BAKU

Azerbaijan’s state energy firm SOCAR plans to increase its stake in the Shah Deniz gas project by acquiring a 4.35 percent stake from Malaysia’s Petronas, following a similar decision by the project operator – British oil major BP.

SOCAR said that after completion of the deal in January 2022 its stake in the project would increase to 14.35 percent.

Earlier this year, Petronas decided to sell its 15.5 percent stake in the project.

In October, Russian energy company LUKOIL said it had acquired 15.5 percent interest in the Shah Deniz project from Petronas for $2.25 billion. The company now decided to reduce the acquired stake to 9.90 percent. As a result, the cost of the deal was reduced to $1.45 billion from $2.25 billion. LUKOIL’s stake in the project will stand at 19.90 percent. The deal will be completed in January 2022.

Last week, BP said that it had acquired a 1.16 percent stake from Petronas for $168 million based on the same commercial terms of the Shah Deniz transaction announced earlier by the Malaysian company.

Change in share distribution in the Shah Deniz project will lead to changes in shares in the Southern Caucasus Pipeline, SOCAR said.

The company did not reveal the cost of the deal.

The BP-led consortium, which develops the Shah Deniz project, has been pumping gas from the giant offshore field’s first phase since 2006, delivering more than 10 billion cubic metres (bcm) a year of gas to Azerbaijan, Georgia and Turkey. The second phase started its output in 2018, adding 16 bcm of gas production capacity at its peak to bring total capacity to 26 bcm.

Azerbaijan started supplying commercial natural gas to Europe from the second stage of the Shah Deniz project via its $40-billion Southern Gas Corridor in December 2020, when the corridor’s last part, the Trans-Adriatic Pipeline (TAP), became operational. Europe is a highly lucrative new market for Azerbaijan, as the continent is seeking to diversify its supply away from Russia, on which it still depends for 34 percent of its gas.

Azerbaijan’s goal is to eventually supply the European market with 10 bcm of gas a year, including 8 bcm to Italy and a combined 2 bcm to Greece and Bulgaria. This year, the country plans to export 5 bcm to Europe and over 12 bcm to Turkey.

Exports from Shah Deniz to Turkey amounted to 7.833 bcm in the first nine months of 2021 for $1.2 billion, exports to Georgia totalled 2.262 bcm for $282 million, to Europe – 4.663 bcm for $1.5 billion.

Apart from BP, SOCAR and LUKOIL, participants in the Shah Deniz consortium are Turkey’s TPAO, Iran’s NICO and SGC Upstream.