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25th anniversary of signing Azerbaijan’s largest gas deal

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Tomorrow is the 25th anniversary of the Shah Deniz project, located in the Azerbaijani sector of the Caspian Sea. 

On June 4, 1996 in the “Gulistan” Palace the State Oil Company of Azerbaijan (10% share) and foreign companies – British BP (25.5%), Norwegian Statoil (25.5%), French Elf Petroleum (10%), Iranian NIOC (10%), Turkish TPAO (9%), Russian-Italian LUKAgip (5.4%) and Russian LUKoil (4.6%) signed a PSA-type contract for exploration and development of the Shah Deniz offshore structure.

The term of the contract was 30 years from the date of entry into force. The contract entered into force on October 17, 1996. However, this contract was later extended twice, now the contract completion date is 2048.

The Shah Deniz field was discovered in the third decade of June 1999 when the first exploratory well was drilled to a depth of 6316 meters. On June 30, the then President of SOCAR Natig Aliyev, at a meeting with Ukrainian Foreign Minister Boris Tarasyuk, announced the discovery of the unique Shah Deniz field in the Caspian Sea.

Only by mid-July was it officially announced the discovery of a gas condensate field in the deep-water part of the Azerbaijani sector of the Caspian Sea. Until 2007, it was believed that the field’s reserves amounted to 600 billion cubic meters of gas and 750 million barrels of condensate. However, later, as a result of drilling an appraisal well to a depth of 7301 meters (the deepest well in the Caspian), new productive strata were discovered. After that, the reserves of the field were increased to 1 trillion cubic meters of gas and up to 2 billion barrels of condensate.

As of April 1, 2021, 140 billion cubic meters of natural gas and 261.5 million barrels (32.7 million tons) of condensate had been recovered from the field. So far, BP and partners have invested $ 33.73 billion in both capital and operating funds to extract gas and condensate.

Thanks to the Shah Deniz project, Azerbaijan has become a gas exporter since 2007. 

Prior to that, the country imported gas from Russia.

By the end of 2020, Azerbaijan produced 26.05 billion cubic meters of gas. Twelve billion cubic meters was used in the domestic market, and the rest was exported. Currently, Azerbaijan sells gas from Shah Deniz to Georgia, Turkey, Greece, Bulgaria and Italy. 

Now the shareholders of the Shah Deniz project are: BP (28.8% – operator), Turkish TPAO (19%), Malaysian Petronas (15.5%), Russian LUKoil (10%), Iranian NICO (10%), as well as Azerbaijani SOCAR (10%) and SGC Upstream (6.7%). 

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