AZERBAIJAN: The backers of Azerbaijan's Shah Deniz II gas project sign a final investment deal

Record ID: 218345

  • Title: AZERBAIJAN: The backers of Azerbaijan's Shah Deniz II gas project sign a final investment deal
  • Date: 17th December 2013
  • Summary: BAKU, AZERBAIJAN (DECEMBER 17, 2013) (REUTERS) EXTERIOR OF AZERBAIJANI STATE OIL COMPANY CAR DRIVING AWAY CARS ON ROAD AZERBAIJANI STATE OIL COMPANY ENTRANCE BAKU, AZERBAIJAN (DECEMBER 17, 2013) (ORIGINALLY 4:3) (REUTERS) VARIOUS OF PEOPLE SITTING IN CONFERENCE HALL (SOUNDBITE) (English) AZERBAIJANI PRESIDENT, ILHAM ALIYEV, SAYING: "In 2012 we signed an historic agreem
  • Embargoed: 1st January 2014 12:00
  • Keywords:
  • Location: Azerbaijan
  • Country: Azerbaijan
  • Topics: International Relations,Energy
  • Reuters ID: LVAB48LFHM7L8GBXR6UMR1H1OXQ6
  • Story Text: Backers of Azerbaijan's Shah Deniz II gas project signed a final investment decision on Tuesday (December 17), a crucial move for the future of an alternative gas transit route to Europe as the continent tries to wean itself off Russian energy supplies.
    Azeri President Ilham Aliyev was pleased to announce the deal at a ceremony held in the capital Baku.

    "In 2012 we signed an historic agreement with Turkey on Trans-Anatolian pipeline PANAP. This year, 2013, Trans-Adriatic pipeline TAP was selected as the main export root. And now we are signing the final investment decision on Shah Deniz, too," Aliyev said.
    The documents signed in Baku include an investment decision on Shah Deniz II, as well as the Trans-Anatolian (TANAP) and Trans-Adriatic (TAP) gas pipeline projects. Combined, the projects will cost $35 billion, Aliyev said.
    Statoil said it would sell a 10 percent stake in the consortium to partners BP of Britain and Azeri state energy firm SOCAR for $1.45 billion in cash. BP will buy 3.3 percent and SOCAR 6.7 percent.
    Norway's Statoil, in a surprise announcement, said it was cutting its stake in the Shah Deniz consortium to 15.5 percent from 25.5 percent.
    An official statement by the consortium, which also includes Total, was expected later on Tuesday.
    Croatian Prime Minister Zoran Milanovic, who also spoke at the conference, told the audience that the Southern Gas Corridor was important for Croatia and Central Europe.

    "Croatia in this project is in a way at the end, literally at the end of the pipeline. It is deep in central Europe, speaking of our Mediterranean ports. We also intend to diversify the sources of our energy supplies. We are partially self-reliant but to the extent you are not fully reliant, you are not reliant at all. We have serious plans underway to construct the LNG (liquified natural gas) terminal in the port of Rijeka as the additional source of the energy and gas supply for the countries of central Europe," Milanovic.
    BP Azerbaijan and the consortium said SOCAR and its partners in Shah Deniz II had agreed to extend terms for the project by 12 years to 2048.
    The Chairman of Azerbaijani Centre for Economic and Social Development, Vugar Bayramli, welcomed the deal, saying it was very important for Azerbaijan from both political and economic points of view.

    "Of course, TANAP and TAP are really important for Azerbaijan not only from the political point of view but also from the economic point of view. Considering that Azerbaijan's signing with TAP and TANAP, Azerbaijan will have a direct access to the European market and in the first year Azerbaijan will be able to export more than 10 billion cubic meters of natural gas to the European market. And at the same time Azerbaijan will export more than 10 billion cubic meters of natural gas to the Turkish market," Bayramli said.
    From around 2019, Shah Deniz II is expected to supply 16 billion cubic metres (bcm) per year to Europe, including 6 bcm for Turkey.
    European buyers have struggled to find alternatives to Russian gas producer Gazprom, whose contracts link prices to oil, generally making it expensive compared to the spot market.
    Gazprom covers a quarter of Europe's gas needs, with more than 150 bcm of exports a year. In response to Europe's quest for Caspian supply, Gazprom proposed its $39 billion South Stream project, which would pipe gas to northeast Italy through the Black Sea starting at the end of 2015.
    Earlier this year, SOCAR and partners including BP and Statoil selected the TAP for potential gas deliveries to Europe over its Austria-based rival Nabucco West.
    TANAP will be built from the Turkish-Georgian border to Turkey's border with Europe, with its preliminary total cost estimated at $20 billion.
    Buyers of Azeri gas from Shah Deniz II are Shell, Bulgargas, Gas Natural Fenosa, Greek DEPA, Germany's E.ON , France's GDF Suez, Italian regional utility Hera Trading, Switzerland's AXPO and Italy's Enel.
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