BAKU, Aug 4 (Reuters) - The European Bank for Reconstruction and Development (EBRD) has approved $500 million loan to Russia’s second biggest oil producer, Lukoil, for participation in the development of Shah Deniz gas field in Azerbaijan, the bank said.
The credit is a half of $1 billion loan to be allocated to Lukoil by the EBRD and the Asian Development Bank (ADB). The EBRD and ADB were appointed by Lukoil as the mandated lead arrangers for the transaction, which is aimed at financing the company’s 10 percent share in the project.
Around half of the loan amount is expected to be syndicated under the loan programmes of both the EBRD and the ADB.
The EBRD has already disbursed $380 million to Lukoil’s subsidiary, Lukoil Overseas Shah Deniz Ltd (LSD), for the company’s activity in the Shah Deniz project. The first tranche totalled $180 million was allocated in 2005, while the second tranche of $200 million was allocated in 2014.
Shah Deniz, Azerbaijan’s biggest gas field, is being developed by BP, Azeri state energy firm SOCAR and others and is estimated to contain 1.2 trillion cubic metres of gas.
The project will offer an alternative gas supplier for Europe as the continent tries to reduce its reliance on Russian energy.
Shah Deniz I has been pumping gas since 2006 and has an annual production capacity of about 10 billion cubic metres (bcm) of natural gas.
Shah Deniz II is expected to produce 16 bcm of gas a year from 2019-2020, with 10 bcm earmarked for Europe and 6 bcm for Turkey. (Reporting by Nailia Bagirova and Margarita Antidze; Editing by Louise Heavens)