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Azerbaijan Extends Shah Deniz Gas Deal to 2036

Azerbaijan's biggest gas field and one of the largest in the world began producing gas in 2006, with a production capacity of 8 billion cubic meters (bcm) per year.

Its second phase is expected to start in 2018 and will reach 16 billion cubic meters in annual output.

"We have agreed to extend the Shah Deniz PSA from 2031 to 2036, and the Shah Deniz partners will now proceed with phase 2," Elshad Nassirov, vice president of Azerbaijan's state oil company SOCAR, told Reuters. Nassirov noted that talks about an extension of the ACG production sharing agreement beyond 2024 continue.

The Shah Deniz gas project partners aim to ship Azerbaijan's gas to Europe in order to reduce its dependence on Russia for energy supplies.

BP said it was targeting 2018 as the beginning of the second phase of production.

"There is (a) green light for the building of the pipeline for Phase 2," Nassirov explained, mentioning the pipeline stage would go as far as Turkey.

Beyond Turkey, Shah Deniz partners BP, Statoil, Total and SOCAR are set to choose by mid-2013 whether to transport gas via the Nabucco-West pipeline into Austria or the rival Trans-Adriatic pipeline (TAP) into Italy.

TAP partners are EGL AG of Switzerland with 42.5 percent, Statoil with an equal-size stake, and Germany's E.ON Ruhrgas EONGn.DE with 15 percent.

Nabucco's six equal partners are Austria's OMV AG, Germany's RWE AG, Hungary's MOL through its gas pipeline operator FGSZ, Turkey's Botas, Bulgaria's BEH and Romania's Transgaz.

The Shah Deniz group has options to take a 50 percent interest in each of the two projects.

Source: Reuters

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