Shah Deniz gas field

Azerbaijani natural gas field

Shah Deniz gas field is the largest natural gas field in Azerbaijan. It is situated in the South Caspian Sea, off the coast of Azerbaijan, approximately southeast of Baku, at a depth of The field covers approximately Stretching out over 140 square kilometres, the reservoir is similar in size and shape to Manhattan Island. It is considered to be a founding link for the Southern Gas Corridor, aiming to bring additional and alternative natural gas volumes to EU member countries.

The Agreement on “the Exploration, Development, and Production Sharing (PSA)” for Shah Deniz area was signed between SOCAR and some oil companies of foreign countries on June 4, 1996. Azerbaijani Parliament confirmed the document of “the Exploration, Development, and Production Sharing (PSA)” on October 4, 1996. The Shah Deniz gas and condensate field was discovered in 1999. “An Intergovernmental” Agreement and a “Sale and Purchase” Agreement were signed by delegates of Azerbaijan and Turkey with the participation of President Sezer and President Heyder Aliyev in Ankara on March 12, 2001. "An Intergovernmental" Agreement and relevant agreements for the carrying and selling of natural gas were signed by delegates of Azerbaijan and Georgia with participating of President Shevardnadze and President Aliyev on September 29, 2001. Some contracts for the construction of the first stage of Shah Deniz were concluded on June 5, 2003, and Construction work for Shah Deniz began at Sangachal Terminal on November 3 of the same year. Construction works for South Caucasus Pipeline started in Azerbaijan on October 14, 2004.

The Shah Deniz field is operated by BP which has a share of 29.99%. Other partners include LUKoil (19.99%), TPAO (19.00%), SOCAR (14.35%), NIOC (10.00%) and Southern Gas Corridor Upstream (6.67%). Eni sold its 5% share to LUKOIL in June 2004. Later divestitures included pre FID (Final Investment Decision) in December 2013 sales of 10% of the shares by Statoil, to BP and SOCAR who shared them at 3.3% and 6.7% respectively. as well as sale by Total SA in May 2014 its 10% share to Turkish TPAO

In October 2014, Statoil sold its remaining 15.5% stake in the project to Petronas for a fee of $2.25 billion.

The Shah Deniz reserves are estimated at between of oil equivalent from 50 to 100 billion cubic meters of gas. Gas production to date at the end of 2005 was estimated to be approximately 7 billion cubic meters or an average of per day. The Shah Deniz field also contains gas condensate in excess of 400 million cubic meters.

The South Caucasus Pipeline, which began operation at the end of 2006, transports gas from the Shah Deniz field in the Azerbaijan sector of the Caspian Sea to Turkey, through Georgia. The associated condensate is mixed with the oil from the ACG field and is transported to Turkey through Georgia, along the Baku–Tbilisi–Ceyhan pipeline.

The Shah Deniz scheme started to produce gas at the end of December 2006, three months later than expected, and was forced to close briefly in January 2007. Azerbaijan announced that the field had resumed output only to admit that it had been shut down once more, for a few weeks, due to technical issues. The shutdown forced Georgia to buy emergency gas supplies from Russia at a market price. Georgia hopes that production from Shah Deniz will allow the country to decrease its energy — and political — dependence on Russia. By July 2007, the Shah Deniz gas plant at Sangachal Terminal was fully operational, with all buyers of Shah Deniz taking gas.