Shah Deniz Consortium Signs Major Gas Sales Deal with European Buyers

The Shah Deniz consortium announced today that 25-year sales agreements have been concluded for just over 10 billion cubic metres a year (BCMA) of gas to be produced from the Shah Deniz field in Azerbaijan as a result of the development of Stage 2 of the Shah Deniz project. Nine companies will purchase this gas in Italy, Greece and Bulgaria.

The Shah Deniz Stage 2 project is set to bring gas directly from Azerbaijan to Europe for the first time, opening up the Southern Gas Corridor.

In total 16 BCMA of Shah Deniz Stage 2 gas will be delivered through more than 3500 kilometres of pipelines through Azerbaijan, Georgia, Turkey, Greece, Bulgaria, Albania and under the Adriatic Sea to Italy.

Today’s agreements for European gas sales follow the signing of agreements with BOTAS in 2011 to sell 6 BCMA of gas in Turkey.

“We are delighted that the years of negotiations led by SOCAR with multiple European companies have come to a successful conclusion. These agreements mark the biggest gas sales in the history of Azerbaijan. They also mark the beginning of direct links between Azerbaijan’s huge gas resources and the European markets. Azerbaijan is committed to long-term cooperation with the Shah Deniz gas purchasers. I am sure that this cooperation will bring benefits to consumers across Europe and will play an important role in strengthening European energy security,” said Rovnag Abdullayev, President of SOCAR.

Commenting on the agreements, Gordon Birrell, Regional President for BP in Azerbaijan, Georgia and Turkey, and President of the Operator of the Shah Deniz PSA, said: “The Shah Deniz consortium is proud to be involved in the conclusion of one of the biggest gas deals in the history of the oil and gas industry. On behalf of the Shah Deniz consortium, I would like to thank all the companies involved in these negotiations. The deep cooperation that has led to the signing of these gas sales agreements sets the foundation for many years of partnership. The strong demand for Shah Deniz gas gives us confidence in the long-term development of Azerbaijan’s gas resources. Today’s signings represent another important milestone bringing us closer to a final investment decision on the Shah Deniz 2 project”.

The buyers who have today agreed to buy the gas are: Axpo Trading AG, Bulgargaz EAD, DEPA Public Gas Corporation of Greece S.A., Enel Trade SpA, E.ON Global Commodities SE, Gas Natural Aprovisionamientos SDG SA, GDF SUEZ S.A., Hera Trading srl and Shell Energy Europe Limited. Of the total 10 BCMA, around 1 BCMA will go to buyers intending to supply to each of Bulgaria and Greece and the rest will go to buyers intending to supply Italy and adjacent market hubs.

The completion of these agreements follows expressions of interest from many different companies for Shah Deniz gas and marks the completion of the Shah Deniz 2 gas sales process.

The gas sales agreements will enter into force following the final investment decision on the Shah Deniz Stage 2 project which is targeted for late this year.

The Shah Deniz Stage 2 project will bring gas from the Caspian Sea to markets in Turkey and Europe, opening up the ‘Southern Gas Corridor’. Shah Deniz Stage 2 is expected to add a further 16 billion cubic meters per year (BCMA) of gas production to the approximately 9 BCMA from Shah Deniz Stage 1.

This Stage 2 development of the Shah Deniz field, which lies some 70 kilometres offshore in the Azerbaijan sector of the Caspian Sea, is expected to include two new bridge-linked production platforms; 26 subsea wells to be drilled with 2 semi-submersible rigs; 500 kilometres of subsea pipelines built at up to 550 metres of water depth; a 16 bcma upgrade for the South Caucasus Pipeline (SCP); and expansion of the Sangachal Terminal. The Trans-Anatolian Pipeline (TANAP) will transport gas across Turkey and the Trans-Adriatic Pipeline will transport gas from the Turkish-Greek border to Italy.

The Shah Deniz co-venturers are: BP, operator (25.5 per cent), Statoil (25.5 per cent), SOCAR (10 per cent), Total (10 per cent), Lukoil (10 per cent), NICO (10 per cent) and TPAO (9 per cent).

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Press Release, September 20, 2013