BP tries to limit Shah Deniz gas project cost overruns

Dec 21, 2004 01:00 AM

BP is attempting to limit cost overruns on the Shah Deniz Caspian gas project it operates in Azerbaijan, a company executive said.
"We're making interventions to contain the cost increase to around 25 %," David Woodward, BP Azerbaijan associate president told.

Shah Deniz, which is scheduled to start shipping gas to Turkey in 2006, was originally budgeted at $ 3.2 bn. But the weak dollar, inflation due to the high oil price and factors related to the original design of the project have raised the price.
Woodward said cost increases could be capped by changing drilling techniques, de-bottlenecking and speeding up the schedule for drilling of wells that would allow for some gas to be sold to Azerbaijan from 2006.

Shah Deniz is one of the biggest offshore gas fields discovered recently and has an estimated 700 bn cm of gas.
The parties to the Shah Deniz Production Sharing Agreement are BP with 25.5 %, Statoil with 25.5 %, the State Oil Company of Azerbaijan Republic, or SOCAR, with 10%, LUKAgip -- a joint venture between Russia's LUKoil and ENI unit Agip -- with 10 %, National Iranian Oil Company with 10 %, Total with 10 % and Turkey's TPAO with 9 %.

Source: Dow Jones
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