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

 
 
 

43 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

7 weeks 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 ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

7 weeks 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 tragedies of MH370 and MH17" hits home ...
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

Clashes between locals, Ebola team in Sierra Leone, curfew imposed
Freetown, Oct 22 (IANS) A mid-day curfew was imposed in the city of Kono in eastern Sierra Leone after two people were killed in a conflict between local residents and an Ebola team which tried to take a suspected patient for testing, media reported.
 
 
Indians in Gambia contribute to fight against Ebola (Lead, superseding earlier story)
Dakar (Senegal), Oct 22 (IANS) The Indian community in the West African nation of Gambia, has provided 865,000 dalasis ($20,567) to that country's government to boost preparatory strategy against the Ebola virus disease, a gesture that has been highly appreciated.
 
 
Nepal ministries monitor 'third worst airport'
Kathmandu, Oct 22 (IANS) Five Nepalese ministries Wednesday decided to monitor the country's only international airport after it was ranked as the world's third worst airport by a famous travel website, saying the airport resembled a "bus station in an impoverished neighbourhood".
 
 
Indians in Gambia contribute to Ebola fight
Dakar (Senegal), Oct 22 (IANS) The Indian community in neighbouring Gambia, one of the three countries in West
 
 
 

Latest from the Network

European Champions League standings
Paris, Oct 22 (IANS) Following are the European Champions League standings for Groups E to H after Tuesday's matches (tabulated under matches played, won, drawn, lost, goals for, against, points), according to Xinhua...
Read more on Sport Balla
 
Rogerio set to break Giggs world record
Rio de Janeiro, Oct 22 (IANS) Sao Paulo goalkeeper Rogerio Ceni is one victory away from earning his fourth Guinness World Record by eclipsing a mark held by Manchester United legend Ryan Giggs. The 41-year-old will...
Read more on Sport Balla
 
Ryan Reynolds can't keep his hands off Blake Lively
Ryan Reynolds was ''really sweet'' to Blake Lively at the Angel City Ball. The couple, who got married in September 2012, made their first red carpet appearance together in New York City on Monday night (10.20.14) since...
Read more on Celebrity Balla
 
Kris Jenner doesn't know who Bruce Jenner is dating
Kris Jenner has ''no idea'' whether Bruce Jenner is dating her best friend. The 58-year-old reality TV star, who split from the Olympic gold medallist last October after 23 years of marriage, claims she doesn't know if...
Read more on Celebrity Balla
 
When Rihanna dressed like 'Harry Potter'
New York, Oct 22 (IANS) Singer Rihanna was spotted here in a Harry Potter style costume. She wore the wizard-like get-up while heading for a business meal here Monday, reports mirror.co.uk. The 26-year-old combined a...
Read more on Celebrity Balla
 
Germany raises humanitarian aid to Iraq
Berlin, Oct 22 (IANS) Germany has pledged a further 20 million euros (about 25.5 million dollars) in humanitarian aid to Iraq, the foreign ministry said in a statement Tuesday. The additional funds are immediately...
Read more on Politics Balla
 
India calls on Israel, Palestine to resume peace process
United Nations, Oct 22 (IANS) India has called upon Israelis and Palestinians to resume the peace process as "dialogue remains the only viable option" to address the issues confronting the region. In a brief statement...
Read more on Politics Balla
 
Airstrikes help ground forces fight IS: Pentagon
Washington, Oct 22 (IANS) Kurdish forces are in control of the majority of the Syrian city of Kobane despite efforts by the Islamic State (IS) to take the town, a spokesperson for US defence department said Tuesday....
Read more on Politics Balla
 
Palestine, Israel urged at UN to halt unilateral initiatives
United Nations, Oct 22 (IANS) UN Secretary-General Ban Ki- moon Tuesday called on Palestine and Israel to overcome differences and halt unilateral initiatives that fuel mistrust, so as to pursue long-term stability in...
Read more on Politics Balla
 
China urges Israel to create conditions for peace
United Nations, Oct 22 (IANS) Chinese government has called on Israel to create necessary conditions for the resumption of peace talks with Palestine. At an open debate of the Security Council on the situation of the...
Read more on Politics Balla