TURKEY - Black Sea Operations.

Prospects in the Black Sea are excellent judging by data acquired by BP, and the US companies Toreador Resources and Anadarko. BP operates in the south-western and eastern sections of the sea and has found a fairly large reserve of gas put on stream in 1998. BP, in a 50-50 JV with TPAO, has drilled in that area. The shelf there is only about 19-19.3 km wide. The water deepens within a short distance to more than 2,000 feet, requiring the drilling of costly deviated wells from the shore at Akcakoca, with a high-angle deviation able to cover most of the shelf.

BP is leading deep-water exploration in the Turkish and Georgian parts of the Black Sea. In mid-June 2005, BP spudded its first appraisal, about 120 km north-east of the city of Trabzon, and was to drill two wells 4,600 metres below the seabed in water depths ranging from 1,100 to 1,300 metres. These were the first deep-water drilling activities in the Black Sea, representing a major challenge in exploration technology and investment in what is viewed as a geological and ecological frontier.

BP had already collected extensive 2D seismic covering the entire 18,000 sq km of Turkey's Block 3534 between 1991-02, and 1,163 sq km of 3D seismic in 2003. It was based on information obtained from the data on Block 3534, that BP and TPAO farmed into an adjacent block in the Georgian sector. About half the size of Block 3534, the Georgian tract covers about 80% of that country's waters.

The production sharing agreement (PSA) for the Georgian block now is held by Anadarko (48%). BP (38.5%) and TPAO (13.5%). Anadarko's UK partner in this block, JKX Oil & Gas, retains a 4% net profit interest. BP has assumed the operatorship of the block. The Georgian government has a 12% "Back-in option" at the expense of Anadarko in the event of a confirmed commercial discovery.

The Georgian block and Block 3534 share similar geological formations which extend from north to south and from Georgian to Turkish waters. A number of structures have been identified there. Upstream on April 29, 2005, reported that each of these potentially contained several billion barrels of oil. It said the cost of each well there may vary between $45-50m.