Lukoil closes financing for Shah Deniz project

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Lukoil closes financing for Shah Deniz project

Lukoil has obtained long-term financing worth US$1 billion for the Shah Deniz stage 2 project located in the Caspian Sea off the coast of Azerbaijan.

Specifically, the company signed a 12 year credit-facility agreement with consortium of banks to borrow US$1 billion.

Of that amount, US$560 million will be provided for 12 years jointly by the European Bank for Reconstruction and Development (EBRD), the Asian Development Bank (ADB) and the Black Sea Trade and Development Bank (BSTDB).

The remaining US$440 million will be provided for a period of 10 years by a commercial banking syndicate comprised of ING Bank, Bank of China, UniCredit and Societe Generale.

Located 70 km south-east of Baku on the deep water shelf of the Caspian Sea, the Shah Deniz full field development project is the second stage of the Shah Deniz endeavor. It will add 19 billion cubin meters per year (bcma) of gas production to the 9 bcma produced by stage 1.

The gas will be transported to the Georgia-Turkey border where additional pipeline systems will distribute 6 bcma of gas to Turkey and 10 bcma of gas to various markets in Europe.

The project has a total investment cost of roughly US$28 billion and consists of the following:

  • Two new bridge-linked offshore platforms,
  • 26 gas production wells which will be drilled with 2 semi-submersible rigs,
  • 500 km of subsea pipelines linking the wells to the onshore terminal,
  • Upgrade of the offshore construction vessels,
  • Expansion of the Sangachal terminal to accomodate the new gas processing and compression facilities.

Stage 2 of Shah Deniz started in December 2013. The operating consortium is made up of BP (28.83%), TPAO (19%), Petronas (15.5%), SOCAR (10%), Lukoil (10%), NICO (10%) and SGC (6.67%).

The annual production will peak at 25 billion cubic meters of natural gas.

IPP Journal reported on Petronas' acquisition of a stake in Shah Deniz from Statoil in October 2014.

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