Bloomberg News

Statoil Sees Shah Deniz Investment Decision in a Year’s Time

May 10, 2012

Statoil ASA (STL), a partner in the Shah Deniz 2 gas field off Azerbaijan, expects the development group to make a final investment decision in mid-2013 as Europe seeks to tap the fuel to ease dependence on Russian supply.

The Norwegian company and the rest of the BP Plc-led group must decide on pipeline routes before agreeing on investment, Lars Sorensen, president of Statoil Azerbaijan, said today in the Azeri capital, Baku. “We cannot sanction the project and start big investments unless we have a transportation route.”

Proposed pipelines including Nabucco, the South East Europe Pipeline and the Trans-Adriatic Pipeline are competing for gas from Shah Deniz, whose partners will select a route by mid-2013, BP Vice President for Shah Deniz Al Cook said in April. Europe, which gets 25 percent of its gas from Russia, is seeking to add sources after suffering supply halts in the past six years.

About $23 billion to $24 billion will be invested in producing gas from Shah Deniz 2, estimated to hold 1.2 trillion cubic meters of the fuel, Lorensen said. The second phase of the Caspian Sea project will expand its current production of 9 billion cubic meters a year by 16 billion cubic meters.

Shah Deniz 2 is due to start output in late 2017 or early 2018. Apart from BP and Statoil, the project partners include France’s Total SA and State Oil Co. of Azerbaijan, or Socar.

Turkish Pipeline

Socar has an 80 percent stake in the Trans-Anatolia Pipeline, which is designed to carry Shah Deniz gas across Turkey and could be a “viable alternative” to the European Union-backed Nabucco route, Sorensen said.

Azerbaijan and Turkey signed a memorandum of understanding in December on the 2,000-kilometer (1,240-mile) pipe. Turkey’s state pipeline company, Boru Hatlari Ile Petrol Tasima AS, and energy producer Turkiye Petrolleri AO have a combined 20 percent stake in the venture.

The start of Shah Deniz 2 will also necessitate the expansion of the BP-led South Caucasus pipeline to 25 billion cubic meters in annual capacity from 9 billion cubic meters, Lorensen said. The capacity can be increased to more than 60 billion cubic meters a year if more gas becomes available from Azerbaijan or Turkmenistan, he said.

To contact the reporter on this story: Zulfugar Agayev in Baku at zagayev@bloomberg.net

To contact the editor responsible for this story: Hellmuth Tromm at htromm@bloomberg.net


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