Contracts worth $3bn awarded for Shah Deniz phase two

The consortium developing Phase 2 of the Shah Deniz gas project announced on April 10th that it had awarded a third contract for the gasfield, worth US$750m. Subsequently, on April 14th, FM Technologies (US) announced that it had been awarded a US$322m contract.

The consortium, which is led by BP (UK), awarded the US$750m contract for the construction and supply of subsea infrastructure necessary for the gasfield's development. The US$322m contract is for subsea work at the gasfield. 

These contracts followed on from two earlier contracts, awarded in December 2013 and March 2014. The contract signed in December is worth US$974m and is for the construction of two offshore platforms in the Caspian Sea. 

The contract awarded in March is worth US$841m and is for subsea production infrastructure. Together, the four contracts are worth a combined US$2.9bn, equivalent to 4% of 2013 GDP. Further contract awards for construction and supply at the field are expected over the forecast period as the development of the field progresses.

In a statement to the press, BP's regional president, Gordon Birrell, said that the deals would allow subsea production technology to be used for the first time in the Caspian Sea region, increasing the opportunity for further energy sector development.

Shah Deniz Phase 2 is expected to come on stream in 2019, producing 16bn cu metres of gas a year. Of this, 10bn cu metres will be supplied to Europe, and the remaining 6bn cu metres will be for Turkish domestic consumption. 

Interest in the Shah Deniz project has increased in recent months owing to tensions between Russia and Ukraine. The current capacity to be shipped to Europe from the Shah Deniz project will not be sufficient to offset the 150bn cu metres of gas exported from Russia to Europe each year. However, the Russo-Ukrainian conflict has reawakened interest in the Trans-Caspian pipeline, which would ship gas from Turkmenistan to European markets.

The president of Turkmenistan, Gurbanguly Berdymukhamedov, said in early April that the project was one of the country's most important goals. However, the project has been under discussion for over a decade, and similar statements by Mr Berdymukhamedov in the past have not led to material progress on the ground.

(EIU)

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