$45bn ‘Contract of the New Century' signed in Baku with a BP-led Consortium

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The European Azerbaijan Society (TEAS) has acknowledged the importance of signing a momentous $45bn deal that is destined to bring Azerbaijani Caspian gas to the heart of Europe.

The announcement of the Shah Deniz II development is welcome news for Azerbaijan, for the UK and for Europe.

On 16 December, according to a Bloomberg release 'BP-led group Signs $45bn deal to pipe Azeri gas', William Hague, UK Foreign Secretary, visited Baku to witness the signing of a massive $45bn 2000-mile gas pipeline deal that will see Azerbaijani Caspian gas from the Shah Deniz II field being piped to Italy, making the proposed Southern Energy Corridor into a reality. The move will ensure energy security for Europe.

The deal, signed between the BP-led Shah Deniz Consortium and the Azerbaijani government, will see development of the Shah Deniz project in the Caspian Sea and the construction of pipelines across Turkey and into Greece, Albania and Italy. It is estimated that initial production will be 16bn cubic metres (bcm) per annum, increasing to 23bcm by 2023.

According to the FCO, Mr Hague said: “The announcement of the Shah Deniz II development is welcome news for Azerbaijan, for the UK and for Europe. This adds to Europe’s energy security and competitiveness by opening up a new source of gas for southern Europe. The deal will also be good news for the UK – with many of the 300 firms based in Azerbaijan gaining from this major new project. The UK appreciates the vital role that Azerbaijan has played in making this deal a reality.” The gas will reach Turkey in 2018 and Europe one year later.

Lionel Zetter, Director, The European Azerbaijan Society (TEAS), who attended the signing ceremony, said: “This is a great day for BP and SOCAR, and for Azerbaijani relations with Europe – especially the UK.

“It was good to see William Hague in Baku, signing this deal alongside Azerbaijani President Ilham Aliyev; Georgian Prime Minister, Irakli Garibashvili; Italian Prime Minister Enrico Letta; Albanian Prime Minister Edi Rama and Günther Oettinger, EU Energy Commissioner.

“This contract and this event clearly illustrate the fact that Europe needs Azerbaijan – and Azerbaijan needs Europe.”

Bob Dudley, Chief Executive Officer, BP stated that gas production from the Shah Deniz field, which holds an estimated 1.2tn cubic meters of natural gas, would immediately be expanded by 1.4bcm per annum.

Expanding the field and the pipeline to Turkey will cost about $28bn, with the remaining investment being spent on building the Trans-Anatolian Pipeline (TANAP) across Turkey and the Trans-Adriatic Pipeline (TAP) into Italy. BP’s partners in the Shah Deniz Consortium include Norwegian Statoil, the State Oil Company of the Azerbaijani Republic (SOCAR), French Total, Iranian Naftiran Intertrade, Turkish Turkiye Petrolleri, and Russian Lukoil.

According to Al Cook, Vice-President, Shah Deniz Development, BP, the pipelines are designed to convey gas from other suppliers. He commented in Baku: “It’s about as large as you can make a long gas pipeline. It would be very easy to double the amount of gas flowing through it. There are a number of countries that this gas could come from. We regard TANAP as being a hugely strategic pipeline for the future.”

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