Manila’s Asian Development Bank (ADB) is investing US$1 billion in the expansion of the BP-led Shah Deniz II project, offshore Azerbaijan in the Caspian Sea.

Shah Deniz is some 70km offshore Baku in 50-500m water depth, and is one of the largest gas-condensate fields in the world with 40 Tcf – over 1 Tcm of gas in place. Shah Deniz II will add a further 16 Bcm/y of gas production to the approximately 9 Bcm/y by Shan Deniz Stage 1.

According to BP, about $28 billion in capital investment will be required to produce the gas and transport it to the Georgia-Turkey border. From there, additional pipeline systems will deliver 6 Bcm/y of gas to Turkey and a further 10 Bcm/y of gas to markets in Europe, in a route known as the Southern Gas Corridor. Shah Deniz gas will travel 3500km, to elevations of over 2500m, and over 800m below the sea.

ADB said its investment will consist of a $500 million private sector loan to the Southern Gas Corridor Closed Joint Stock Co. (SGC) and a $500 million sovereign-counter-guaranteed partial credit guarantee. The guarantee will back $526 million in commercial loans made by a consortium of international banks to SGC, which is 51% owned by the

Azerbaijan government and 49% by the state oil company of the Azerbaijan Republic.

The project is currently more than 83% complete in terms of engineering, procurement, and construction, and remains on track for first gas from Shah Deniz II to begin in 2018. The project will provide more than 19,000 jobs through the construction phase, and create 1800 permanent jobs.

“ADB, through its private sector window, has already demonstrated strong support to the Shah Deniz gas field expansion through its direct assistance to this project in 2015,” said Michael Barrow, director general of ADB’s Private Sector Operations Department. “The proposed assistance to Southern Gas Corridor is a continued testament to ADB’s belief in the development impact of this important project, and the importance of crowding in commercial capital to support Azerbaijan’s funding needs for the project.”

“The expansion of the Shah Deniz gas field is key for Azerbaijan’s economy, providing the country a long-term revenue stream and diversifying its gas exports to Europe,” said Sean

O’Sullivan, ADB director general for Central and West Asia department. “ADB’s support will help generate economic opportunities for the private sector, create thousands of jobs, and help boost Azerbaijan’s ties with neighboring countries and Europe.”

In September, Shah Deniz Stage 2 platforms sailed away from the Heydar Aliyev Baku Deepwater Jackets Factory (BDJF) for offshore installation.

The pipelay barge Israfil Huseynov completed installation of all four North Flank and West Flank flowlines and is currently making progress on the remaining 32in gas export lines, in which this scope of work will continue through into Q1 2017, according to BP.

In addition, the Khankendi subsea construction vessel has continued good progress and started up its main engines in September. Once completed, this new vessel will be deployed to the Shah Deniz 2 area for the construction of the subsea structures.

Meanwhile, at the ATA yard, construction of both Shah Deniz 2 platform topsides is well above 90% complete and commissioning is progressing. The flare tower has been safely installed on the production and risers platform, BP confirmed.

In 2015, ADB approved a $475 million loan facility for Lukoil Overseas Shah Deniz to partly fund its share of the Shah Deniz gas field expansion.

The Shah Deniz consortium consists of: BP, operator (28.8%), SOCAR (16.7%), Petronas (15.5%), Total (10%), Lukoil (10%), NICO (10%) and TPAO (9%).

Source: www.reuters.com