BP-Led Consortium Agrees on $45bn Azerbaijan Gas Project to Change Europe's Energy Map

An international consortium led by British oil giant BP signed a deal to expand Azerbaijan's Shah Deniz field and develop a natural gas pipeline connecting the field to Italy.

The $45bn (£27.6bn, €32.7bn) deal would offer the European Union an alternative to Russian supplies.

The project led by BP would see the expansion of the Shah Deniz project in the Caspian Sea and the construction of natural gas pipelines across Turkey, supplying gas to a number of European countries including Greece, Bulgaria and Italy.

BP has a 28.8% stake in the project. Its partners on the project include Statoil, Total and Lukoil, as well as Azerbaijan's state oil company, Socar.

By expanding the gas field, the companies expect to produce 16 billion cubic metres per year of gas. That will be carried some 3,500 kilometres to provide energy for millions of consumers in Georgia, Turkey, Greece, Bulgaria and Italy.

First gas is targeted for late 2018, with sales to Georgia and Turkey; first deliveries to Europe will follow approximately a year later.

Furthermore, the expansion would increase gas condensate to 120,000 barrels per day, from current levels of about 55,000 barrels per day.

The production increase is already in progress and is expected to be complete by the end of 2014.

"This project paves the way for Azerbaijan's future and the region's future," Rovnag Abdullayev, Socar president, said in a statement.

"Firstly, it enables us to unlock Azerbaijan's giant gas resources for the benefit of our nation. Secondly, it establishes Azerbaijan as an important energy supplier to Europe, fulfilling a vision we have had for so many years. Thirdly, it brings benefits to countries stretching from the Caspian Sea to the heart of Europe through creating a direct transportation link between the Caspian and the European gas markets."

Changing Europe's Energy Map

The Shah Deniz field was discovered in 1999. Azerbaijan has been exporting gas to Georgia and Turkey since 2006 from the first phase of Shah Deniz project.

The second phase would change the energy map of Europe, which largely depend on Russian supplies for its gas needs. Europe currently has gas pipelines from Norway, Russia and Algeria.

"Shah Deniz 2 and the Southern Corridor pipelines will not only change the energy map, but will give customers in Europe direct access to the gas resources of Azerbaijan for the first time," said Bob Dudley, group CEO of BP.

The project, which represents the largest ever foreign investment to Azerbaijan, is expected to create tens of thousands of jobs along the route of the pipelines in Azerbaijan, Georgia, Turkey and Europe.