Azerbaijan gas find brings cheer to BP

BP investors were treated to a rare bit of good news yesterday when the oil giant revealed that it had discovered a gas reservoir that could double the output of the largest natural gas field in Azerbaijan.

Though the new zone in the Shah Deniz field will not begin producing natural gas for at least a decade, if at all, shareholders were cheered by the news, sending the company's stock up 2.7 per cent to close at 599p.

"The exploration discovery represents a potentially significant find," the company said. The Shah Deniz field is a deep-sea site in the South Caspian Sea. The new gas zone sits below the currently tapped reservoir and is highly pressurised, meaning that extracting it will be difficult, and expensive. "Although further work is required to define this second phase it will likely be similar or larger than stage 1," BP said. The company and its partners—StatoilHydro, Total, State Oil Co. of Azerbaijan, Nico of Iran, and Lukoil – have earmarked $4.2bn (£2bn) to develop phase one.

The discovery comes just three weeks after the company agreed to pay $303m to American authorities to settle charges that it manipulated the propane market there in 2004, the latest in what has been a raft of bad news that has buffeted the company's share price. Last month it reported a 50 per cent drop in profits.

BP's Anglo-Dutch rival Royal Dutch Shell moved yesterday to counteract its own operational difficulties in Nigeria. The company announced a restructuring of its operations in the country, combining three companies that until now have operated separately. The move was seen as an acknowledgementthat it does not expect to return to full capacity production in the country for the foreseeable future.

Last year, Shell was forced to shut down its operations in the Western Niger Delta amid violence and hostage-taking of oil workers by locals demanding a greater piece of oil revenues and compensation for pollution.