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Statoil, Norway’s largest energy company, is selling its share in a major Caspian Sea oil field and a pipeline in the Caucasus to Petronas, Malaysia’s state-owned oil and gas company, for $2.25 billion. Statoil’s stake in the Shah Deniz field in the Caspian near Baku, the capital of Azerbaijan, is now 15.5 percent, the same stake it has in the South Caucasus Pipeline Co., which ships gas from Azerbaijan to Turkey and Georgia. Statoil also is selling its 12.4 percent share in the Azerbaijan Gas Supply Co. Lars Christian Bacher, Statoil’s executive vice president for international development and production, issued a statement on Oct. 13 saying, “The divestment optimizes our portfolio and strengthens our financial flexibility to prioritize industrial development and high-value growth.”
In other words, like other large energy companies, Statoil has been selling assets to shore up profit margins that recently have been eroded by rising operating costs and declining oil prices. The sale is expected to close early in 2015, once it receives regulatory approval.
The Shah Deniz oil field, about 40 miles southeast of Baku, was discovered in 1999 and began production in 2006. In the second quarter of 2014, Statoil’s share of the recovered assets from the field was the equivalent of 38,000 barrels of oil a day.
Britain’s BP owns about 28.8 percent of Shah Deniz’s extracted oil. Other investors include Russia’s LUKoil; the Naftiran Intertrade Co., the Swiss-based subsidiary of Iran’s national oil company; Azerbaijan’s State Oil Co.; and the Turkish energy company Turkiye Petrolleri Anonim Ortakligi. Petronas, the new owner of Statoil’s stake in Shah Deniz and the South Caucasus Pipeline, already has production and exploration efforts under way in at least 22 countries in Africa, Central Asia, Latin America and Southeast Asia, which account for nearly one-fourth of its total oil and gas reserves. It also has interests in Mexico, Argentina and Canada.
Meanwhile, Statoil’s withdrawal from Shah Deniz isn’t the first from the oil field this year. In May France’s Total SA sold its 10 percent share in the project, again to cut back on capital investments and make up for the lower price of oil and the rising costs of operations.
To illustrate these rising costs, the second phase of the Shah Deniz project is to export gas through new pipelines to Italy in an effort to reduce Europe’s dependency on Gazprom, the Kremlin-run Russian gas giant. The cost of setting up that phase is expected to be $28 billion.
Since 2010, Statoil has sold assets for prices totaling more than $22 billion, including a 10 percent share in Shah Deniz in 2013. It also has cut back on its planned investments for 2015 in hopes of increasing returns for its shareholders.
By Andy Tully of Oilprice.com
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Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com