AZERBAIJAN - The Shah Deniz Project.

In late June 2002, BP said the cost of the first phase in developing the offshore Shah Deniz gas field and building related pipelines for the domestic market and for export has risen by $600m to $3.2 bn. But it said the project was still economically viable.

The field's proven reserves are 31 TCF of gas and 1.7 bn barrels of condensate. The Shah Deniz partners are expected to sanction the project before end-September 2002. Offshore facilities are to be linked by gas and condensate pipelines to the Sangachal terminal. First gas exports from Shah Deniz are expected to arrive in Turkey in late 2005. Greece is among European markets to buy this gas through a pipeline from Turkey.

The shareholders in the Shah Deniz consortium are: BP (25.5%), Statoil (25.5%), TotalFinaElf (10%), LukAgip (10%), Socar (10%), NaftIran or Nico (10%) and TPAO (9%). Nico acquired the 10% equity from OEIC, an affiliate of state-owned National Iranian Oil Co. (NIOC).

Development of the field, which lies in water depths of between 50 and 600 metres some 70 km south-east of Baku, began in July 2002 - with Technip having done the design work. The project will include construction of a self-installing fixed gas production platform (based on Technip's TPG 500 concept), other infrastructure and the drilling of 10 wells to depths of up to 6,500 metres each. These will be followed later by subsea wells in some 300 metres of water.

The field is planned to produce at the initial rate of 8 BCM/year. This will rise to 16 BCM/year when the field is fully developed. The gas and condensate to be produced will be pumped to the mainland through two pipelines, each 100 km long, to Sangachal. The gas will be processed at a plant to be built in Sangachal.