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Wednesday, May 09, 2007

Shah Deniz players eye upgrade

04 May 2007 - Upstream OnLine - Azerbaijan's huge Shah Deniz gas field may reach peak annual production of 9.6 billion cubic metres in its first phase rather than the previous forecast of 8.6 Bcm, Azeri state energy company Socar said today. Kyamal Abbasov, head of gas operations at Socar, said the companies behind Shah Deniz were discussing raising production in late 2008, which might take output to the new peak in 2009-2010. "Right now the Shakh Deniz partners are discussing additional investments to increase production by 1 Bcm a year from the fourth quarter of 2008," he told Reuters, without disclosing the amount of investment required. He said the extra production would be exported at commercial terms, unlike the volumes specified in the Shah Deniz contract, which are sold at a fixed price. The $4 billion project is operated jointly by UK supermajor BP and Norway's Statoil. It started production in December but had to halt output soon afterwards due to a leak from the first well, which has also halved this year's production forecast. Abbasov said the second of four production wells planned for this year would be brought on stream later this month. The group plans to start exports to Georgia and Turkey in the second quarter of this year and Abbasov said construction of the Baku-Tbilisi-Erzerum pipeline had now finished in Turkey, although testing was still required. Talks with buyers of gas from the second stage, which will start development in 2012, would start at the end of this year or early in 2008. "According to a preliminary assessment, the second phase of Shah Deniz will produce 12 bcm a year at its peak," said Abbasov. Shah Deniz's total reserves are estimated at 1.2 trillion cubic metres. Besides BP and Statoil, which have 25.5% of the project each. Socar, Russia's Lukoil, Iran's Nico and French giant Total each have 10% owned. The other 9% is held by Turkey's TPAO.

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