U.K.-based oil major BP Plc (BP) reported that the Shah Deniz consortium has agreed to proceed with the Front End Engineering and Design (FEED) on the Shah Deniz Stage 2 project valued at $25 billion.
Located about 70 kilometers offshore in the Caspian, the Shah Deniz Stage 2 project will offer new opportunities along the Southern Gas Corridor by carrying gas originating from the Caspian Seato markets in Turkey and Europe. The success of this project would help the Shah Deniz consortium to achieve its goal to begin gas exports around the end of 2017.
The adoption of FEED will facilitate advanced engineering studies, drilling operations on new wells and new commercial contracts, as well as initiation of important construction contracts.
The Shah Deniz consortium will decide on the export routes across Turkey and into Europe, in the FEED phase of the project. The final decision is likely to be made in 2013.
The consortium is pondering three alternatives to make gas available in Europe. Firstly, via the Trans Adriatic Pipeline (TAP) with a route to Italy. Secondly, using Nabucco West, which would carry gas from the Turkish-European border across Eastern Europe to the West. Lastly, through the South East Europe Pipeline (SEEP) carrying gas through Hungary, Bulgaria and Romania.
BP operates Shah Deniz Stage 2 project, estimated to hold more than 30 trillion cubic feet of gas resources. Shah Deniz Stage 2 is likely to boost annual gas output by 16 billion cubic meters from the current output of 9 billion cubic meters per annum from Shah Deniz Stage 1.
The field is considered to be one of the largest oil and gas developments worldwide. It has over 26 wells, two new platforms, a terminal expansion and about 4,000 kilometers of new pipelines to Europe. The terminal expansion includes the extension of the Sangachal Terminal.
There is also a scheduled upgrade of 16 billion cubic meters per annum for the South Caucasus Pipeline. Further additions would be made to the pipeline system to carry gas from Shah Deniz across Turkey and Europe.
BP holds a Zacks #2 Rank, which is equivalent to a Buy rating for a period of one to three months. Longer term, we maintain our Neutral recommendation on the stock. BP faces tough competition from ExxonMobil Corporation (XOM).
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