Caspian Sea

Russian oil firm Lukoil is to receive a grant of $500m from the European Bank for Reconstruction and Development (EBRD) for the development of offshore gas exploration and production project Shah Deniz in Azerbaijan part of the Caspian Sea.

The loan will be allocated to Lukoil by the EBRD and the Asian Development Bank (ADB), which were appointed by the company as the mandated lead arrangers for the transaction.

The deal is aimed at financing the company’s 10% interest in the project, Reuters reported.

Lukoil’s subsidiary, Lukoil Overseas Shah Deniz company also plans to raise a loan from the ADB, which may amount to a total of $450m.

Of the total funds provided by this loan, $250m is planned to be allocated at the rate of Libor, and the remaining will be provided by additional funding scheme.

More than 20 subsea wells will be drilled using the additional financing, in addition to constructing two platforms.

"The deal is aimed at financing the company’s 10% interest in the project."

Subsea infrastructure will also be created, in addition to expanding the Sangachal oil terminal and the South Caucasus gas pipeline.

Lukoil Overseas Shah Deniz (LSD) previously received $380m from the EBRD for its activity in the offshore project.

In 2005, the first tranche of $180m was allocated, while the second $200m provided in 2014.

Azerbaijan’s biggest gas field Shah Deniz is operated by BP, which has a share of 28.8%.

Other partners include TPAO (19%), SOCAR (16.7%), Petronas (15.5%), LUKoil (10%) and NIOC (10%).

The field is situated in the South Caspian Sea, off the coast of Azerbaijan, 70km south-east of Baku, at a depth of 600m and covers around 860km².

Image: Location map of Caspian Sea. Photo: courtesy of Uwe Dedering.