EBRD Funds Further Development of Shah Deniz Gas Field in Azerbaijan

The European Bank for Reconstruction and Development (EBRD) is continuing to invest in projects that will strengthen the security of energy supply in its region of operations.

The EBRD is extending a senior loan of US$ 200 million to LUKOIL Overseas Shah Deniz Ltd, a wholly-owned subsidiary of LUKOIL Overseas, the operator of LUKOIL’s overseas upstream projects.

The proceeds of the loan will be used to further develop Stage 1 of the offshore Shah Deniz gas and condensate field in Azerbaijan.

EBRD Managing Director for Energy and National Resources, Riccardo Puliti, said: “Stage 1 of the Shah Deniz field is crucial for the energy security of Azerbaijan, Georgia and Turkey. Our new financing will help prepare the ground for further reservoir expansion to feed the gas through the Southern Corridor – a proposed energy route from the Caspian which could potentially deliver gas all the way to the European Union. This project is also an example of the good cooperation with LUKOIL in our common efforts to develop operational best practices for hydrocarbon production.”

The EBRD has played a crucial role in the initial development of Shah Deniz Stage 1, providing LUKOIL with loans of US$ 180 million, and SOCAR – the state oil company of Azerbaijan – with US$ 170 million. The EBRD also ensured the application of high international standards – technical, environmental and health and safety.

Vice President of LUKOIL, President of LUKOIL Overseas, Andrey Kuzyaev, said: “Shah Deniz is one of the company’s key projects in this region, and LUKOIL is paying substantial attention to ensuring that high standards are implemented in the field. We are satisfied with our long-term cooperation with the EBRD and appreciate their support for our efforts in these matters.”

The current loan will pay for part of a technological upgrade of existing operations, which could see output from the field increase by up to 2 billion cubic metres per annum (bcma). This increase will see peak production from the gas field reach 8.9 bcma. For comparison, Azerbaijan itself consumes 13 bcma of gas.

The Shah Deniz consortium comprises BP (as operator), Statoil, LUKOIL, SOCAR, Total, NICO and TPAO. LUKOIL owns 10 per cent of the gas field. Gas and condensate from the field are transported via the South Caucasus gas pipeline and the BTC oil pipeline respectively, to Turkey through Georgia.

Press Release, February 27, 2014; Image: BP