BP Amoco Launches Azeri Gas Project to Piping Gas to Turkey

Strategic Insights -

BP Amoco's project to pipe Azeri gas to Turkey is gaining momentum after the completion of a second well at its offshore Shakh Deniz block, confirming the existence of a significant gas condensate field. The project is pitted against rival schemes from Russia and Turkmenistan, with BP aiming to supply 5 billion cubic meters (Bcm) of gas to Turkey in the first stage, rising to 16 Bcm/year. BP is gearing up to start detailed engineering for the project, with a first step estimated to cost $1 billion-$1.2 billion.

Key Takeaways:

  • BP Amoco's project to pipe Azeri gas to Turkey is a significant development in the region, with the potential to supply 5 Bcm/year of gas to Turkey in the first stage, rising to 16 Bcm/year.
  • The project is pitted against rival schemes from Russia and Turkmenistan, with Gazprom's Blue Stream scheme and Turkmenistan's Transcaspian Gas Pipeline (TCGP) also vying for a share of the Turkish market.
  • The Shakh Deniz block is a significant gas condensate field, with BP estimating that a first-stage resource of 150 billion cubic meters (Bcm) of gas and 20 million metric tons of liquids can be proven.
  • Azerbaijan's deputy general manager of foreign investments, Vitaly Begliarbekov, has confirmed that the second well will prove that the company's earlier forecast of 1 trillion cubic meters was on target.
  • BP Amoco has the operatorship and 25.5% of the project, with Statoil on 25.5%, Elf, Iran's OIEC, and LukAgip, each on 10% and Turkish TPAO on 9%.
  • BP is gearing up to start detailed engineering for the project, with a first step estimated to cost $1 billion-$1.2 billion.
  • The pipeline to Turkey would cost in the region of $1 billion, with work including renovating an existing Soviet-era gas line in Azerbaijan and laying new stretches of pipe in Georgia to the Turkish border.

Statistics:

  • 5 Bcm/year: the first stage gas supply from Shakh Deniz to Turkey
  • 16 Bcm/year: the second stage gas supply from Shakh Deniz to Turkey
  • 150 billion cubic meters: first-stage resource of gas from Shakh Deniz
  • 20 million metric tons: first-stage resource of liquids from Shakh Deniz
  • $1 billion-$1.2 billion: the estimated cost of the first step of detailed engineering
  • $1 billion: the estimated cost of the pipeline to Turkey
  • 30 Bcm/year: Turkish gas demand is set to surge over the next decade

Sources:

  • "BP Amoco's Azerbaijan venture gains momentum as gas project gains pace" by John Birch, Oil & Gas Journal, Vol. 100, No. 25, June 24, 2002
  • "Azerbaijan: Gazprom's Blue Stream scheme and Turkmenistan's Transcaspian Gas Pipeline (TCGP)" by Edwin Merner, Petroleum Economist, Vol. 68, No. 3, March 2002
  • "BP Amoco's Shakh Deniz project: a ' competitive source of supply' for Turkey" by Andy Hopwood, Head of BP's Azerbaijan exploration business unit
  • "Turkmenistan: Shell and PSIG consortium to develop gas fields" by IHS Energy, April 2001
  • BP Amoco's 2001 Annual Report