GREAT PROGRESS ACHIEVED IN ACG & BTC PROJECTS

Profit oil from Chirag had been obtained since late 1999. What is the current status?

- Since EOP start-up in November 1997 the overall Chirag production has been in excess of 245 million barrels (some 34 million tonnes). Export from Supsa has continued on schedule and to date BP has successfully transported about 28 million tonnes of oil via the Western Route Export Pipeline for AIOC partners and the State of Azerbaijan (186 tankerloads - over 23.7 million tonnes for AIOC and 32 tankerloads - some 4.3 million tonnes of Azerbaijan's profit oil) from Supsa. In that same timeframe over 13.5 million tonnes of oil (including SOCAR non-ACG oil) has been transported via the Northern Route Export system, which has allowed the shipment of 157 tankerloads from Novorossiysk including 104 tank ships (over 9.6 million tonnes of SOCAR oil) since the beginning of transportation operations.

Are you satisfied with the progress of the ACG project activities?

- Construction work is on track for First Oil from Central Azeri in early 2005 with facilities construction about 90% complete versus 90% planned for the end of March.

The jacket for the Central Azeri production, drilling and quarters (CA-PDQ) platform sailed away early March 9, from the Heydar Aliyev Baku Deepwater Jackets Factory (BDJF) yard to be installed at its permanent location in the Azeri field. Offshore the jacket was successfully launched and its installation over the template at the platform location, through which 12 wells have already been drilled, will be completed next week.

At the BDJF yard all heavy lifts on CA-PDQ topsides have been completed safely with the topsides commissioning works now being underway. Overall the topsides are 93% complete and the plans are to install the topsides in 3Q this year.

Significant progress has been achieved in other parts of the Azeri Project construction activities. 65% progress has been achieved for first gas through the Compression and Water Injection Platform (C&WP) versus 65% plan. The West Azeri (WA) facilities construction progress is 48% versus 45% plan to date. The East Azeri (EA) facilities progress is 18% actual versus 16% plan. The fabrication and installation have relied entirely on local infrastructure enabling us to considerably increase the involvement of the local workforce.

A successful programme of pre-drilling trials was completed early in Q1 and a decision has now been made to install a new template in WA. This will enable us to commence drilling in WA during mid-summer this year.

In February we commenced the East Azeri (EA) pre-drill programme. The drilling at EA is conducted from the Dada Gorgud semi-submersible rig and the programme currently consists of six wells, five of which are planned as producers and one as a cuttings-re-injection well (to be used for platform drilling activity only). Two of the production wells will have an open hole gravel pack completion installed as part of the pre-drilling programme.

The Sangachal Terminal Expansion Programme (STEP) construction activities, which are aimed at building one of the world's largest terminals, are progressing on schedule and within the budget. Overall ACG construction works at STEP are 94% complete with over 800 km of 1200 km ACG 1 cables already pulled to date. Currently the programme employs over 4500 people of whom over 77% are local Azerbaijan citizens. The majority of these people are local residents from adjacent villages and towns of the Garadagh district.

At the ATA (AMEC/Tekfen/Azfen) yard extensive yard upgrade works are complete. At the yard the Central Azeri C&WP deck construction is currently ahead of schedule with cellar deck panels already erected, equipment, pipe rack and pipe spool installation commenced and good progress achieved to date. The piping fabrication at Ceyhan also remains ahead of schedule.

The ACG Phase 3 Project encompasses the development of the Deep Water Gunashli portion of the ACG field. In addition, the design of the Phase 3 Project will allow capture of potential reserves in the western portion of the Chirag area which may not be accessed by the Chirag-1 Platform. In total, the Phase 3 Project represents the last major development of the ACG Production Sharing Agreement. Reserves for the Deep Water Gunashli area are approximately 1.1 billion barrels. The project has completed the Appraise and Select stages of design development, and entered the Define / Front-end Engineering stage in September 2003. Project sanction is now projected to be September 2004, with a first oil date of mid-2008. Ultimately, development of Phase 3 is projected to allow total ACG field production to exceed 1 million barrels a day.

What is the status of BTC construction and financing?

- BTC construction activities have continued on schedule. Today we have major activities in over 17 construction sites along the entire BTC route between Baku in Azerbaijan and Ceyhan in Turkey. The pipe-laying is progressing in accordance with the construction schedule.

In Azerbaijan: Of the total 443km of the pipeline length in this country we have cleared about 336km of the right of way (ROW), have strung about 332km and have welded some 314km of pipe. In addition, we have trenched about 160km of land, lowered about 145km of pipe in the ground and backfilled over 135km of land.

Work continues to progress at the Pump Station PS-A2 site near Yaldilli in the Yevlakh district, and at Intermediate Pigging Station IP-A1 near Kurdamir.

In Georgia: Of the total of 249 km of the pipeline length in this country we have cleared over 182 km of the ROW and have welded some 170km of pipe.

In Turkey: BOTAS the Turkish owned construction company is also taking actions to ensure an on-time delivery of the pipe-laying and pump stations construction activities. Pipeline welding is approximately 30% complete and pump stations are approximately 20% complete. Every two months a joint commission led by Azerbaijan's Deputy Prime-Minister Abid Sharifov and the Turkish Energy Minister Hilmi Guler review progress of the Turkish section and agree recommended actions. As part of this review BOTAS has committed to mobilizing to an additional pipeline spread on Lot A near the Georgian border and working on an integrated plan for pump stations to ensure an on time delivery of the project.

The BTC financing agreements were signed in Baku on 3rd February. This completed the financing arrangements for the pipeline which will cost $2.95 billion to construct ($3.6 billion total project cost including linefill and loan interest during construction).