BP share price: Group and partners sanction $6bn Azeri development

BP (LON:BP) and its partners have sanctioned a $6-billion project offshore Azerbaijan, the blue-chip oil major has said. The news comes as the London-listed group prepares to update investors on its first-quarter performance on April 30.

Thursday’s trading saw the BP share price give up 0.75 percent to close at 567.70p, marginally underperforming the broader UK market, with the benchmark FTSE 100 index losing 11.44 points to end trading 0.15 percent lower ahead of the long Easter weekend. This morning, the shares have surged 1.30 percent to 575.10p as of 08:05 BST, tracking oil prices higher, as compared with a 0.16-percent gain in the Footsie.

Development of giant ACG field

BP and its partners, which include Azerbaijan’s state energy company SOCAR, sanctioned on Friday the Azeri Central East (ACE) project, which marks the next stage of development of the giant Azeri-Chirag-Deepwater Gunashli (ACG) oilfield complex in the Azerbaijan sector of the Caspian Sea. The $6-billion development includes a new offshore platform and facilities designed to process up to 100,000 barrels of oil per day.

The project is expected to achieve first production in 2023 and produce up to 300 million barrels over its lifetime.  Construction activities are due to start this year and run through mid-2022. At peak, construction activities are expected to create up to 8,000 jobs.

Analysts weigh in on news

Reuters quoted Robert Morris, senior analyst at Wood Mackenzie, as commenting that BP’s main aim now would be to maximise the extraction of remaining reserves.

“ACE is central to those plans, adding 100,000 barrels per day of production at peak in the mid-2020s,” he pointed out.

In other analyst news, RBC Capital downgraded the oil major, taking it off its ‘Top Picks’ list, explaining that the BP share price had “performed well versus the sector in recent months, and we see less valuation upside now”.