Oil Majors Sign Caspian Pipeline Deal with Georgia

Partners in the giant Azeri offshore Shakh Deniz gas field have cleared the way for construction of an export pipeline to Turkey by signing an agreement with transit nation Georgia.

A BP-led consortium signed a Host Government Agreement with Georgia at a ceremony in the capital Tbilisi, the last governmental agreement necessary for the launch of the first phase of the project in July this year.

"This is yet another remarkable milestone which paves the way for the development of the world class Shakh Deniz gas field...and the construction of a new gas pipeline from Baku," David Woodward, President of BP in Azerbaijan said after the ceremony, witnessed by Georgian President.

The $2.6 billion first phase includes the construction of a production platform at the Caspian field and a pipeline through Georgia to link up with a new Turkish-built line. Last year, Azerbaijan signed an agreement to supply Turkey with two billion cubic meters (bcm) of gas from 2004-2005, rising to 6.6 bcm by around 2007. The pipeline will also feed the Georgian market, lessening Georgia's dependence on Russian gas supplies, which are intermittently cut off.

Woodward said Shakh Deniz had a full production potential of 16 bcm a year.