The main workhorse of Azeri oil production – the Azeri-Chirag-Guneshli field – will peak in 2010, due to BP and consortium members driving an aggressively fast extraction programme. As the revenues poured in over the last eight years, the state budget soared, covering military expansion, President Aliev’s opulent lifestyle and doubtful infrastructure projects including a billion-dollar road bridge in the middle of Baku.
With those in power loath to cut their budgets, the Azeri government is desperate to increase future oil extraction potential. Hence the State Oil Company (SOCAR) is opening up Azerbaijan’s last oil prospects. BP seemingly got first pickings in mid-July, signing an agreement to explore Shafag & Asiman zones deep below the Caspian.
As part of the government’s plan to ensure that all of Azerbaijan’s offshore waters are fully exploited this MOU gives BP the exclusive right to negotiate a production sharing agreement to explore and develop the block, which lies some 125 kilometres (78 miles) to the south east of Baku.
The seabed below the Azeri-controlled section of the Caspian is already well explored – this is a step closer to “full exploitation”. But this agreement is not only the product of the Azeri elite opening up its oil fields further and BP’s management pursuing future profits. Since the early 1990s, British foreign policy has placed an emphasis on prising oil reserves in the former Soviet Union away from Russia. Hence, while the agreement will have been previously negotiated elsewhere, the signing ceremony was orchestrated during a meeting between British Prime Minister Gordon Brown and Azeri President Ilham Aliev.
The MOU was signed today in London, in the presence of HE Ilham Aliyev, President of the Republic of Azerbaijan, and UK Prime Minister Gordon Brown, by Rovnag Abdullayev, President of SOCAR, and Andy Inglis, BP’s Chief Executive of Exploration and Production.
The man responsible for landing this deal is already on his way elsewhere. BP Azerbaijan President Bill Schrader has been appointed Chief Operating Officer for TNK-BP, the Russian joint venture that has faces a struggle for control between Russian shareholders and BP. Before spending three years expanding the Baku-Ceyhan pipeline and bringing the mega Shah Deniz gas field on stream, Schrader was based in Indonesia, making the controversial Tangguh LNG project in occupied West Papua a reality.