BP-Led Shah Deniz Group Inks Deals to Sell Azeri Gas Direct to Europe

The BP-led consortium developing the giant Shah Deniz natural gas field in Azerbaijan 's Caspian Sea said Thursday it has clinched deals valued at more than $100 billion to sell gas from the project direct into Europe .

The agreements pave the way for Azeri gas to flow directly via pipelines into European markets for the first time, helping to strengthen the region's energy security by diversifying supplies and reducing dependence on Russian gas imports.

The 25-year gas-sales contracts with utilities and gas-trading companies remove one of the last big hurdles in the $40 billion project for BP PLC (BP) and its partners, in the run up to the final investment decision for Shah Deniz II, due by the end of this year.

The deals are valued at more than $100 billion over the lifetime of the contracts.

"The strong demand for Shah Deniz gas gives us confidence in the long-term development of Azerbaijan 's gas resources," said Gordon Birrell, regional president for BP in Azerbaijan , Georgia and Turkey .

The nine utilities and gas-trading companies who have agreed to buy the gas include Enel SpA (ENEL.MI) of Italy, E.ON AG (EOAN.XE) of Germany, GDF Suez SA (GSZ.FR) of France , the energy trading arm of Royal Dutch Shell PLC (RDSA), Hera Trading and DEPA Public Gas Corp. of Greece .

Of the total 10 billion cubic meters of gas a year the companies have pledged to take, around 2 billion cubic meters will go to buyers intending to supply Bulgaria and Greece , with the rest going to buyers intending to supply Italy and adjacent market hubs.

During the selection process, the Shah Deniz consortium received offers for between three to four times the volume of available gas from different buyers across central and southeastern Europe , said Al Cook, BP's vice president for Shah Deniz.

"This gives us quite a lot of confidence that future projects in Azerbaijan get developed," he said, referring to ACG Deep--a layer of gas beneath the offshore Azerbaijan oil fields that BP and other companies are developing--and Shafag-Asiman also in the Azeri sector of the Caspian Sea , where BP is exploring.

The first gas from the second phase of Shah Deniz is set to flow into Turkey in 2018 and into Europe by 2019 as more wells are brought onstream and production from the field is increased.

Ahead of the final investment decision, due by the end of this year, the consortium has to finalize the engineering plans for the second phase of Shah Deniz and the expansion of the South Caucasus Pipeline that will carry the gas through Azerbaijan and Georgia to Turkey.

The group also has to conclude engineering, permitting and shareholder agreements in the TANAP pipeline through Turkey and get the final commercial arrangements and intergovernmental agreements in place for the TAP pipeline that will take the gas from Turkey into Greece , Albania and Italy .

BP is operator of the Shah Deniz consortium that includes Statoil ASA (STO), Azerbaijan 's state oil company SOCAR, Total SA (TOT)of France , Russia 's Lukoil (LKOH.RS) and Turkey 's TPAO.