Shah Deniz Partners To Proceed With FEED Phase For Stage 2 Development

Azeri President Ilham Aliyev and BP Group CEO Robert Dudley on 17 April announced, on behalf of the Shah Deniz consortium, that the partners had decided to proceed with front end engineering design (FEED) for Stage 2 of the field’s development. The consortium was established in 1996 to develop the Shah Deniz offshore gas field, which has estimated reserves of 1.2 trillion cu ms. The beginning of FEED “represents the start of a key phase in the project during which engineering studies will be refined, further wells will be drilled, commercial agreements will be finalized and key construction contracts will commence,” the consortium says. Stage 2 of the field’s development is estimated to cost $25bn and will include the expansion of the Sangachal terminal, the construction of two new bridge-linked production platforms, the drilling of 26 new subsea wells and the completion of a 500km underwater network of pipelines at depths close to 550ms that would link the field with Sangachal. Moreover, Phase 2 calls for the expansion of the South Caucasus Pipeline (SCP), which runs from Baku to Erzurum in eastern Turkey, by 16 bcm/year from the current 9 bcm/y.

The initiation of the FEED phase indicates that the consortium is entering the final stage of the selection process for the optimal evacuation route. Three pipeline projects are competing to carry Shah Deniz 2 gas across Turkey to Europe: the Trans Adriatic Pipeline (TAP); the South East Europe Pipeline (SEEP); and Nabucco West, a modified version of the original Nabucco pipeline proposal. By June the consortium’s selection committee – which involves Azeri state firm Socar, BP, Statoil and Total – is expected to choose between SEEP and Nabucco West to enter a final face-off against TAP. The decision on the optimal pipeline route must be taken by the time the consortium plans to take its final investment decision (FID), scheduled for June 2013. The beginning of the FEED phase will also help the consortium partners gain a more solid understanding of projected costs, which according to Socar’s President Rovnag Abdullayev could “vary by 30% either upward or downward in the course of the project.” Last June BP estimated Shah Deniz 2 costs at $20bn (MEES, 13 June 2011).

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