Shah Deniz Project Phase 2

Shah Deniz Project Phase 2 Map

The Shah Deniz Project Phase 2 Gas Field Expansion

In keeping with its reputation for both innovation and growth, BP has implemented another drilling and expansion project in Azerbaijan with the Shah Deniz project phase 2.

Costing the company around $28 billion, the Shah Deniz gas field expansion reached its mark for half-completion in 2016. It is also on target for total completion and full-scale production in 2018.

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The following article is everything that you need to know about this project, and the different phases that it has entailed.

Shah Deniz Project Steakholders

Ultimately, this project belongs to BP, but there are multiple stakeholders along with nine companies that have opted into the related contractual agreement.

Among these nine entities are Axpo Trading, Shell Energy Europe and Gas Natural. Once completed, the project will have two extra, offshore gas platforms that are bridge-linked.

It will also include wells undersea along with an extension of the Sangachal Terminal gas plant. These last two additions include an estimated project cost of approximately $10 billion.

Shah Deniz Project Location

Where Is The Project Located And How Big Will It Ultimately Be?. This is currently one of the largest projects in all the world.

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The Shah Deniz is situated approximately 43 miles southeast of Baku, the expansion involves drilling at a depth of nearly 2000 feet or 600 meters.

The entire field spans 330 square miles or 860 square km. It is situated in a reservoir that measures 140 square kilometers.

To lend the project some perspective, the reservoir is about the same size as Manhattan, which is of course huge in scale and gives you an indication to the pure size of the project.

What Will Be Accomplished By The Expansion?

Currently thought of as a link for the Southern Gas Corridor, the goal of this project is to acquire and bring large volumes of alternative gas to the member countries of the EU.

At present, the South Caucasus Pipeline is being used to transport gas from this field which lies in the Caspian Sea in the Azerbaijan sector. This pipeline travels 430 miles or 692 kilometers through Georgia and to Turkey.

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This is the equivalent of 50 billion to 100 billion cubic meters of gas. In 2005 and entering 2006, the estimated gas production for this facility was placed at 7 billion cubic meters.

There is also 400 million cubic meters of gas condensate in this locale. This condensate is combined with oil that has been extracted from the ACG field. It is then moved through the Baku-Tbilisi-Ceyhan pipeline via Georgia and to Turkey.

There are political, social and economic goals associated with this project. Georgia has long been reliant upon other countries for meeting its oil and gas needs.

This is especially true of Russia. Thus, the primary aim for one of the foremost stakeholders is to simply obtain a greater level of self-reliance and self-sufficiency.

This will in turn allow Georgia meet its needs at a more affordable cost, while limiting the influence that Russia has on Georgia’s political landscape.

What Is The Total Cost Of The Shah Deniz Project

While the total costs for this expansion project are placed at $28 billion, BP is not the sole stakeholder.

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Statoil was one of several additional companies that was participating in and funding this project. Statoil did, however, sell its last stake of 15.5 percent to Petronas to exit the project in 2014. This share was sold for $2.25 billion.


Shah Deniz Project First Phase

The first phase of this project ran a bit behind schedule. It only began to produce gas at the very end of 2006, which was a full three months beyond what was intended.

Moreover, there was a brief closure of the site in early 2007 that halted both production and sales. Shortly after resuming output in late January 2007, Azerbaijan had to shut the field down again as the result of technical problems.

As such, Georgia was forced to purchase emergency gas supplies at market cost. These supplies were bought from Russia. One of the major goals of this project is to help Georgia obtain a greater level of sufficiency.

This will in turn allow it to limit its political and energy dependence with Russia. Fortunately, the Sangachal Terminal plant became fully operational in July 2007.

The Second Phase Of Shah Deniz

$1 billion dollars in private and public assistance was approved by the Asian Development Bank at the end of 2016.

These funds were allocated specifically for Shah Deniz field 2 and its expansion. This finance included $500 million in loans from the private sector along with $500 million in a public-backed partial credit guarantee.

Upon completion, phase 2 will have provided a total of 26 wells subsea long with undersea pipelines for both gas and condensate.

It will additionally provide 2 new gas compressors. Finally, the expansion will allow for a South Caucasus Pipeline connection. All in all, this is considered a massive project for BP and will bring much needed jobs at a time of uncertainty in the oil and gas market.

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