Shah Deniz

The second stage of one of the world’s largest offshore gas projects, Shah Deniz, is expected to enter its production phase in 2018, according to a report by GlobalData. Stage 2 of the BP-operated field is approximately 60% complete.

Entitled ‘Azerbaijan Shah Deniz Project Panorama – Oil and Gas Upstream Analysis Report‘, the report outlines the importance of the development for BP as it is considered among the company’s significant technological and commercial successes. The favourable outcome of the project was able to offset the difficulties faced by BP at the Azeri-Chirag-Guneshli complex. It also spurred other important developments in the Azeri sector of the Caspian Sea, including Umid, Absheron, and Shafag-Asiman prospect.

The field is expected to achieve peak production in 2022 at 2,521Mcfd of gas and 118,467bpd of condensate. BP estimates that overall production from the field will increase significantly following the start of stage 2 in 2018.

Shah Deniz is expected to have a seven-year production plateau resulting in the extraction of 22,318Bcf of natural gas and 994Mbbl of condensate over its full life.

The project’s remaining net present value (NPV) is estimated to be $11.775bn assuming a 10% discount rate with an internal return rate (IRR) of 12.8% for the field owners.

According to GlobalData’s report, the field’s development includes collaboration with a number of leading oil service providers. Multiple contracts were awarded by the field operator at the start of 2016 and recipients included Atlantas Marine and Trelleborg.

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Image: The Shah Deniz field is located in the Caspian Sea. Photo: courtesy of Shahin Abasaliyev.