BP Plc’s declining production in Azerbaijan prompted President Ilham Aliyev to threaten action against the U.K. explorer, which gets more than 3 percent of output from the former Soviet republic.
Aliyev said the “unexpected decline” in oil output was because of “grave mistakes’ by BP, which operates the Azeri-Chirag-Guneshli, or ACG, and Shah Deniz fields. In comments broadcast yesterday on state TV, Aliyev accused BP of failing to deliver on a promise nearly a month ago to keep output at a stable level.
“It’s totally unacceptable,” Aliyev said in his first public criticism of the London-based company. “The State Oil Co. of Azerbaijan has been instructed to officially raise this issue and take the necessary measures. Serious measures are needed and will be taken.”
The dispute comes as Europe’s second-largest oil company works through litigation in the U.S. over the 2010 Gulf of Mexico spill and attempts to sell its stake in the Russian venture TNK-BP. BP shares have dropped about 5 percent this year and remain about a third below their price before the Macondo disaster two years ago.
ACG output plunged 12 percent in the first half of 2012 from a year earlier, according to data on BP’s website. The field, which BP operates and holds a 35.8 percent stake in, produced 684,000 barrels a day in the period. ACG produced 35.4 million metric tons of oil last year, or 78 percent of Azerbaijan’s total output.
BP’s failure to meet output targets at the field had cost Azerbaijan $8.1 billion in revenue, Aliyev said in comments posted on the presidential website.
BP’s worldwide output was 2.4 million barrels a day in the first half, excluding its share in TNK-BP. Azerbaijan accounts for either 4.5 percent without TNK-BP or 3.2 percent including it.
“We are fully committed to Azerbaijan,” said London-based BP spokesman Robert Wine in an e-mailed response to questions. “We are working with Socar to address ACG production issues as quickly as possible.”
Shah Deniz produced about 18.5 million cubic meters of gas a day in the first half, or 119,000 barrels of oil equivalent. BP’s share was about 4.7 million cubic meters a day, or 30,000 barrels of oil equivalent.
BP and the U.S. Department of Justice are getting closer to a settlement over the Gulf oil spill that would resolve civil and criminal liabilities for the company, the Wall Street Journal reported today, citing unidentified people close to the discussions.