360° Coverage : BP-Led Group Set To Develop A New Source Of Natural Gas For...

2 Updates
BP-Led Group Set To Develop A New Source Of Natural Gas For Europe
Photo Credit: Forbes Business

BP-Led Group Set To Develop A New Source Of Natural Gas For Europe

Dec 24 2013, 3:33pm CST | by

A consortium of energy companies led by BP, which is developing the Shah Deniz natural gas project in the South Caspian Sea, recently announced the final investment decision for the second phase of...

Filed under: news

 
 
 

35 weeks ago

BP-Led Group Set To Develop A New Source Of Natural Gas For Europe

Dec 24 2013, 3:33pm CST | by

A consortium of energy companies led by BP, which is developing the Shah Deniz natural gas project in the South Caspian Sea, recently announced the final investment decision for the second phase of development of the Shah Deniz gas field located around 70 kilometers offshore in the Azerbaijan sector of the Caspian Sea.

The second phase of development of Azerbaijan’s largest gas field will be coupled with huge investments in establishing the pipeline infrastructure to transport 10 billion cubic meters of natural gas per annum to the European markets. These markets are heavily dependent on Russia for their natural gas supply, which gives a lot of political leverage to Russia in the region. Importing gas from the Caspian region is one of the prime alternatives for the European countries to diversify their natural gas supplies away from Russia.

BP is the operator of the Shah Deniz project with a 28.8% stake. Azerbaijan’s state-owned oil and gas company, SOCAR owns 16.7% stake in the project, followed by the Norwegian multinational energy giant, Statoil, which owns 15.5% stake. Apart from this, Total, National Iranian Oil Company, and the Russian energy giant, Lukoil also own 10% stake in the project each. Turkey’s state-run energy company, TPAO owns 9% stake in the project as well.

See Our Complete Analysis For BP

Shah Deniz Phase-I

Discovered in 1999, the Shah Deniz field is one of the world’s largest gas-condensate fields with over 1 trillion cubic meters of gas in place. Phase-I of the development project aimed at tapping this huge reserve started operations in 2006. It has the capacity to produce about 9 BCMA of gas and approximately 50,000 barrels per day of condensates. Apart from the gas wells, a platform and an onshore terminal, Phase-I of the project also included the 700-kilometer long South Caucasus Pipeline, which runs through Azerbaijan and Georgia to the Georgia-Turkey border. The project currently supplies gas to Azerbaijan, Georgia and Turkey.

Shah Deniz Phase-II

The second phase of the Shah Deniz project will add another 16 BCMA of natural gas production capacity to the 9 BCMA being produced currently. Of the additional capacity, 6 BCMA will be supplied to a state-owned crude oil and natural gas pipelines and a trading company in Turkey and 10 BCMA will be sold to nine European utilities and gas trading companies according to the recently signed agreements.

The total investment required in the project to expand its production, processing and transportation capacity to the Georgia-Turkey border is currently estimated at around $25 billion. The consortium is targeting first gas exports to Turkey in 2018 and to Europe in 2019.

Supply Diversification

While the consumption of natural gas in the EU has been consistently increasing over the past few decades, production in the region has declined in recent years. As a result, the region’s dependence on imported natural gas from its primary supplier, Russia, has been increasing. Natural gas, unlike oil, is not a global commodity, and thus the predominant regional supplier has a much higher control over the pricing of this commodity.

Moreover, fragile relations between Russia and Ukraine through which most of the natural gas supplies to Europe flow, also increases the susceptibility of these supplies to unwarranted fluctuations. Therefore, the European countries have been looking for alternatives to diversify away from the Russian gas supplies. Currently, Russia accounts for more than 30% of the natural gas imports into EU.

The Southern Gas Corridor

The transportation of natural gas from the Shah Deniz field in the Caspian Sea across 4,000 kilometers to Europe would require enhancement of some of the existing infrastructure and development of a chain of new pipelines. The southern corridor is a non-Russian and non-Iranian natural gas pipeline system to transport natural gas from the Caspian region and Central Asia to Europe.

The existing SCP will be expanded with a new parallel pipeline across Azerbaijan and Georgia to transport the additional gas that will be produced from the second phase of the project. Once in Turkey, the gas will be transported through a new Trans Anatolian Pipeline. In Europe, the Trans Adriatic Pipeline will be built to take gas through Greece and Albania to Italy. This chain of pipelines will complete the southern corridor, which will create an alternative route for natural gas supplies to the European countries. Establishing this pipeline infrastructure is expected to cost more than $15 billion.

Prospects For BP

The start-up of the second phase of the Shah Deniz project will boost BP’s natural gas revenues through higher production capacity. At 16 BCMA, the project’s gross capacity is around 25% of what BP’s subsidiaries achieved in 2012. We therefore expect the project to boost the company’s net natural gas production by 5-6% over 2012 levels in the long run.

Moreover, since the company has been operating in the region for the past 6-7 years, it will also have a much better understanding of geological and other technical challenges that the project can potentially face. Not only this, the company could also leverage some of its existing infrastructure and improve operational efficiency through larger scale. Also, a higher proportion of natural gas sales in the European countries, where prices are much higher compared to those in the U.S., will also enhance the company’s average price realizations for natural gas. We expect these factors to boost the company’s natural gas operating margins in the long run.

Understand How a Company’s Products Impact its Stock Price at Trefis

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.

Source: Forbes Business

 
Update
2

10 minutes ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and slashing the workforce of 20,000 by 30 per ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

1 day ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double t ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Modi government selling off Indian assets: Mamata
Kolkata, Aug 30 (IANS) Accusing the Narendra Modi led BJP government of selling out the country's assets by embracing FDI across sectors, West Bengal Chief Minister Mamata Banerjee Friday warned that such policies would put Indian economy in grave crisis.
 
 
13 die of Ebola in DRC
Kinshasa, Aug 29 (IANS) A total of 13 people, including five doctors, died of Ebola virus disease in the Democratic Republic of Congo (DRC), the country's Minister of Public Health Felix Kabange told Xinhua Friday.
 
 
How birds learnt to fly
New York, Aug 29 (IANS) Birds have an innate ability to maneuver in mid-air, a talent that could have helped their ancestors learn to fly rather than fall from a perch, says a study.
 
 
Millions of mites crawling on your face right now!
New York, Aug 29 (IANS) Are you aware that your face is brimming with living mites that feed on the oil our skin secretes and hide in tiny hair follicles? And no, they are not pooping on you as they store up all the excreta until they die!
 
 
 

Latest from the Network

850,000 displaced in one month in Iraq
Geneva, Aug 30 (IANS/EFE) The Islamic State minlitants advancements have forcibly displaced 850,000 people in one month, the International Organisation for Migration(IOM) said Friday. The total number of people who...
Read more on Politics Balla
 
US identifies citizens fighting for Islamic State
Washington, Aug 30 (IANS/EFE) US intelligence and law enforcement agencies have identified around a dozen of its citizens, who have traveled to the Middle East to join jihad led by the Islamic State, officials said....
Read more on Politics Balla
 
Keira Knightley goes topless
London, Aug 30 (IANS) British actress Keira Knightley showed her upper body for a racy magazine photoshoot. The "Pirates of the Caribbean" actress stripped off for fashion magazine Interview. In the photo, she appears...
Read more on Celebrity Balla
 
UN human rights report on Ukraine distorts facts: Russia
Moscow, Aug 30 (IANS/ITAR -TASS) The latest report of office of the UN High Commissioner for Human Rights distorts the situation on the Russia-Ukraine border, Russia's foreign ministry said Friday. "The authors of the...
Read more on Politics Balla
 
Happy to call Brad Pitt my son-in-law: Voight
Los Angeles, Aug 30 (IANS) Actor Jon Voight is happy that now he can call Brad Pitt his son-in-law. Voight is happy about the wedding of his daughter Angelina Jolie to her partner of nine years and although he wasn't...
Read more on Celebrity Balla
 
Modi government selling off Indian assets: Mamata
Kolkata, Aug 30 (IANS) Accusing the Narendra Modi led BJP government of selling out the country's assets by embracing FDI across sectors, West Bengal Chief Minister Mamata Banerjee Friday warned that such policies...
Read more on Politics Balla
 
Gunmen kill two officials in Yemen
Sana'a, Aug 30 (IANS) Unidentified gunmen shot dead two officials in Yemen's southern province of Lahj Friday, a security official said. "An official of the General People Congress party and another official of Lahj...
Read more on Politics Balla
 
Adam Levine wants 100 kids
Adam Levine wants to have ''more kids than would be socially responsible.'' The Maroon 5 frontman, who married Namibian model Behati Prinsloo in Mexico last month, can't wait to become a father, but says they're too...
Read more on Celebrity Balla
 
David Beckham uninjured in motorcycle crash
David Beckham crashed his motorcycle in Los Angeles yesterday (08.28.14). The 39-year-old star, who has sons Brooklyn, 15, Romeo, 11, and Cruz, nine, and three-year-old daughter Harper with wife Victoria Beckham,...
Read more on Celebrity Balla
 
Demi Lovato got confidence from Kim Kardashian
Demi Lovato credits Kim Kardashian and Beyoncé for helping her to feel more body confident. The 22-year-old singer claims she was ''miserable'' when she was thinner and says the 'Keeping Up with the Kardashians' beauty...
Read more on Celebrity Balla