Shah Deniz sets cornerstone for European energy security

At $28 billion, the Shah Deniz field is the largest project operated by British supermajor BP.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |  July 2, 2018 at 9:38 AM
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July 2 (UPI) -- The start of the second phase of the Shah Deniz gas field off the coast of Azerbaijan sets a cornerstone for European energy security, an analyst said.

British energy company BP said Monday its partners at the Shah Deniz field in the Caspian Sea marked the start of operations with the first commercial gas delivery to Turkey.

Heralded as BP's largest gas discovery when it was announced in 1999, the first phase of Shah Deniz started sending gas to Azerbaijan, Georgia and Turkey in 2006. The second phase will push gas through a network of pipelines dubbed the Southern Gas Corridor deep into southern Europe.

"The upstream phase is the cornerstone of the vast Southern Gas Corridor value chain, from the Caspian Sea to Italy, via Turkey," Ashley Sherman, the principal regional analyst for consultant group Wood Mackenzie, said in a statement emailed to UPI. "Shah Deniz has now started fulfilling its Phase 2 gas contract with Turkey via the new TANAP pipeline."

Upstream refers to the exploration and production side of the energy sector. TANAP is the Trans Anatolian Natural Gas Pipeline, a 1,150-mile network inaugurated in mid June by Turkish President Recep Tayyip Erdogan.

TANAP is designed to carry natural gas from the BP-controlled Shah Deniz field through Turkey to its western borders at Greece or Bulgaria. The Trans Adriatic Pipeline is the next section of the Southern Gas Corridor on pace for completion.

Europe gets about a quarter of its gas needs met by Russia, though most of that runs through the Soviet-era transit network in Ukraine, where geopolitical conflicts present a risk to energy security. The broader Southern Corridor is in a race against plans by Russian energy company Gazprom to twin the Nord Stream gas pipeline through the Baltic Sea to Germany.

"Together with the Southern Gas Corridor pipeline system, Shah Deniz 2 will deliver significant new energy supplies to Europe, further diversifying its sources of energy and providing new supplies of natural gas which will be essential in the energy transition," BP CEO Bob Dudley said in a statement.

The Southern Corridor has support from the United States, which is trying to break into the European market with its own liquefied natural gas. Russian energy company Lukoil, however, is part of the Shah Deniz consortium.

The $28 billion Shah Deniz project is BP's largest.

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