Talks, not tender to sell Shah Deniz gas

Thu 05 August 2010 08:00 GMT | 13:00 Local Time

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The consortium developing Azerbaijan's major gas field, Shah Deniz, is to begin talks with potential customers for 10bn cubic metres of gas per year.

The gas will be produced as part of the second stage of development of the offshore field.

A spokeswoman for consortium member Statoil said on Wednesday that the talks were at the planning stage.

"We're planning bilateral negotiations with potential customers...," the spokeswoman said in a response to emailed questions from Dow Jones.

She added that the Shah Deniz 2 consortium wasn't planning a tender process, contradicting recent reports in the Turkish media that potential customers had been notified about an upcoming auction process.

"A number of potential customers have been prequalified and negotiations will be initiated in a short while," the spokeswoman said.

She added that the customers included three "potential pipeline projects", but did not name any of them.

Three pipeline projects designed to pump gas to Europe via what is known as the Southern Corridor have made no secret of their interest in Shah Deniz gas.

The chief executive of the Nabucco pipeline project, Reinhard Mitschek, said in Baku in June that, "Azerbaijan is one of the most important countries in the issue of gas supplies for Nabucco. We mostly propose taking gas for this project from the second stage of the Shah Deniz field."

A spokesman for the Trans-Adriatic Pipeline (TAP), which will supply gas to south-eastern Italy via Greece and Albania, in June described stage two of Shah Deniz as a potential source of gas.

The Interconnector Turkey-Greece-Italy (ITGI) pipeline is also being built with Azerbaijani gas in mind. An official of ITGI shareholder Edison, Elio Ruggeri, told a conference in March that only Azerbaijan was capable of delivering new supplies of natural gas to the European market in the next few years, with the development of Shah Deniz Stage 2.

Nabucco is to have an annual capacity of 31bn cu.m, TAP of 10bn cu.m and ITGI of 8-10bn cu.m.

In the second stage of development, Shah Deniz is expected to produce 16bn cubic metres of gas per year from 2016, if not before.

The EU is keen to see Azerbaijani gas supplied to Europe as it will help diversify supply routes and reduce dependence on Russian gas. 

Heinz Hilbrecht, director for security of supply and energy markets at the European Сommission's Directorate General for Energy, told a Baku conference in June: "We are working on gas supplies within the framework of the second stage of the Shah Deniz field development and the European Commission has already expressed interest in supplies of Shah Deniz gas via the Southern Corridor. This proves the growing role of Azerbaijan for the whole of Europe and its increasing potential to diversify energy sources."

He said that the Nabucco, Turkey-Greece-Italy and Trans-Adriatic gas pipeline projects were mutually complementary systems.

The production sharing agreement on the Shah Deniz field includes BP as the operator with a 25.5% share, Statoil (25.5%), SOCAR (10%), LUKOIL (10%), the National Iranian Oil Company (10%), Total (10%) and TPAO (9%).


See Also

Output up at Azerbaijan's main oil, gas fields in first half year

SOCAR eager to get legal rights for sale of Shah Deniz gas

'Gas fields in Azerbaijan and Central Asia richest in world' - Nabucco

TAP welcomes deal between Azerbaijan, Turkey

SOCAR proposes alternative plan for Shah Deniz

New pipelines the talk of Caspian Oil & Gas Conference



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