BP strikes gas deal with Azerbaijan

The deal is worth billions, but has drawn fire for the Caspian state's poor human rights record

Published September 19, 2013 6:42PM (EDT)

 An oil platform off the coast of Brazil         (Wikimedia)
An oil platform off the coast of Brazil (Wikimedia)

BP is at the centre of one of the world's biggest gas sales agreements worth up to $100bn (£62bn) over 25 years after signing a deal with European buyers for supplies from a field it operates in the Caspian Sea.

Over 10bn cubic metres of gas a year will be produced via a $40bn scheme – the biggest ever undertaken by BP – to develop a second stage of production from the huge Shah Deniz field located in the territorial waters of former Soviet republic, Azerbaijan.

The project will involve a massive new transport network of three new pipelines to move in total 16bn cubic metres a year of offshore gas through Georgia, Greece and under the Adriatic Sea to Italy.

The next phase of Shah Deniz, which is double the size of the first part, is expected to be given the go-ahead before Christmas by BP, which is operator and 25% equity holder alongside Statoil of Norway (25%) and others.

The project will help with European energy security but also enhances the position of Azerbaijan, a country whose president Ilham Aliyev is accused by Amnesty international of presiding over a human rights "crisis".

Al Cook, vice president of BP in Azerbaijan, said the deal with nine companies including Shell, E.ON and Enel of Europe – on the back of a summer deal with BOTAS of Turkey – was another "vital milestone" in developing this project.

He added: "We are confident we can take a final investment decision at the end of the year for a scheme that will open up the southern corridor and bring gas direct to Europe for the first time from Azerbaijan."

Asked whether the scheme could enhance the reputation of a controversial regime, Cook pointed out that the project was supported by the European Union and would only proceed as a "sound economic proposition".

Shah Deniz 1 brought 8bn cubic metres of gas out of the Caspian for sale to Azerbaijan itself plus Georgia and Turkey. Shah Deniz 2 involved 16bn more going to Bulgaria, Greece, and Italy.

The second phase will involve drilling 26 new wells at a cost of more than $5bn, 500 kilometres of subsea pipelines and 3,500 kilometres of onshore links including a Trans Adriatic Pipeline. BP and its partners, which includes the local Azerbaijan state-owned oil group, SOCAR, will also need to construct two new giant pumping stations in Georgia which will each be the size of 50 football pitches.

The signing of the gas sales deal comes as Aliyev runs for a third consecutive term as the country's president after changing the constitution in 2009 to allow him to serve an unlimited number of years.

Amnesty has been calling for the immediate release of opposition candidates, journalists, pro-democracy activists who it claims to have been imprisoned in a pre-election crackdown.

Aliyev, who succeeded his father as president in 2003, is alleged by Amnesty to have "presided over a deepening human rights crisis" in the Caspian state.

This article originally appeared on guardian.co.uk

By Terry Macalister

MORE FROM Terry Macalister

Related Topics ------------------------------------------

Bp Gas Natural Resources Oil The Guardian