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Charles Kennedy

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Total to Sell Stake in Azerbaijan’s Shah Deniz

French oil giant Total SA is planning to sell its 10% stake in the Shah Deniz II gas field in Azerbaijan, making it the second major to downsize in the venue in less than a year.  

Total is moving to divest in Azerbaijan due to costs as the project enters its $28-billion second phase, and is in line with plans to sell off up to $20 billion is assets between 2012 and then end of 2014.

Total also said it was shifting focus from Shah Deniz to another Azeri gas field, Absheron, in which it owns a 40% stake.

Exploratory drilling in Absheron discovered up to 300 billion cubic meters of gas resources, which were declared commercial in 2012.

In December last year, Norway’s Statoil—also seeking to reduce costs--sold a 10% stake in Azerbaijan for $1.45 billion to British oil giant BP and the Azeri state-owned Socar, reducing Statoil’s stake to 15.5%.

According to BP, Shah Deniz—which Europe is hungrily eyeing as an alternative energy provider—will eventually reach yearly production of 16 billion cubic meters, which is equivalent to Europe’s annual gas consumption.

Aside from Total, BP, Statoil and Socar, Russia’s second-largest producer, Lukoil, and Turkish and Iranian state oil companies also have interests in Shah Deniz.  

Turkish state gas and pipeline company Botas has confirmed it is in talks to buy Total's stake in the project. Botas is developing the pipeline section to pump Azeri gas into Turkey and onward towards the European Union.

Socar may also be interested in increasing its stake in Shah Deniz.

Azeri gas will be piped to Turkey’s eastern border and then linked up with Greece and then further into the European Union, where its supply could help reduce dependence on Russian gas. The second phase of development is slated to begin production in 2018.

The gas field’s second development phase, which includes the pipeline, will cost an estimated $28 billion.

By Charles Kennedy of Oilprice.com


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