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

3 days 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 ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

4 days 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 ...
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

Nigeria to get Japanese drug for Ebola treatment
Abuja, Sep 2 (IANS) Nigeria will soon get a Japanese drug to treat Ebola, the country's Health Minister Onyebuchi Chukwu said Monday.
 
 
Japan to aid connectivity upgrade in northeast India
Tokyo, Sep 1 (IANS) India and Japan Monday decided to strengthen cooperation for improving connectivity and socio-economic development in northeastern states of India.
 
 
Three Ebola cases recorded in Nigeria oil hub
Abuja, Sep 1 (IANS) At least three cases of Ebola virus disease (EVD) have been recorded in Nigeria's oil hub of Port Harcourt, where a fatality was confirmed last week, the country's Minister of Health Onyebuchi Chukwu said here Monday.
 
 
India, Japan to elevate strategic partnership
Tokyo, Sep 1 (IANS) Prime Minister Narendra Modi Monday said relations with Japan were of the "highest priority" for his government and announced a slew of initiatives, including turning the strategic partnership into a "special" partnership and a fast-track channel for Japanese investors.
 
 
 

Latest from the Network

13 killed in Baghdad bomb blasts
Baghdad, Sep 2 (IANS) As many as 13 people have been killed in two explosions in Iraq's capital Baghdad Monday, a police source said. Thirteen people were killed and 45 others injured when two car bombs exploded in...
Read more on Politics Balla
 
Rebels, Syrian forces clash near Golan Heights
Cairo, Sep 2 (IANS/EFE) Islamic rebels clashed with the Syrian forces near Israeli-controlled Golan Heights Monday, the Syrian Observatory for Human Rights said. The observatory, in a statement, said that fighting...
Read more on Politics Balla
 
Kelly Brook suffered second miscarriage
London, Sep 2 (IANS) Actress-model Kelly Brook has revealed that she suffered a second miscarriage while dating Thom Evans. The 34-year-old and the former rugby star lost their first child May 6, 2011 when Brook gave...
Read more on Celebrity Balla
 
Russia may retaliate against fresh EU sanctions
Moscow, Sep 2 (IANS/EFE) Russia will take retaliatory measures to defend its legitimate interests if the European Union imposes new sanctions over Moscow's intervention in Ukraine, the country's foreign ministry said...
Read more on Politics Balla
 
Britney Spears looking forward to dating
Britney Spears is looking forward dating again. The 32-year-old singer admitted during her 'Piece of Me' show at the Planet Hollywood in Las Vegas yesterday (08.31.14) that she's excited about meeting someone new...
Read more on Celebrity Balla
 
Lindsay Lohan seeks hypnosis to quit smoking
Lindsay Lohan has reportedly been undergoing hypnotherapy to help her give up smoking. The 28-year-old actress has turned to psychotherapy in the hope of kicking her nicotine addiction before she performs in 'Speed-the...
Read more on Celebrity Balla
 
Ian Somerhalder and Nikki Reed spend $860 in sex shop
Ian Somerhalder and Nikki Reed allegedly spent nearly $1,000 in a sex shop yesterday (08.31.14). The new couple, who have been dating for the past few months, reportedly forked out $860 on a number of erotic toys -...
Read more on Celebrity Balla
 
Robin Williams' daughter returns to Twitter
Robin Williams' daughter has returned to Twitter. Zelda Williams posted her first tweet on the social networking site tonight (01.09.14) almost three weeks after she abandoned her account when she received abusive...
Read more on Celebrity Balla
 
Is Miley Cyrus dating Douglas Booth?
Los Angeles, Sep 2 (IANS) Pop star Miley Cyrus and British actor Douglas Booth are reportedly dating. The "Wrecking Ball" hitmaker was first rumoured to be romancing Booth in 2010 when they co-starred in teen drama "...
Read more on Celebrity Balla
 
UN chief alarmed by Israeli claim on West Bank land
United Nations, Sep 2 (IANS) UN Secretary-General Ban Ki-moon Monday expressed alarm at the Israeli declaration of a 400 hectares area in the West bank as "state land". "The secretary-general is alarmed by yesterday's...
Read more on Politics Balla