Foreign companies working in Azerbaijan plan to cut costs and increase hydrocarbon production at the same time. Earnings for Baku from the contracts will increase, BP-Azerbaijan President David Woodward said in Baku.

AIOC COSTS TO DROP 0.3%. Azerbaijan International Operating Company (AIOC), operator of the Azeri-Chirag-Gunashli offshore project, is targeting costs to edge down 0.3% to $2.896 bln in 2006, David Woodward, the company's president, told a press conference.

Capital costs will be $2.552 bln, and operating costs $344 mln in 2006, compared with a forecast $2.711 bln and $193 mln respectively in 2005, Woodward said.

He said capital costs were $400 mln over budget and operating costs $40 mln over in 2005 due to an additional workload, faster schedule and growth in equipment and input costs.

Expenditure on the development of the Shah Deniz field in 2006 will amount to $865 mln, which is 33.4% less than forecast expenditure in 2005, Woodward said.

He said that the drop in expenditure is due to the completion of work on the construction of a production platform and an export pipeline.

Oil production from the platform in western Azeri will begin in January, he said.