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Azerbaijan’s Shah Deniz makes announcement on long-term natural gas supplies

Oilfield Technology,

The Shah Deniz gas project consortium in Azerbaijan has made a long-awaited announcement on long-term supplies to Europe, confirming that from around 2019 the Azeri gas fields will feed 16 billion m3/yr of gas to Europe. Only a tenth of these supplies, however, will reach the eastern European states Brussels had hoped would benefit.

The BP-led Shah Deniz consortium, which includes Azerbaijani state oil company Socar, Norway’s Statoil and French oil major Total, has been developing the country’s gas reserves for several years.

Continued dependence on Russian energy supplies

The European Commission had wished the Shah Deniz gas would be pumped to southern and eastern Europe to ease states’ dependence on Russia, which has a history of cutting gas supplies to Europe during past payment disputes with Ukraine.

Earlier this summer, the Shah Deniz consortium backed the TAP pipeline that will terminate in Italy, rather than the EU-backed Nabucco project that would have passed through southeastern Europe, signalling the brush aside of eastern Europe.

During its announcement, the consortium said 80% of the gas is destined for Italy and neighbouring markets.

“Shah Deniz gas is now effectively lost to eastern Europe,” said Thierry Bros, Senior European Gas Analyst at Société Générale. “Those countries will remain dependent on Russia for a large percentage of their supply.”

Société Générale analysts also said last week that Russia would reclaim its position as Europe’s largest supplier from Norway this year, after Gazprom’s exports to Europe climbed 10% compared with 2012 in the year to August.

Gazprom covers a quarter of Europe's gas needs with exports over 150 billion m3/yr. In response to Europe's quest for Caspian supply, Gazprom proposed its US$ 39 billion South Stream pipeline project which would pump gas to northeast Italy through the Black Sea starting from the end of 2015.

Natural gas for Italy

From around 2019, Shah Deniz is expected to distribute 16 billion m3/yr of gas to Europe, with 10 billion m3/yr reserved for Europe and 6 billion m3/yr for Turkey.

A SOCAR official confirmed that half of the gas is destined for Italy.

"Around 8 billion m3 of gas will be shipped to the Italian market, where European buyers will be getting it for their facilities in the country (Italy)", SOCAR's Vice President Elshad Nasirov said.

SOCAR will act as an operator of sales from Shah Deniz II. Statoil is a sale operator for Shah Deniz I.

Edited from various sources by Cecilia Rehn

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