BP Awards $750M Contract for Shah Deniz Project
British oil company BP plc’s (BP) share prices fell 1.7% as news surfaced, of the company-led consortium awarding construction and supply contract worth $750 million for the development of the Shah Deniz II gas field in Azerbaijan.
Shah Deniz II offers Europe an opportunity to reduce its dependence on Russian gas. The consortium involved in the development of Azerbaijan’s biggest gas field, Shah Deniz, includes Statoil ASA (STO), Azeri state energy company SOCAR and others along with BP.
Shah Deniz I commenced production in 2006. The field has an annual production capacity of about 10 billion cubic meter (bcm) of natural gas. The next phase, Shah Deniz II, is vital for Europe as it will present an alternative gas supply to Russia’s Gazprom. Shah Deniz II is expected to come online in 2019 and produce 16 bcm of gas annually. Of the total 16 bcm of gas, 10 bcm is allocated for Europe and the remaining 6 bcm is for Turkey.
A quarter of Europe’s gas needs are currently covered by Gazprom, which exports over 150 bcm of gas per year. The tensed situation in Ukraine has made it necessary for Europe to look for alternative gas supplies as about 40% of the gas imported to Europe from Russia moves across that country.
The latest contract has been awarded to the consortium of BOS Shelf LLC, Saipem Contracting Netherlands B.V. and Star Gulf FZCO. The consortium is likely to complete the work by 2017 and is responsible for the construction of subsea structures that will be used for the first time in the Caspian Sea.
Earlier, in Dec 2013, the Shah Deniz consortium inked a $974 million contract with a consortium including Turkish construction firm Tekfen Insaat to build two offshore platforms for the project. Other contracts awarded by the Shah Deniz consortium earlier in 2014 include construction and engineering contracts valued at $841 million and a contract for the supply of the subsea production systems for $394 million.
BP carries a Zacks Rank#3 (Hold). Better-ranked stocks in the industry include Range Resources Corporation (RRC) and Helmerich & Payne, Inc. (HP), both with a Zacks Rank #1 (Strong Buy).
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