BP-led consortium awards $750 mln contract for Shah Deniz gas project

TBILISI, April 10 Thu Apr 10, 2014 9:09am EDT

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TBILISI, April 10 (Reuters) - A consortium led by British oil company BP has awarded construction and supply contract worth $750 million to help to develop the Shah Deniz II gas field in Azerbaijan, a project that offers Europe a chance to cut reliance on Russian gas.

Azerbaijan's biggest gas field, Shah Deniz is being developed by consortium partners BP, Statoil, Azeri state energy company SOCAR and others.

Shah Deniz I has been pumping gas since 2006 and has an annual production capacity of about 10 bcm of natural gas.

The next phase, Shah Deniz II, is important for Europe in terms of providing an alternative gas supply to Russia's Gazprom . Shah Deniz II is expected to produce 16 bcm of gas per year from around 2019, with 10 bcm earmarked for Europe and 6 bcm for Turkey.

Gazprom currently covers a quarter of Europe's gas needs, with more than 150 bcm of exports a year. Alternative supplies have come under the spotlight in the light of the tense situation in Ukraine, as 40 percent of gas imported to Europe from Russia is pumped across that country.

The latest contract, awarded to the consortium consisting of BOS Shelf LLC, Saipem Contracting Netherlands B.V. and Star Gulf FZCO, is for the construction of subsea structures that will be used for the first time in the Caspian Sea.

"The use of this technology in Azerbaijan will open up new opportunities for oil and gas developments," Gordon Birrell, BP's president for the Azerbaijan-Georgia-Turkey region said in a statement. Works are expected to complete in 2017.

The Shah Deniz consortium signed a $974 million contract in December with a consortium including Turkish construction firm Tekfen Insaat to build two offshore platforms for the project.

It also awarded construction and engineering contracts worth $841 million and a contract for the supply of the subsea production systems worth $394 million earlier this year. (Reporting by Margarita Antidze and Nailia Bagirova; Editing by Jane Merriman)

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