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Shah Deniz Consortium Starts Project's Stage II

The consortium developing Azerbaijan's Shah Deniz gas field will move ahead with the Front End Engineering and Design (FEED) phase of the estimated $25 billion stage II project, said operator BP (BP.L)

The decision was announced in Baku at a meeting between Azerbaijani President Ilham Aliyev and BP Chief Executive Bob Dudley.

"We are pleased to announce this major step forward," said Rashid Javanshir, BP's president for Azerbaijan, Georgia and Turkey. "Engineering studies, commercial agreements and the support of the state of Azerbaijan and other governments give the Shah Deniz consortium the confidence to embark upon this FEED phase." .

Shah Deniz, developed by BP, Statoil (STL.OL) and Azerbaijan's state energy company SOCAR, is estimated to contain 1.2 trillion cubic meters of gas, which European companies hope will supply them for decades to come, decreasing their dependence on Russia.

Production was launched in 2006, with the second phase expected to start by the end of 2017. The project's second phase is set to produce 16 billion cubic meters (bcm) of gas per year.

According to BP, "selection of the export route from Shah Deniz II is to be made by the consortium during this stage, when engineering studies will be refined, further wells will be drilled, commercial agreements will be finalied and key construction contracts will start."

Moreover, BP says that "the Shah Deniz consortium will make a final route selection in 2013." The Nabucco and Trans Adriatic Pipeline (TAP) consortia are vying to build the infrastructure to carry gas to Europe from the second phase of Azerbaijan's Shah Deniz gas field.

One more option is the South East Europe Pipeline from Turkey to the Romania-Hungary border, a route proposed by BP days before a deadline for consortia to submit bids in October last year.

Source: Reuters

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