BP Negotiating to Extend Azeri ACG Oil Contract Beyond 30 Years

BP Plc (BP/) is in talks with Azerbaijan to extend a 30-year contract to operate the country’s largest oil deposit after the company worked to appease criticism over falling output at the project by bringing in new managers.

BP, operator of the Azeri-Chirag-Guneshli development with a 35.8 percent stake, is “looking at additional project extensions,” Charles Hendry, the British prime minister’s trade envoy for Azerbaijan, Kazakhstan and Turkmenistan, told reporters today in the Azeri capital of Baku. “Discussions are going on with your government about how to take this forward, the ACG project, for instance, being one of those.”

The current contract is due to expire in 2024.

“We have been asked to conduct a technical survey of what ACG will be like after the existing” production-sharing agreement expires, Tamam Bayatli, a spokeswoman for the U.K.’s biggest oil company, said today by telephone. BP will submit the survey to Socar, she said, declining to comment further.

BP has staunched declining output at ACG since the country blamed it for a slump last year. The company replaced regional managers and brought in advisers from abroad to pare the drop after Azeri President Ilham Aliyev accused the London-based company of “grave mistakes” at the field.

State Oil Co. of Azerbaijan, or Socar, agreed in 1994 with BP and partners including Statoil ASA (STL), Chevron Corp. and Exxon Mobil Corp. to develop the deposit in Azerbaijan’s section of the Caspian Sea. ACG produced 24.5 million tons of oil in the first nine months of 2013, after 25.3 million tons a year earlier, BP’s Baku office said Nov. 13. The deposit provided about 78 percent of Azerbaijan’s total production last year.

Socar executives have previously suggested the company may want to develop the field on its own after the contract expires.

To contact the reporter on this story: Zulfugar Agayev in Baku at zagayev@bloomberg.net

To contact the editor responsible for this story: Hellmuth Tromm at htromm@bloomberg.net

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