Azernews.Az

By Aynur Karimova

BP-Azerbaijan Company, which is the operator of Azerbaijan's huge oil and gas projects, remains committed to its plan on transportation of natural gas as part of the second stage of development of Azerbaijan's giant Shah Deniz field.

Gordon Birrell, BP' Regional President on Azerbaijan, Georgia and Turkey, told journalists on March 10 that the first gas from the Shah Deniz field will be delivered to Turkey in 2018, and to Europe - in 2020.

He said that as of today, approximately two thirds of works on the Shah Deniz-2 project has been completed.

"The Shah Deniz field remains stable and reliable. Last year, around 10 trillion cubic meters of gas and 2.3 million tons of condensate were extracted from this field. These volumes were produced at only six wells," Birrell stated.

Azerbaijan, located within the South Caspian Sea Basin, is among the oldest oil producers in the world. The country is one of the Caspian region's most important strategic oil and gas export routes to the West. Azerbaijan's proven natural gas reserves are estimated at approximately 35 trillion cubic feet, the U.S. Energy Information Administration has reported.

With its huge natural gas resources, Azerbaijan has initiated the multi-billion Southern Gas Corridor project, which envisages the transportation of the gas extracted at the giant Shah Deniz field in the Azerbaijani section of the Caspian Sea to Europe.

Azerbaijan's Energy Minister Natig Aliyev believes that Azerbaijan’s gas reserves are quite enough to fill the Southern Gas Corridor project.

"During the next decade, the Absheron gas field is expected to be started and other fields also developed. Azerbaijan’s gas reserves are quite enough to fill the Southern Gas Corridor, but it is open to other states’ reserves as well," he told in an interview with the Natural Gas Europe on March 10.

"We have good experience in this sphere. We started the Baku-Tbilisi-Ceyhan pipeline to transit Azerbaijani oil, but within a few years of the project’s start-up in 2006, it began shipping oil from Kazakhstan and Turkmenistan. We should adopt that approach for the Southern Gas Corridor," he added.

The Shah Deniz Stage 2 gas will make a 3,500 kilometer journey from the Caspian Sea into Europe. The first gas supplies through the corridor to Georgia and Turkey are given a target date of late 2018. Gas deliveries to Europe are expected just over a year after the first gas is produced offshore in Azerbaijan.

Aliyev believes revenues from the Shah Deniz 2 and Southern Gas Corridor projects would exceed the expenditures by 2028-2030, noting that while SGC is projected to remain active for 50-60 years."

"Azerbaijan eyes Shah Deniz, TANAP and TAP as a united project, because subtracting one of them nullifies the whole. Shah Deniz 2’s capital expenditures are estimated at $20 billion and Southern Gas Corridor’s at $25 billion," he noted.

"Notice that the revenues of Shah Deniz 2 begin before gas flows to the EU from Shah Deniz 2. Based on the production-sharing contract, some of the costs will be clawed back annually from the produced gas until 2020. On the other hand, alongside the 16 billion cubic meters of natural gas per year, there are more than 29 million barrels/year of gas condensate from Shah Deniz 2. This will be shipped through BTC. The natural gas and gas condensate production level of Shah Deniz 1 is about 10 billion cubic meters and 16.4 million barrels annually," he stated.

TANAP

Commenting on the expenditures on the TANAP project, Aliyev said that capital expenditures on the construction of the pipeline have decreased by $2.5 billion for 3 years.

He noted that on 2013, when the construction of TANAP was contracted, capital expenditures were estimated to stand at $11.7 billion, but currently the figure is $9.2 billion.

This is due to declining the materials and service costs, Aliyev believes.

"For now, about 938 kilometers pipes have been produced, of which 720 kilometers have been delivered to be construction area and 281 kilometers have been welded," the minister said adding that currently, 66 percent of Shah Deniz 2 and 33 percent of expansion of the South Caucasus Pipeline is completed.

TANAP’s initial capacity is expected to reach 16 billion cubic meters of gas per year. Some six billion cubic meters of this gas will be delivered to Turkey and the rest will go to Europe. The capital costs of the TANAP project are expected to stand at $9.5 billion.

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Aynur Karimova is AzerNews’ staff journalist, follow her on Twitter: @Aynur_Karimova

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