirag platform Export Pipeline Novorossiysk NER

Supsa

GEORGIA Chirag Tbilisi WER Platform

Oil Rocks AZERBAIJAN Baku ARMENIA Western Route Export Pipeline Sangachal Terminal Chirag-1 Platform SangachalSangachal EOPEOP terminalterminal Azeri-Chirag-Gunashli – Twice as Big as Forties

FORTIES FIELD – North Sea

• Discovered: 1970

• Reserves: 2.6 bn bbl FORTIES ACG • Life of Field: 40 years • Peak production: ~500mbd

(1979)

ACG FIELD – Caspian Sea

• Discovered: 1979-87

• Reserves: ~5.4 bn bbl

• Life of Field: >30 years 0 km 5 • Peak production: ~1.1mmbd

(2009) ACG Full Field Development

• Reserves 5.4 bn bbl gross 1400 ACG gross production • Peak production > 1 mmbd gross 1200 • Total capital cost ~$20 bn gross Deepwater 1000 • 2007 production forecast 686 mbd Gunashli

• Project start-up dates: mbd 800 – Central Azeri Feb 2005 600 Azeri – West Azeri Dec 2005 400 – Gas injection May 2006 200 – East Azeri Oct 2006 Chirag 0 – Phase 3 (DWG) 2Q 2008 2005 2008 2011 2014 2017 2020 2023

1 BP Azerbaijan Vision

2007

End 2004End , RailSangachal The Future Sangachal 2006 Sangachal

Chirag West East Azeri Azeri Central 2006 Chirag l Azeri Chirag ACG Phase 3 West Azeri East Azeri 2006 Shah Deniz 1 2008 Central Azeri

Shah Deniz Stage 1

GROWTHGROWTH CapitalCapital SpendSpend GROWTHGROWTH CapitalCapital SpendSpend 2004:2004: $12m/$12m/ dayday 2007:2007: $9m/day$9m/day

Offshore: Chirag Chirag, CA/CWP, WA, SD,EA 8+ operating platforms + projects

People: 3000 BP staff + 4000 BP staff + agency >2000 BP staff agency

Infrastructure: • 2 export pipelines • 4 export pipelines and rail • 3 export pipelines • Sangachal EOP • Expanded Sangachal terminal • One of the biggest terminals in the world Terminal • Oil 1 mmbd in 2008 • Oil over 600 mbd • Gas 479 mmscf/day in 07; peak 822 Production: • Gas start-up mmscf/day 130 mbd • Condensate peak of 58 mbd Istanbul- the big issue behind BTC

• Oil volumes shipped through Bosphorus increasing every year (pipeline oil would have increased volume by 50%) • Oil tanker traffic increasing as a percentage of total transits through Bosphorus BTC - Scope and Scale

8.9%Unocal Itochu 3.4% 8.7%Statoil 2.5%ConocoPhillips 6.5%TPAO SOCAR 25% 5%Total 5% Eni 2.5%Inpex Key Facts Delta/Hess 2.4% BP • 1768km length 30.1% • 2800m max elevation • 8 Pump Stations @ 130 MW • 1 Terminal with Offshore Jetty • $3,9 billion ready 1H2006 • 52 million construction hours (BTC/SCP) • 8 main spreads • 22,865 land parcels

Project Framework • Intergovernmental Agreement (Az/Geo/Turkey/US) • Host Government Agreements (Az/Geo/Turkey) Pipeline diameter: • BTC = 11 International Partners 42/46/34’’ • Financing by IFC/EBRD/ECAs Volumes: 1,000,000 bpd • In operation Region Development Initiative Pressure: 100 bar • 1,000,000 bpd (365 tankers per annum) avoiding the Turkish Straits BTC – The Project

• ACG/BTC currently one of the world’s largest energy project

• BTC to supply 1 million b/d of oil ~ 1.5% of world oil supplies

•BTC to supply 25% of world’s new oil demand growth in 2007-2008

• BTC provides incremental non-Persian Gulf/non-Russian oil supplies and adds to global supply diversity

• BTC has has insignificant impact upon world carbon emissions • 1768 km in length crossing three countries • Regional integrator Shah Deniz

• Reserves (total) ~15 tcf of gas Shah Deniz Stage 1 Gas Sales ~600 mmbbl of condensate

bcma BOTAS • Stage 1 peak production 142 mboed 9 • Total capital cost >$4bn 8 7 Stage 1 • 2007 production forecast 65 mboed 6 BTC SPA Decline Sales • Project start-up dates : 5 − TPG 500 platform installed: April 2006 4 3 Georgia SPA − First gas: Dec 2006 2 Azerbaijan SPA − First gas to Georgia: Jan 2007 1 0 − First gas to Turkey: Jul 2007 2005 2010 2015 2020 2025 2030 Azerbaijan, Georgia, Turkey Pipelines Project

Baku-Tbilisi-Ceyhan Pipeline South Caucasus Pipeline Full capacity (2007) 1 mmbd First gas Dec ‘06 Length 1768 km Ultimate Capacity 20 bcma BLACK SEA Diameter 46/42/34” Length 690 km Gross Capex $3.9 bn GEORGIA DiameterCASPIAN SEA 42” First tanker departed 4th June BLACK Gross Capex $1.1bn Current BTC export capacity 750 mbd SEA TBILISI

CASPIAN SEA AZERBAIJAN BAKU TURKEY BAKU Sangachal Sangachal Erzurum

CEYHAN

CEYHAN MEDITERRANEAN MEDITERRANEANSEA SEA

Turkey Georgia Azerbaijan 3000m

2000m

1000m Sea Level 1700 1600 1500 1400 1300 1200 1100 1000 900 800 700 600 500 400 300 200 100 0 BTC Pipeline Route Profile (Distance in km) History Sangachal Terminal 2005 SangachalSangachalSangachalSangachalSangachal Terminal Terminal TerminalTerminalTerminal 2004 20031992 2002 20002001 A Strategic Hub for the Caspian: BTC ACG going to SCP Azerbaijan HP-SD going to Western Export Azerbaijan Route

LP going to Azerbaijan

Northern Export Third party Route export oil SANGACHAL TERMINAL

Third party 24” Oil from Chirag

12 26” SD Phase II 4” 30” Oil from Azeri

Alov 28” gas from ACG Inam 30” from Guneshli and Chirag 30” Oil from Azeri SD Phase I Community Investment Projects

CIPs contribute to the development of communities through sustainable development initiatives: • Scholarships – 20 area students receive scholarships. 10 Universities involved • Computer Basics - 1100 students covered • Pre-educational training covered 165 students - 102 students admitted to Universities • Literature Program • Environmental Education Program BTC HPS Shah Deniz

TPG500TPG500 ProgressProgress onon SDX-04SDX-04

SCPSCP BlockBlock ValveValve GeorgiaGeorgia SangachalSangachal TerminalTerminal Azeri

CentralCentral AzeriAzeri && C&WPC&WP WestWest AzeriAzeri onon productionproduction

EastEast AzeriAzeri onon productionproduction SangachalSangachal TerminalTerminal BTC

RoWRoW ReinstatementReinstatement GeorgiaGeorgia PumpPump StationStation

Ceyhan Marine Terminal TheThe officialofficial inaugurationinauguration ofof BTCBTC First Tanker Loading

4th June 2006: First Tanker Loading at Ceyhan Terminal was successfully completed. “British Hawthorn” sailed away with 592,000 barrrels on board. THANK YOU AND SEE YOU NEXT TIME Presentation

Baku 2008