Azerbaijan extends Shah Deniz PSA

Extended: Sha Deniz II PSA gets pushed back to 2036

Azerbaijan has given BP another five years on the production sharing agreement for the massive Shah Deniz gas project after the UK supermajor pushed back the start date for the second phase.

"We have agreed to extend the Shah Deniz PSA from 2031 to 2036, and the Shah Deniz partners will now proceed with phase two", Elshad Nassirov, vice president of the Azeri state oil company Socar, told Reuters.

BP said earlier this week that it was targeting 2018 for first gas from the $10 billion second phase, a year later than previously planned.

Shah Deniz, Azerbaijan's biggest gas field and is estimated to hold 1.2 trillion cubic metres of gas. It has been pumping gas from its first phase since 2006 with a capacity of 8 billion cubic metres.

The second phase is expected to produce another 16 Bcm a year.

BP leads the consortium operating Shah Deniz II that also includes Lukoil, Total and Statoil, as well as Azeri state player Socar, Turkiye Petrolleri and Naftiran Intertrade.

The partners plan to ship Azeri gas by a new pipeline to Europe. Nassirov said there was a “green light” to begin construction of the line.

A final investment decision on Shah Deniz II has been pushed back to the end of this year.

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