BP announces plans on Shah Deniz Stage 2 ahead of investment decision this year
By Aynur Jafarova
A final investment decision on the project for Phase 2 of developing Azerbaijan's Shah Deniz offshore gas field Shah Deniz is planned for 2013, BP Vice President Al Cook told journalists on Wednesday, according to Trend news agency.
"And that means BP, SOCAR and our partners have to prepare not just Shah Deniz, we have to prepare the wells, offshore facilities, we have to prepare the South Caucasus Pipeline Expansion (SCPX), the Trans-Anatolian pipeline system and the European pipeline system. All this has to be ready in 2013 for a final investment decision," the BP's Vice President for Shah Deniz Development said.
Cook said there are plenty of challenges ahead in 2013. "And one of the most important milestones is selection between the Trans Adriatic Pipeline and the Nabucco West pipeline to be made in June for our gas sales to Europe," Cook said.
Cook noted that on December 18, following the meeting between the BP CEO Bob Dudley and Azerbaijani President Ilham Aliyev, a series of agreements were signed on the Shah Deniz project and South Caucasus Pipeline extension as well as Trans Anatolian Pipeline (TANAP) project.
According to Cook, these agreements set out a number of important concepts. They underpinned the commercial terms for the Shah Deniz 2 project.
"On the South Caucasus Pipeline Expansion, this changes SCPX from a pipeline that transports Shah Deniz gas into a pipeline that supports all gas from Azerbaijan. This means that SOCAR will be able to control the expansion of SCP beyond Shah Deniz 2 requirements in the future," Cook said.
"That means for the first time SOCAR will have a leadership role in all the pipelines that take gas from Azerbaijan all the way to Europe. We strongly believe that the government of Azerbaijan and SOCAR should have control over its vital gas export infrastructure," Cook added.
He said BP also plans to join TANAP as a 12-percent shareholder and support SOCAR in its role as the operator of TANAP.
"SOCAR will be able to control the future capacity of SCP; SOCAR will be able to make a decision on how big we want the future SCP to be, when we want to expand it, and BP will support SOCAR in doing that. BP will take the project to 24-25 billion cubic meters annually and SOCAR will be able to decide when it wants to expand it from 25 to 30, 50 billion cubic meters per year and so on," he said.
Cook stressed the importance of the agreements reached on December 18.
"They covered the commercial terms for Shah Deniz 2. We have not officially entered TANAP, we plan to do that in the next few months."
According to Cook, BP believes that TANAP is one of the most strategic pipelines in the world.
"At the eastern end of TANAP we have some of the world's greatest gas resources, in Azerbaijan and in the Middle East. At the western end of TANAP we have one of the world's most important gas markets. TANAP is the connection between the two. In particular we applaud the leadership of Azerbaijan and Turkey in ratifying the TANAP agreements signed last year," he said.
Cook said in August last year BP signed an agreement with Trans Adriatic Pipeline (TAP) to fund their project and for BP, Total and SOCAR to join the project. "Last week in Vienna we signed similar agreements with Nabucco West."
From BP's perspective this is important because the company now has rights to have equity in all four big southern pipeline corridors - SCPX, TANAP, Nabucco West and TAP, he said.
"So, finally all these agreements put us in a very good place to spend money in 2013-14, to take Shah Deniz to first production in 2018," he said.
"Over $1 billion has been spent on Shah Deniz 2 already. Over one thousand people are now involved in the project, in total. Work on Shah Deniz 2 started about five years ago but we stepped up the activity in the last three years," he said.
April 1 is the deadline for Nabucco West and TAP projects to submit their offers to the consortium of Azerbaijani Shah Deniz gas field development, Cook added.
"We hope Nabucco will move fast to catch up with TAP and will submit their proposals in a timely manner - by April 1," Cook said.
The Shah Deniz consortium will make its selection between Nabucco West and TAP in June 2013. According to Cook, at this stage, for Shah Deniz 2 one pipeline will be selected but in the future two options may be considered.
"In the future, maybe they can both be built, as new sources of gas come on stream," Cook said.