Under the second stage of the Production Sharing Agreement of the BP-operated Shah Deniz Project in the Caspian Sea offshore Azerbaijan, Lukoil has signed in Baku a 12-year credit-facility agreement with a consortium of banks to borrow $1 billion.
According to Lukoil, $560 million will be provided for 12 years jointly by the European Bank for Reconstruction and Development (EBRD), the Asian Development Bank (ADB) and the Black Sea Trade and Development Bank (BSTDB). Lukoil further said that the remaining amount of $440 million will be provided for a period of 10 years by a commercial banking syndicate comprising of the ING Bank N.V., the Bank of China, UniCredit AG and Societe Generale via B Loan programs of the EBRD and ADB.
Stage 2 of Shah Deniz started in December 2013. The project will include two additional bridge-linked offshore gas platforms, 26 subsea wells, 500km of subsea pipelines, and the expansion of the gas plant at Sangachal Terminal and the South Caucasus Gas Pipeline expansion.
Lukoil notes that the total amount of investments provided by the operating consortium will be approximately $28 billion, excluding the construction of the export pipeline systems. The operating consortium consists of BP 28.83% the operator, TPAO 19%, Petronas 15.5%, SOCAR 10%, LUKOIL 10%, NICO 10%, and SGC 6.67%.
The Russian company added that the annual total Shah Deniz Stage 1 and Stage 2 production will peak at 25 billion cubic meters of natural gas.
“This will be the largest gas field development project undertaken in Azerbaijan, generating more economic opportunities and helping to boost closer regional ties with Georgia and Europe,” said Michael Barrow, Deputy Director General of ADB’s Private Sector Operations Department. “ADB’s involvement has helped catalyse long-term bank financing support from commercial banks.”
“This project is one of the EU’s highest priorities for the energy sector. It is key for energy security because it diversifies routes and sources of gas supply,” said Riccardo Puliti, EBRD Managing Director for Energy and Natural Resources. “It helps cut carbon emissions by providing a bridge fuel for renewables and replacing coal. The project will also be a very big step towards the market-based hub pricing for gas which will bring Europe closer to a common gas market.”
“Supporting regional cooperation and energy efficiency in the Black Sea region are strategic priorities for BSTDB. We are happy to contribute to this project demonstrating strengthened synergies among development partners to foster sustainable growth in our member countries,” said Igor Leshukov, BSTDB Vice President, Banking.
According to EBRD, production from the project is expected to begin in 2018 and will help provide jobs for over 16,000 people through to 2022.