BP plc · LSE:BP.
BP — Investor Presentation (September 2006)
87 slides from BP's investor presentation, September 2006
Slide 1: BP in Azerbaijan
BP in Azerbaijan Baku September 2006
Slide 2: Cautionary statement
Cautionary statement Forward looking statements: This presentation and the associated slides and discussion contain forward- looking statements, particularly those regarding oil and gas prices; expected start-up of Thunderhorse; the timing of other projects and their contribution to expected product
Slide 3: Introduction
Introduction Fergus MacLeod Head of Investor Relations
Slide 4: 1989 Access Agenda
1997 Baku Analyst Trip 1989 Access Agenda E & W Siberia Caspian Algeria GOM Vietnam Deepwater Nigeria Yemen Venezuela Lombok Angola
Slide 5: Current Environment
1997 Baku Analyst Trip Current Environment Competition Increasing Challenge to BP – Access competition – Keep ahead of pack – New players – Play to strengths – Terms erosion – Exploration track record – Deepwater technology – Relationship management – Deepen existing positions – Broaden into new pos
Slide 6: Production Profile
1997 Baku Analyst Trip Production Profile mb/d 2500 2000 1500 Others 1000 500 BP 0 1995 2000 2005 2010 2015 2020
Slide 7: E&P Strategy Update
E&P Strategy Update Tony Hayward Chief Executive, Exploration & Production
Slide 8: BP Azerbaijan organisation
BP Azerbaijan organisation BP Azerbaijan President David Woodward / Bill Schrader* Commercial Director Chief of Staff Phil Home Erich Krumanocker Executive Assistant Georgia General Manager Kamala Husseynli Hugh McDowell Turkey E&P Director Djan Suphi Offshore Onshore Renewal VP Shah Deniz VP Major
Slide 9: Project start-ups
Project start-ups 2005 2006 2007 2008 - 2009 2010 and beyond 9 Valhall Waterflood 9Cannonball Temsah Atlantis King Sub-sea Thunder Horse Ursa Expansion Atlantis North Flank Paz Flor Egypt LNG T2 9 Mad Dog 9Redevelopment Pump Kizomba C Puma Browse 9 Central Azeri 9BTC San Juan ACG Phase 3 Coal Bed Me
Slide 10: Production to 2010
Production to 2010 mmboe/d 5 Divestments closed in 4 2006 3 TNK-BP 2 New profit centres 1 Existing profit centres 0 2001 2002 2003 2004 2005 2010 Actual prices and Production portfolio at $40 BP projection for ‘06-’10 updated to reflect closed ’06 divestments
Slide 11: Strategy – building profit centres
Strategy – building profit centres Alaska Alaska North North Sea Sea Russia Russia North North America America Gas Gas Azerbaijan Azerbaijan Deepwater Deepwater Egypt Egypt Gulf Gulf of of Mexico Mexico North North Trinidad Trinidad Africa Africa Asia Asia & & Tobago Tobago Middle Middle Pacific Pac
Slide 12: Resource growth & progression
Resource growth & progression 2001- 2005 New Further discoveries appraisal, revisions 8.0 7.8 Start ‘01 End ‘05 Purchased Sold resources resources 25.9 12.5 Non-proved 4.4 40.7 9.1 15.2 2.7 Proved 1.9 18.3 41.1 59.0 6.7 Produced Totals in billion boe Proved UK SORP, non-proved BP data
Slide 13: End 2005 resource by type
End 2005 resource by type Non-Proved Proved Conventional Oil Deepwater Oil Water Flood Viscous 41 bn boe 18 bn boe and Heavy Oil Conventional Gas LNG Gas Tight Gas Coal Bed Methane Between 2005 and 2010 11 bn boe of non-proved resources are expected to be Totals in billion boe moved to proved reserv
Slide 14: The ultimate prize
The ultimate prize 200 bn boe oil bn boe and gas initially Produced 38 in place Proved Non-Proved 18 Currently unrecoverable hydrocarbon 41 Does not include exploration potential
Slide 15: Summary
Summary • New Profit Centres have arrived − Major Projects underpin production growth through the end of the decade and beyond • Power of incumbent positions − Technology to unlock the resource base
Slide 16: Building a New Profit Centre: Azerbaijan
Building a New Profit Centre: Azerbaijan Andy Inglis Deputy Chief Executive, Exploration & Production
Slide 17: Building a new profit centre: Azerbaijan
Building a new profit centre: Azerbaijan • Resource base • Technology • Project delivery • Statecraft and diplomacy • Sustainability through mutuality
Slide 18: Resource base: Azerbaijan
Resource base: Azerbaijan ACG and Shah bn boe 0.4 Deniz Gross Produced Resource 6.1 Sanctioned Non-Proved Currently unrecoverable hydrocarbon 7.6 Source: BP data
Slide 19: Technology
Technology Reserves pull-through Maximising revenue Capital efficiency
Slide 20: Project delivery
Azerbaijan Project delivery Central Azeri - 2004 West Azeri - 2005 East Azeri – 2006 ACG3 - 2008 Angola G. Plutonio - 2007 Bk31 North – 2010+ Bk31 Central – 2010+ Bk31 South – 2010+ Bk18 West – 2010+ Trinidad Cannonball – 2006 Red Mango – 2007 Cashima – 2008 Chachalaca -2009 Egypt Train 1 Supply 200
Slide 21: Statecraft and diplomacy
Statecraft and diplomacy
Slide 22: Sustainability through mutuality
Sustainability through mutuality Workforce capability Local content Capacity building
Slide 23: Overview of Azerbaijan and BP’s presence
Overview of Azerbaijan and BP’s presence Rashid Javanshir Vice President, Onshore Operations
Slide 24: Geography
Geography UKRAINE KAZAKHSTAN M OL DO RUSSIA VA Odessa Constanta Black Sea Novorossiysk BULGARIA Caspian Sea ru s ho sp Supsa Bo TURK MENI STAN GEORGIA Istanbul Baku AR ME NI A AZERBAIJAN TURKEY Ceyhan IRAN IRAQ Mediterranean Sea SYRIA
Slide 25: Oil rate (mbd)
150 years of oil production Further Developments 1400 ACG 2010 (1200 mmb/d) 1200 Phase 3 online 2008 1000 Today DW Oil rate (mbd) 800 G Azeri online 2005 600 Historical peak 1941 (475 mmstb/d) Chirag online 1997 400 Azeri 200 Chirag Future decline for other fields assumed 3% annual 0 1870 1880 1890
Slide 26: Azerbaijan’s oil history
Azerbaijan’s oil history Oil wells in the vicinity of Baku pumping oil into reservoir lakes in 1880s. The Nobel Brothers' oil wells in Photo: Azerbaijan National Archives. Balakhani, a suburb of Baku. View of Oil Rocks c. 1950s 2006 Central Azeri platforms
Slide 27: BP Azerbaijan assets
BP Azerbaijan assets Novorossiysk Russia Kazakhstan Black Sea NREP NREP Pipeline Pipeline Caspian Sea Georgia WREP WREP Tbilisi Supsa Pipeline Pipeline Sangachal Sangachal Terminal Turkmenistan Terminal BTC ACG ACG BTC Pipeline Pipeline Oil Oil Oil Production Oil Production South South Caucasus Baku
Slide 28: BP Azerbaijan assets
BP Azerbaijan assets • Total gross investment of $25bn, with over $21bn spend to date • Peak production of over 1 million barrels per day and 840 mmcfd (8.7 bcma) gas from existing projects • Sangachal - the largest terminal outside of the Middle East (3 million barrels of storage) • BTC – One of th
Slide 29: Resources and Renewal
Resources and Renewal Paul Clyne Vice President, Renewal
Slide 30: Resource base: Azerbaijan
Resource base: Azerbaijan Gross oil / gas resource potential 9 8 Resource potential Bn boe 7 3.1 Non-proved 6 5 Sanctioned (incl. produced) 4 Exploration (risked) 4.5 3 5.4 2 2.2 1 1.1 0 ACG SD Exploration Source: BP data (based on existing PSCs only)
Slide 31: BP Azerbaijan net resource progression
BP Azerbaijan net resource progression 2001 - 2005 Additions Current PSC appraisal and exploration 1.9 Start ‘01 End ‘05 resources resources 1.3 Non-proved 2.0 1.2 0.2 Proved 1.3 1.5 3.3 0.1 Produced *Totals in bn boe End ‘05 position based on UK SORP, non-proved BP data
Slide 32: Future potential
Future potential 1,800 Potential gross oil + condensate production 1,600 production (mbd) Oil & condensate 1,400 1,200 1,000 800 PSC base 600 production 400 200 0 Further 2006 2009 2012 2015 2018 2021 2024 2027 2030 develop existing PSCs 9 Potential gross gas production Gas production (bcfd) 8 Furth
Slide 33: Major Projects Delivery (Offshore)
Major Projects Delivery (Offshore) Bruce Luberski, Vice President, Major Projects Mike Skitmore, Vice President, Shah Deniz
Slide 34: ACG field
ACG field ACG sanctioned resource 5.4 bn bbl Peak production gross 1.2 mmbd Capital cost gross $17 bn BP working interest 34.1% ACG gross production 1400 1200 1000 800 mbd 600 Deepwater Gunashli Azeri 400 200 Chirag 0 2005 2008 2011 2014 2017 2020 2023 Forward projections: BP data
Slide 35: BP Azerbaijan vision
BP Azerbaijan vision End 2004 End 2006 The Future Sangachal Sangachal Sangachal East Azeri Chirag West East Azeri Azeri Central 2006 ACG Phase 3 Chirag l 2008 Chirag Azeri & West C&WP Central Azeri Shah Deniz 2 Azeri Shah Deniz 1 Shah Deniz 1 GROWTH Capital GROWTH Capital Inam Alov Spend 2004: Spend
Slide 36: Project schedule
Project schedule 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 ACG PSC First Oil Early Oil Project First Oil C&WP Start-up Central Azeri & C&WP First Oil WA First Oil EA First Oil WA West & East Azeri First Oil ACG Phase 3 (DWG) Ceyhan Lifting BTC Shah Deniz PSC Fir
Slide 37: ACG early oil project (Chirag)
ACG early oil project (Chirag) Chirag platform Sanctioned 1994 First oil Nov 1997 Sangachal EOP terminal 2005 production – exported 140 mbd gross 2005 Lifting and transportation cost ~$1.60/bbl Total investment ~$2.2bn
Slide 38: ACG full field development
ACG full field development Sangachal Terminal Deepwater Chirag West Azeri Central East Azeri Gunashli EOP Phase 2 Azeri Phase 3 Phase 1 Phase 2 2008 Nov 1997 Dec 2005 Mar 2005 4Q 2006 • 90,000 te topsides • One of world’s largest terminals • 80% of man-hours in Azerbaijan • 90,000 te jackets • 7 yea
Slide 39: Sangachal history
Sangachal history 2000 Early Oil Project
Slide 40: Sangachal history
Sangachal history 2005 Early Oil Project Shah Deniz
Slide 41: Projects production line
Projects production line Production facilities engineering costs Build duration CA 30 Direct manhours/te (41) WA 29 (32) Months 28 Clo EA 27 CA CWP ne (15) (21) 26 WA 25 EA
Slide 42: Shah Deniz Stage 1 development
Shah Deniz Stage 1 development
Slide 43: Shah Deniz Stage 1 development
Shah Deniz Stage 1 development Sanctioned resource (Stage 1) 6.5 tcf (185 bcm) of gas 300 mmbbl of condensate Stage 1 peak production 840 mmcfd (8.7 bcma) Capex (upstream & midstream) $4bn Working interest 25.5% Shah Deniz Stage 1 gross gas sales 900 800 700 600 500 Turkey SPA mmcfd Stage 1 Decline
Slide 44: Shah Deniz
Shah Deniz Offshore pipeline – beach pull TPG500 installation Sangachal Terminal on track Progress on SDX-04 appraisal
Slide 45: Statecraft and Diplomacy: The Story of BTC
Statecraft and Diplomacy: The Story of BTC Michael Townshend Former Vice President, Onshore Operations & Projects
Slide 46: Regional context
Regional context Ukraine Kazakhstan M ol do va Russia Odessa Constanta Black Sea Novorossiysk Bulgaria Caspian Sea us hor Geo ` Bo sp Supsa r gia Turkmenistan Istanbul A rm Baku en Azerbaijan ia Turkey Ceyhan Iran Iraq Mediterranean Sea Syria
Slide 47: The politics of welding
The politics of welding Golden Weld Azerbaijan /Georgia – Oct 04 1st Oil Azerbaijan – May 05 1st Oil Georgia – Oct 05 Golden Weld Azerbaijan /Georgia – Oct 04
Slide 48: Social
Social
Slide 49: Environmental
Environmental
Slide 50: Project financing and NGO scrutiny
Project financing and NGO scrutiny Why external financing: • Ensured pipeline built to international standards • Provided political risk cover Impacts of external financing: • Higher levels of NGO scrutiny • Significant media coverage • High standards set and audited by lenders
Slide 51: Scope and scale of BTC and SCP
Scope and scale of BTC and SCP BTC SCP
Slide 52: Security and Integrity
Security and Integrity
Slide 53: Unexploded ordinance on right of way
Unexploded ordinance on right of way
Slide 54: Mud volcano ridge
Mud volcano ridge
Slide 55: Digging for the pipe & block valve station
Digging for the pipe & block valve station
Slide 56: Going down deep
Going down deep
Slide 57: River crossing
River crossing
Slide 58: Ridgeline construction – Turkey (and China)
Ridgeline construction – Turkey (and China)
Slide 59: Rock removal
Rock removal
Slide 60: Trench breakers and broken bones
Trench breakers and broken bones
Slide 61: Steep slope
Steep slope aS bol ee
Slide 62: Moving down
Moving down
Slide 63: Nearly there…
Nearly there…
Slide 64: The end in sight
S240" 02.2005 Se ee Ee ee ree Bee
Slide 65: The end in sight
fhe end In sight \96.FT Way tad
Slide 66: Value through Technology
Value through Technology Fereidoun Abbassian Technical Director
Slide 67: Technology in support of business delivery
Technology in support of business delivery Reserves pull-through Maximising revenue Capital efficiency
Slide 68: Technology in support of business delivery
Technology in support of business delivery Reservoir Wells Integr ated m Syste Onshore terminal & Offshore production export facilities
Slide 69: Technology delivery track record
Technology delivery track record Open hole gravel pack 3D seismic Drilling simulator Extended reach drilling 2000 -6000m West Azeri Platform Central Azeri Platform Chirag 1 Platform ~ Well Profiles 0 Conventional Well ERD Well Well 500 3500m Trajectories 1,000 Conventional Well (Drilled) Conventiona
Slide 70: Strategic technologies
Strategic technologies Advanced seismic Intelligent completions Water ’ Technology drivers Pereriv A • Reservoir management Pereriv B Pereriv C Pereriv D • New well delivery Pereriv E Zonal flow monitoring Field of the Future™ • D&C performance • Operating efficiency ACE Zone ‘A’ Flow Zone ‘B’ Flow
Slide 71: Advanced seismic
Advanced seismic Aim Ocean bottom cable 4D seismic • Monitor fluid movements in the reservoir BP’s position • Technology leadership area • Industry leader in 4-D life-of-field monitoring
Slide 72: Azeri reservoir management
Azeri reservoir management CARSP: Phase 1 Gas Cap Depletion simulation for the Central Azeri Deep Water Oil Gunashli Water Gas Water Oil Chirag Azeri
Slide 73: Intelligent completions
Intelligent completions Down hole flow control valve Water Aim ’ • Increased production with fewer wells BP’s position • Azerbaijan is leading BP and the Industry Expandable screen Pereriv A Pereriv B Pereriv C Pereriv D Pereriv E
Slide 74: Increased production on Azeri
Increased production on Azeri Water Oil 60,000 30,000 barrels per barrels per day production of oil day injection of water Gas Expandable Sand Screen Oil BP's Top 10 Oil Producers (ACG shown in red) 50,000 Water 40,000 Rate (bopd) 30,000 20,000 10,000 0 Azeri B07 Azeri B11 Azeri B05st1 Azeri B10 Aze
Slide 75: Zonal flow monitoring
Zonal flow monitoring Real-time temperature data Fibre-optic sensor Aim from Central Azeri well B04 technology Time • Real time monitoring of reservoir flow BP’s position Zone ‘A’ flow Depth • World leader in development and Zone ‘B’ flow implementation of technology Zone ‘C’ flow Temper ature
Slide 76: Field of the Future
Field of the Future TM Wells Offshore production facilities Cross Monitoring discipline real time collaboration data Advanced Collaboration Environment Integration Reservoirs Onshore terminals & Decision Analysis/ exports making/people modeling
Slide 77: BP’s Distinctive Caspian Presence
BP’s Distinctive Caspian Presence Rashid Javanshir Vice President, Onshore Operations
Slide 78: Workforce capability
Workforce capability Professional Roles 2500 2000 1500 1000 500 0 2006 2007 2008 2009 2010 National Expats Forward projections: BP data
Slide 79: Local content
Local content Local content development $m 2000 1800 1600 1400 1200 1000 800 600 400 200 0 2003 2004 2005 2006 2007 2008 2009 2010 Local sustainable spend Other spend (excluding projects)
Slide 80: Capacity building
Capacity building
Slide 81: Commercial Structure & Financial Performance
Commercial Structure & Financial Performance Phil Home Commercial Director
Slide 82: PSC terms – General principles
PSC terms – General principles Duration Accounting & Fiscal • Exploration phase normally three years • Accounting is in US Dollars with 2-3 well commitment • Azerbaijan profits tax rate is fixed for • 25 year development phase with a five duration of PSCs year negotiable extension • No customs duty
Slide 83: Example: ACG PSC mechanism
Example: ACG PSC mechanism Profit Oil Shares Total Production X Net Back Government Contractor Contractor's RROR Price Share (%) Share (%) RROR < 16.75 % 30 70 16.75 % ≤ RROR < 22.75 % 55 45 RROR ≥ 22.75 % 80 20 OPEX Recovery 100% Profit Oil Capex Recovery (up to 50%) @ LIBOR+4% Profit Oil Sharing M
Slide 84: Indicative price sensitivity: ACG
Indicative price sensitivity: ACG Gross production @ $25/bbl Gross production @ $60/bbl FOC Profit Oil Share FOC Profit Oil Share 1400 80% 1400 80% 70% 70% 1200 1200 60% 60% 1000 1000 50% 50% 800 800 mbd mbd 40% 40% Az Govt Az Govt 600 Profit Oil 600 Profit Oil 30% 30% 400 FOC Profit Oil 400 20% 20%
Slide 85: ACG PSC: Impact of higher oil prices
ACG PSC: Impact of higher oil prices Lower production and reserve entitlement but much higher returns and NPV BP net ACG reserves and BP net ACG NPV and IRR entitlement factor 1400 90 1200 80 Entitlement Factor (%) 1000 70 NPV (indexed) Reserves (mmbbl) IRR 800 60 600 50 400 40 200 30 0 20 $25/bbl $
Slide 86: BP Azerbaijan net production
BP Azerbaijan net production BP net production 500 400 300 mboed 200 100 0 2005 2006 2007 2008 2009 2010 @ $40/bbl @ $60/bbl Production profiles include sanctioned developments only: Chirag, Central Azeri, West Azeri, East Azeri, Deep-Water Gunashli (DWG) and DWG East manifold in ACG, and Shah Deniz
Slide 87: BP Azerbaijan high margin barrels
BP Azerbaijan high margin barrels 2006 Barrel @ $70/bbl dated Brent (BP net basis) Average Realisation $65.9/boe Net income $35.1 Cash costs Tax $13.7 Lifting costs $1.0 Non-cash costs M&T costs $9.5 $4.9 Cash costs Other cash $7.6 $1.7 costs