Shah Deniz gas field () is the largest

natural gas Natural gas (also fossil gas, methane gas, and gas) is a naturally occurring compound of gaseous hydrocarbons, primarily methane (95%), small amounts of higher alkanes, and traces of carbon dioxide and nitrogen, hydrogen sulfide and helium ...

field in

Azerbaijan Azerbaijan, officially the Republic of Azerbaijan, is a Boundaries between the continents, transcontinental and landlocked country at the boundary of West Asia and Eastern Europe. It is a part of the South Caucasus region and is bounded by ...

. It is situated in the South

Caspian Sea The Caspian Sea is the world's largest inland body of water, described as the List of lakes by area, world's largest lake and usually referred to as a full-fledged sea. An endorheic basin, it lies between Europe and Asia: east of the Caucasus, ...

, off the coast of Azerbaijan, approximately southeast of

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, at a depth of . The field covers approximately . Stretching out over 140 square kilometres, the reservoir is similar in size and shape to Manhattan Island. It is considered to be a founding link for the Southern Gas Corridor, aiming to bring additional and alternative natural gas volumes to EU member countries.

History

The “Exploration, Development, and Production Sharing Agreement" (PSA) for Shah Deniz area was signed between SOCAR and some oil companies of foreign countries on June 4, 1996. Azerbaijani Parliament confirmed the PSA document on October 4, 1996. The Shah Deniz gas and condensate field was discovered in 1999. “An Intergovernmental” Agreement and a “Sale and Purchase” Agreement were signed by delegates of

and

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with the participation of President Sezer and President Heyder Aliyev in Ankara on March 12, 2001. "An Intergovernmental" Agreement and relevant agreements for the carrying and selling of natural gas were signed by delegates of Azerbaijan and Georgia with participating of President Shevardnadze and President Aliyev on September 29, 2001. Some contracts for the construction of the first stage of Shah Deniz were concluded on June 5, 2003, and Construction work for Shah Deniz began at Sangachal Terminal on November 3 of the same year. Construction works for

South Caucasus Pipeline The South Caucasus Pipeline (also known as Baku–Tbilisi–Erzurum Pipeline, BTE pipeline, or Shah Deniz Pipeline) is a natural gas pipeline from the Shah Deniz gas field in the Azerbaijan sector of the Caspian Sea to Turkey. It runs parallel ...

started in Azerbaijan on October 14, 2004.

Shareholders

The Shah Deniz field is operated by BP which has a share of 29.99%. Other partners include LUKoil (19.99%), TPAO (19.00%), SOCAR (14.35%), NIOC (10.00%) and Southern Gas Corridor Upstream (6.67%).

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sold its 5% share to LUKOIL in June 2004. Later divestitures included pre-FID (Final Investment Decision) in December 2013 sales of 10% of the shares by

Statoil Equinor ASA (formerly Statoil and StatoilHydro) is a Norwegian multinational energy company headquartered in Stavanger, Norway. It is primarily a petroleum company operating in 36 countries with additional investments in renewable energy. In th ...

, to BP and SOCAR who shared them at 3.3% and 6.7% respectively. as well as sale by Total SA in May 2014 its 10% share to Turkish TPAO In October 2014, Statoil sold its remaining 15.5% stake in the project to

Petronas Petroliam Nasional Berhad, commonly known as PETRONAS (stylised in all caps), is a Malaysian Multinational corporation, multinational petroleum, oil and natural gas, gas company headquartered in Kuala Lumpur. Established in 1974, it is a lega ...

for a fee of $2.25 billion.

Reserves

The Shah Deniz reserves are estimated at between of oil equivalent from 50 to 100 billion cubic meters of gas. Gas production to date at the end of 2005 was estimated to be approximately 7 billion cubic meters or an average of per day. The Shah Deniz field also contains gas condensate in excess of 400 million cubic meters.

Pipeline

The

, which began operation at the end of 2006, transports gas from the Shah Deniz field in the Azerbaijan sector of the

, through

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. The associated condensate is mixed with the oil from the ACG field and is transported to

through

, along the

Baku–Tbilisi–Ceyhan pipeline The Baku–Tbilisi–Ceyhan (BTC) pipeline is a long crude oil pipeline from the Azeri–Chirag–Gunashli oil field in the Caspian Sea to the Mediterranean Sea. It connects Baku, the capital of Azerbaijan and Ceyhan, a port on the south-easte ...

Recent developments

The Shah Deniz scheme started to produce gas at the end of December 2006, three months later than expected, and was forced to close briefly in January 2007. Azerbaijan announced that the field had resumed output only to admit that it had been shut down once more, for a few weeks, due to technical issues. The shutdown forced Georgia to buy emergency gas supplies from Russia at a market price. Georgia hopes that production from Shah Deniz will allow the country to decrease its energy — and political — dependence on Russia.. By July 2007, the Shah Deniz gas plant at Sangachal Terminal was fully operational, with all buyers of Shah Deniz taking gas.

Phase 2

Shah Deniz-2 discussions started in 2008 with the main topic being the selection of transportation routes for additional gas volumes. Five-year-long, intense negotiations were finalized with the signing of the ''Final Investment Decision'' (FID) on 17 December 2013 in Baku, Azerbaijan. Key discussions concentrated on the selection of a pipeline to deliver the additional gas from the field to the European markets. It took years of negotiations to narrow down almost a dozen proposals to the final competing projects, TAP and

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. Nine companies agreed to sign a gas sales agreement (GSA) with the consortium: * Axpo Trading AG * Bulgargaz EAD * DEPA Public Gas Corporation of Greece S.A. * Enel Trade SpA * E.ON Global Commodities SE * Gas Natural Aprovisionamientos SDG SA * GDF SUEZ S.A. * Hera Trading srl * Shell Energy Europe Limited Out of total 10 bcm intended for Europe, 1 bcm will go to Bulgaria and Greece and the rest will go to buyers in other countries, mainly Italy. The project will include two additional bridge-linked offshore gas platforms, undersea wells, and an expansion of the gas plant at Sangachal Terminal, at an estimated cost of at least $10 billion. The overall cost of Phase 2 expansion, including upstream and midstream stages ( TANAP and TAP pipelines) is estimated to be around $45 billion. In December 2016, the

Asian Development Bank The Asian Development Bank (ADB) is a regional development bank to promote social and economic development in Asia. The bank is headquartered in Metro Manila, Philippines and maintains 31 field offices around the world. The bank was establishe ...

approved a total of $1 billion in both public and private assistance to support the expansion of the Shah Deniz 2 field. The assistance was made up of a $500 million private-sector loan to the Southern Gas Corridor Closed Joint Stock Company and a $500 million sovereign-counterguaranteed partial credit guarantee. This guarantee will back over $500 million in commercial loans from a consortium of banks to SCG. According to the 2017 year-end results, Azerbaijani Government has paid out more than $456 million in operational costs and approximately about $1.176 billion in capital costs on the project of Azeri Chiraq Guneshli in 2017. An Agreement (which is amended and restated), was signed between Azerbaijani Government, and some international companies and SOCAR for working together on the project of Azeri Chirag Guneshli and Production Sharing on September 14, 2017, and this contract was confirmed by

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of Azerbaijan on October 31. Total production of Azeri Chirag Guneshli was approximately 588,000 barrels per day including 51,000 b/d from platforms of Chirag, 137,000 b/d from platforms of Central Azeri, 124,000 b/d from platforms of West Azeri, 82,000 b/d from platforms of East Azeri, 117,000 b/d from platforms of Deepwater Gunashli, 77,000 b/d from platforms of West Chirag during a year (2017).

References

External links

Shah Deniz
Offshore Technology website
Shah Deniz and the South Caucasus gas pipeline
Statoil website
Shahdeniz-2 brochure
BP Azerbaijan {{Energy in Azerbaijan Natural gas fields in Azerbaijan Caspian Sea BP oil and gas fields