BP – surviving in a USD50 oil barrel world

Addressing the plummet in oil prices in recent months at the BBG monthly meeting, BP’s Chief Procurement Officer Wilbert Long said there is no one single projection that people are aligning to about the future.“Are we in a v-cycle or a u-cycle? I can even ask if we are in an up-and-down cycle. People are divided on this,” he addressed attendees at the Hyatt hotel, 27 April 2015.

“We’re fortunate that we had a four years of USD100 dollar oil, and I think we became complacent. We and this country were living very well. Now, with the drop, the people, the country and us as a company are feeling it. We have to change ourselves and say, if we’re a leading company what should we be doing?

“We need to position ourselves to be able to thrive and survive in a USD50-barrel world now, re-baseline the organisation, and do whatever it takes to get us there, and maintain the discipline. So, if oil does go back to USD100, we shouldn’t change, we should maintain the discipline.”

He compared this strategy to Axon, pointing out that despite the decline, the company isn’t making an awful lot of changes in the way they operate day to day. “That’s something that that we are going to have to do and are doing right now,” explained Wilbert.

BP has worked with 1600 British companies in this region (Azerbaijan, Georgina, Turkey) during last 10 years. “British companies have been very, very instrumental in what has transpired in the region. You’re extremely important to us, and certainly you will continue to be important to us in the foreseeable future.”

British Embassy Update

New Deputy Ambassador Stephen McCormack addressed the BBG for the second time since arriving at post, and gave a brief rundown on the activities and events that the British Embassy is organising over the coming month:

13 May: Crisis training exercise in preparation for Baku 2015

31 May: Visit by the Lord Mayor of London Alderman Alan Yarrow to promote UK financial services.

2 June: Caspian Oil and Gas Show (COGS) reception

10 June: Queen’s Birthday Party (QBP)

COGS and the QBP are the British Embassy’s annual flagship events. Sponsorshop is still available so if you would like to have your name associated with the British Embassy please contact Head of the Commercial Section Jacqui Mullen Jacqui.Mullen2@fco.gov.uk

If you would like to attend a meeting or wish to become a sponsor, please contact Chairman John Patterson, jpatterson@i2offshore.net

BP to bring Azerbaijan’s energy to Europe

Back in September, celebrations at the Heydar Aliyev Center marked the groundbreaking for the Southern Corridor, BP’s Shah Deniz 2 project that will deliver gas from Azerbaijan to Italy. As the sponsor’s representative at the November meeting at the Hyatt’s Baku room on Thursday 6 November, BP Vice President of Shah Deniz 2 Ewan Drummond took the podium, and expressed the enormity of the task ahead.

Ewan Drummond
BP Vice President of Shah Deniz 2 Ewan Drummond. Image (and top) courtesy of BP

“The scale of the challenge and its complexity cannot be underestimated. We have seven governments with an active interest, 11 companies that hold shares in one or several parts of the chain, and 11 gas purchasers we’ve signed deals with to meet their customer needs.”

In length, the Southern Corridor is a 3500km gas chain from the Caspian Sea to the Adriatic. En route to Italy it will supply Georgia, Turkey, Greece and Bulgaria. The result will triple the capacity of the existing Sangachal terminal onshore, Azerbaijan’s oil and gas processing hub for oil and gas export, eventually providing 16 billion cubic metres of gas every year.

The project demands a vast network of human work force and local knowledge. It is creating 30,000 jobs including 10,000 in Azerbaijan and 2,000 in Georgia. As well as being an alternative energy supply for Europe, the Southern Corridor will have a positive impact on the economies of all the countries along its stretch.

“It’s breaking new grounds as a pipeline and a geopolitical project,” said Ewan.

For those who’d like a recap, in 1999 BP discovered what proved to be one of the world’s largest gas reserves, Shah Deniz. Shah Deniz housed 40 trillion cubic feet of gas – how it earned its name meaning ‘king of the sea’.

The initial project, Shah Deniz 1, was for a 700km pipeline, the South Caucasus pipeline, through Azerbaijan and Georgia to the Turkey border.

Ewan described: “The challenges in those days were considerable, but despite that, Shah Deniz stage 1 was developed in only seven years, and became operational in 2006. Since then it’s proved a secure and reliable supply of gas, to Georgian and Turkish customers. This is a track record which gives confidence to the government and our customers.”

BP’s challenge with Shah Deniz 2 is to complete Shah Deniz 1 virtually all over again, but on a much larger scale than anything they’ve done previously. They are using world class technologies and bringing in their most experienced managers.

Ewan has been with BP for 30 years and his role is to ensure that the corridor is completed safely, on time, and within the budget: “We must ensure the significant political support we have supporting us, BP and partners, is harnessed to deliver these projects on time,” said Ewan.

“The success of the corridor requires everybody to play a part,” Ewan summarised. “It’s like a chain. A chain is only as going to be as good as its weakest link, and this truly is a chain of projects.”

 

Embassy news

Deputy Ambassador Adrian Lee represented the British Embassy this month. “The big thing his week,” he said, “was yesterdays visit of the Minister for Europe David Lidington. We’ve had a  lot of commercially focused visits recently, so the minister was keen this time to give a different focus – on the Ngorno Karabakh, and in particular the humanitarianism issues of that, so he visited a couple of IDP settlements, students at the diplomatic academy, and political leaders about the prospects for a political solution, and I think that was very well received by our hosts.”

Last weekend and on Monday the British Council has a very successful fair for visiting British universities. This included a speed dating event with  45 Azeri and British institutions. Adrian commented: “It goes to show that the interest there is from both sides for greater links in education.”

Looking ahead, December will see the Bakutel exhibition: “For the first time we will have a UK pavilion, six British companies, and we also hope to be able to tie that in with another visit from the Prime Minister’s Trade Envoy Charles Hendry.”

Watch this space.

This month’s meeting was hosted by BBG Deputy Chairman Morgan Phillips. If you would like to attend a meeting or wish to become a sponsor, please contact Chairman John Patterson, jpatterson@i2offshore.net