BAKU
Russian energy company LUKOIL said it had acquired 15.5 percent interest in the Shah Deniz natural gas project in the Azerbaijan sector of the Caspian Sea from PETRONAS for $2.25 billion.
The BP-led consortium which develops the Shah Deniz project in Azerbaijan has been pumping gas from the offshore field’s first phase since 2006, delivering more than 10 billion cubic metres (bcm) a year of gas to Azerbaijan, Georgia and Turkey through the South Caucasus Pipeline.
The second phase started output in 2018, adding 16 bcm of gas production capacity at its peak to bring total capacity to 26 bcm.
Azerbaijan started supplying commercial natural gas to Europe from the second stage of the Shah Deniz project via its $40-billion Southern Gas Corridor in December 2020, when the corridor’s last part, the Trans-Adriatic Pipeline (TAP), became operational. The project hopes to reduce Europe’s dependence on natural gas supplies from Russia, which currently controls 34 percent of the continent’s gas market.
The 878 km TAP pipeline connects to the Trans-Anatolian Pipeline (TANAP) on the Turkish-Greek border in Kipoi, crossing Greece, Albania and the Adriatic Sea before reaching Italy’s southern coast.
The completion of the deal is subject to fulfilment of conditions precedent, including approval by Azerbaijan’s state energy firm SOCAR.
Following completion of the sale, LUKOIL’s interest in the project will increase to 25.5 percent from 10 percent. The other participants of the project are the project operator BP (28.8 percent), TPAO (19 percent, SOCAR (10 percent), NICO (10 percent), and SGC (6.7 percent).
“Around a thousand Russian businesses, including from LUKOIL, are involved in the implementation of the action plan for the development of key vectors of cooperation between Russia and Azerbaijan, which was signed in 2018 during the meeting of the two national leaders,” Vagit Alekperov, LUKOIL president, said in a statement.
“Increasing our share in the Shah Deniz project creates new opportunities for synergy in future-oriented economy sectors of our countries,” he added.
In September, BP agreed to sell a 25 percent participating interest in the Shallow Water Absheron Peninsula (SWAP) exploration project in the Azerbaijani sector of the Caspian Sea to Russian oil company LUKOIL.
Following completion of the sale, BP will remain operator of the SWAP production sharing agreement (PSA) during the exploration period, holding a 25 percent interest. On completion, participating interests in the PSA will be the following: Azeri state energy firm’s subsidiary SOCAR Oil Affiliate – 50 percent, BP – 25 percent and LUKOIL – 25 percent.