One of the world’s largest gas fields boosted by $1 billion ADB loan

The Asian Development Bank said Wednesday it will loan $1 billion for the expansion of Azerbaijan’s Shah Deniz II, one of the world’s largest gas fields.

The loan consists of a $500 million private sector loan to the Southern Gas Corridor Closed Joint Stock Company (SGC) and a $500 million sovereign-counterguaranteed partial credit guarantee, ADB said in its statement.

The guarantee will back $526 million in commercial loans made by a consortium of international banks to SGC, which is 51% owned by the Azerbaijan government and 49% by the State Oil Company of the Azerbaijan Republic.

Shah Deniz is located offshore in the Caspian Sea, about 70 kilometers from Azerbaijan’s capital, Baku.

The field’s annual gas production capacity is expected to increase from about 10 billion cubic meters (bcm) to 26 bcm.

The additional gas will be exported through a chain of pipelines — called the Southern Gas Corridor — via Georgia and Turkey on to Greece, Albania, and Italy from where it can reach wider Europe.

The total cost of the Shah Deniz II expansion project, being developed by a consortium of companies, is expected to top $26 billion.  BP will build and operate the project facilities.

Production from the project is expected to begin in 2018.