Azerbaijan seeks more scrutiny over BP-led offshore oil project amid anger at output slump

BAKU, Azerbaijan – Azerbaijan's top energy official urged further scrutiny of the international consortium developing the Caspian Sea nation's main oil field amid mounting irritation at a slump in output.

Industry and Energy Minister Natiq Aliyev said Monday that the drop-off in production over recent years at the Azeri-Chirag-Guneshli project was "abnormal."

President Ilham Aliyev said last week that errors by AIOC, the field development consortium led by BP, had cost the oil-dependent country $8 billion in lost revenue. The sharp tone of that statement stoked speculation of increasingly punitive conditions for international investors, as the government seeks to maintain state expenditures despite stagnating energy revenues.

The frustration has also been sharpened by the discrepancy between production and BP's own forecasts.

"We see large numbers that are significantly different from those planned, which means either that the project was conceived improperly or that activities carried out to stabilize oil production are insufficient," Aliyev said at an energy conference in the capital, Baku.

BP Azerbaijan says it's working with state oil company SOCAR to address production issues.

In 2011, Azeri-Chirag-Guneshli produced around 717,600 barrels a day, which amounted to 35.4 million tons over the entire year. The average daily output peaked at 823,100 barrels in 2010.

Aliyev said upward revisions to the total reserve estimate, which currently stands at around 930 million tons of oil, had raised hopes of higher output.

"There had even been plans that annual output could reach 65 million tons, so it is necessary that new wells be put in place," he said

The production drop has been attributed to repair work on drilling platforms and changes in BP security measures implemented after the Gulf of Mexico spill in 2010.

Azerbaijan's economy is strongly dependent on its energy exports and falls in production impact significantly on the country's growth.

Aliyev downplayed concerns that the criticism was a sign of a souring investment climate.

BP controls a 35.8 percent stake in the project, while SOCAR has 11.6 percent and Chevron has 11.3 percent. The other current shareholders are ExxonMobil, Norwegian state-controlled oil company Statoil, Inpex and ITOCHU of Japan, Turkey's TPAO, and New York-based Hess Corp.

The production sharing agreement to develop the project, dubbed the "Contract of the Century," was signed in 1994.