Negotiations on purchase of Shah Deniz gas to wind up in September

Source: AzerNews

BP Azerbaijan, which is part of the international consortium developing Azerbaijan's giant Shah Deniz field in the Caspian Sea, has announced the terms of the completion of the talks on purchase and sale of Azerbaijani gas to be produced within Shah Deniz 2, the second phase of the Shah Deniz development which is due to begin from 2017 or 2018.

The company said that the terms of the sale of gas to be supplied from the Caspian Sea to Europe via Trans-Adriatic Pipeline have been agreed with a number of buyers in Italy, Greece and Bulgaria.

"These arrangements will be finalized during September," the company said.

TAP will transport natural gas from the giant Shah Deniz II field in Azerbaijan to the most attractive markets in Europe.

The pipeline will connect with Trans Anatolian Pipeline (TANAP) near the Turkish-Greek border at Kipoi, across Greece and Albania and the Adriatic Sea, before coming ashore in southern Italy.

Three Shah Deniz Consortium members -- Azerbaijan's state energy company SOCAR, British BP and France's Total -- are planning to spend $2.3bn in 2013 within Shah Deniz Phase 2.

The consortium is planning to make a final investment decision on Phase 2 later in 2013. A final investment decision is expected in the fourth quarter of 2013 and first production under Phase 2 is planned for 2018. Total shipments under Shah Deniz 2 will be 16 billion cubic meters a year, with 10 billion cubic meters designed for Europe and 6 billion for Turkey.

BP's report also said the volume of gas production from the Shah Deniz field amounted to 4.8 billion cubic meters of gas and 1.26 million tons of condensate (about 10 million barrels) in the first half of 2013.

According to the report, the daily production from the Shah Deniz field amounted to approximately 27 million cubic meters of gas and 54,800 barrels of condensate in the reporting period.

In the first six months of 2013 the operating expenses within the project amounted to $94 million while capital expenses made up $855 million. The approved operating expenses will amount to $225 million and capital expenses are forecast at $2.31 billion in 2013, the report said.

About 42.7 billion cubic meters of gas and 11.3 million tons of condensate (90 million barrels) were delivered to world markets from 2006 to the first half of 2013.

The Shah Deniz field, which is one of the world's largest gas-condensate fields, was discovered in 1999. Its reserves are estimated at 1.2 trillion cubic meters of gas. Overall, the field has proved to be a secure and reliable supplier of gas to Azerbaijan, Georgia and Turkey as well as Europe.