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BP Completes Devon Energy Transaction in the Caspian

BP today announced the completion of its purchase from Devon Energy of an additional interest in the BP-operated Azeri-Chirag-Gunashli (ACG) oilfield development in the Azerbaijan sector of the Caspian Sea.

"This is an important step which follows our announcement in March 2010 of a broad-ranging deal between BP and Devon Energy of which the Azerbaijan component has now been completed. The acquisition of the additional interest in Azerbaijan is part of BP's commitment to the Caspian region as a core strategic area where we already hold a strong position and intend to enhance this significantly in the future," said Rashid Javanshir, president BP Azerbaijan.

"Another equally important example of this intention is the Heads of Agreement (HOA) which we recently signed with SOCAR in Baku to define the basic commercial principles for a new production sharing agreement to jointly explore and develop the Shafag and Asiman offshore block in the Caspian," Javanshir added.

Devon Energy's 5.63 per cent stake in the ACG development will be split between BP (3.29 per cent) and the following parties which have exercised preferential rights in relation to the transaction - Chevron (0.99 per cent), Inpex (0.96 per cent) and Itochu (0.38 per cent).

Notes:The ACG Production Sharing Agreement (PSA), signed in September 1994, covers the 30 year development of the Azeri-Chirag-Gunashli contract area. It was ratified by the Milli Majlis and became effective on December 12 the same year, having already become known in Azerbaijan and elsewhere as "the Contract of the Century".

The additional interest acquired from Devon will increase BP's operating interest in the ACG development to 37.43 per cent and those of Chevron, Inpex and Itochu to 11.27 per cent, 10.96 per cent and 4.30 per cent respectively, with the remaining interests held by AzACG (a subsidiary of SOCAR, the State Oil Company of the Azerbaijan Republic - 10 per cent), Statoil (8.56 per cent), Exxon (8.00 per cent), TPAO (6.75 per cent) and Hess (2.72 per cent).

The field has been developed in several phases: Chirag has been producing since 1997 as part of the Early Oil Project (EOP). This was followed by Azeri Project Phase 1, Central Azeri production, in early 2005. The successive Phase 2 included West Azeri, which started production in January 2006 and East Azeri, which started production in October 2006. Phase 3, Deepwater Gunashli, started up in April 2008. The next stage of development of ACG is the Chirag Oil Project which is currently at the execute stage, with first oil expected in 2013. Overall production from all phases is expected to be about 1 million barrels per day.

On March 11 BP announced a broad-ranging deal, in which BP agreed to pay Devon Energy $7.0 billion in cash for assets in Brazil, Azerbaijan and the US deepwater Gulf of Mexico. The Azerbaijan element is the third to be completed so far, following completion of acquisition of assets in the Gulf of Mexico and the sale of a 50 per cent stake in BP's Kirby oil sands interests in Canada. The purchase of assets in Brazil has yet to be completed.

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