Statoil Named Operator for Shah Deniz Project

Statoil has been named commercial operator covering gas sales, contract administration and business development for Azerbaijan's Shah Deniz gas and condensate field in the Caspian. This appointment also covers the South Caucasus Pipeline (SCP) system for gas transport to markets in Azerbaijan, Georgia and Turkey.

The operator assignment awarded forms part of the development decision for Phase I of Shah Deniz, which was taken by the licensees in the Azerbaijan capital of Baku on February 27th.

This project has an overall investment budget (upstream and midstream) of US $3.2 billion, with Statoil's share amounting to US $815 million.

The decision to bring the Caspian field on stream increases the group's booked reserves by 85 million barrels of oil equivalent.

Today's development go-ahead also means orders worth US $46 million for Norway's Hydralift and Nymo companies to deliver equipment and fabricated structures to Shah Deniz.

The field partners have appointed Statoil operator for the newly-established Azerbaijan Gas Supply Company (AGSC), which will administer the sales deals underpinning the Phase I development.

Contracts covering annual gas deliveries of 8.4 billion cubic meters have been signed with Azerbaijan, Georgia and Turkey. In addition come annual sales of 14.6 million barrels of condensate.

In addition to operating AGSC, Statoil will be commercial operator for business development and administration of the South Caucasus Pipeline Company (SCPC).

The latter will pipe gas from Baku via Georgia to Turkey in a 690-kilometer line due to begin operating in 2006, which will be laid alongside the planned Baku-Tbilisi-Ceyhan (BTC) oil pipeline.

AGSC and SCPC have been established by the Shah Deniz licensees to cover the project's midstream side. Upstream operator BP will be technical operator for SCPC.

As chair of the partnership's gas commercial committee (GCC), Statoil will also head work on commercializing the Shah Deniz reserves for a full development of the field.

The latter has the potential for doubling production from the plateau level established in Phase I.

Ottar Rekdal, senior vice president for international gas and power at Statoil, is pleased that the group can now also apply its gas expertise and experience internationally.

"Our gas marketing and sales expertise is highly relevant for the responsibilities we've acquired in Azerbaijan," he comments.

"We regard the decision by the Shah Deniz partners as a vote of confidence and an acknowledgement of our status as a leading international gas company."

A production sharing agreement for Shah Deniz was signed in June 1996, with the field declared commercial in 1999.

This discovery is about twice as large as the Ormen Lange field being developed by Norsk Hydro in the Norwegian Sea. Apart from Statoil and BP, each holding 25.5 per cent, the Shah Deniz partners are Socar, TotalFinaElf, Naftiran and LukAgip all with 10 percent and Turkish Petroleum with nine percent.


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