BP Sign $45 Billion Deal to Pipe Natural Gas from Azerbaijan to Europe

BP, has led a union of energy companies to sign a $45 billion deal that will first expand the Shah Deniz field in Azerbaijan, and then transport natural gas via pipeline to southern Europe, creating an alternative to expensive Russian imports.

The group of companies consists of BP, Statoil, the State Oil Co. of Azerbaijan (SOCAR), Total, Naftiran Intertrade Co. of Iran, Turkiye Petrolleri, and Lukoil.

BP has claimed that the Shah Deniz field, located in the Caspian Sea, will eventually have its production output boosted by 16 billion cubic metres a year, around 1.5 percent of Europe’s annual gas consumption, according to Bloomberg.

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The natural gas will provide a much sought after alternative to supplies from Gazprom, which currently delivers about 25% of Europe’s gas. Such diversification from Russia has been considered a priority ever since supplies were threatened when Russia had a price related dispute with Ukraine, through which several important pipelines run, and cut off the flow of gas.

Bob Dudley, the Chief Executive Officer at BP, said that gas production from the field, which holds an estimated 1.2 trillion cubic metres, would immediately be boosted by 1.4 billion cubic metres a year. It is expected that the work to expand the field and build a pipeline to Turkey, will cost about $28 billion, with the rest of the finance to be used to build the Trans-Anatolian Pipeline across Turkey, and the Trans-Adriatic Pipeline into Italy.

Al Cook, BP’s Vice-President in charge of the Shah Deniz expansion, explained that the TANAP pipeline “is about as large as you can make a long gas pipeline. It would be very easy to double the amount of gas flowing through it. There’s a number of countries this gas could come from. We regard Tanap as a hugely strategic pipeline for the future.”

The pipelines are expected to be up and ready to deliver gas to Turkey by 2018, and then the rest of Europe by 2019.

William Hague, the British Foreign Secretary, said that “it will increase our energy security by providing an additional route and a new source for gas supplies to Europe. There is also the potential to expand the southern corridor to reach major gas suppliers in the Middle East, which could bring huge additional benefits.”

By. Joao Peixe of Oilprice.com