BP confirms project costs increase for Shah Deniz field in 2005

Dec 29, 2004 01:00 AM

A top official in the company managing the development of Azerbaijan’s Shah Deniz gas field confirmed that costs in the $ 3.2 bn project could rise by as much as a quarter.
David Woodward, associate president for British Petroleum Azerbaijan, also told in Baku that the field could yield as much as 20 % more gas and gas condensate than originally predicted.

Woodward’s comments came several days after Azerbaijan’s President Ilham Aliyev said he -- and investors -- were worried that the cost of developing Shah Deniz was nearing $ 4 bn
Azerbaijan’s state oil company, Norway’s Statoil and France’s TotalFinaElf are among the participants in the project, which, when finished, will pump an estimated 8.4 bn cm of gas annually through Baku and the Georgian capital Tbilisi to Erzurum in Turkey. The project includes a drilling platform, five underwater wells, two underwater pipelines, aboveground pipelines, and an onshore processing terminal.

Rob Kelly, a vice president with Shah Deniz, said there were no exact figures as to the hike in costs. But Woodward said project managers were trying to keep the increase in costs to around 25 %, and he said the company could try to defray costs by speeding up the drilling of another well and selling some gas to Azerbaijan beginning in 2006.
"The project is experiencing upward cost pressures. The reasons for this are partly oil-field price inflation and currency exchange rate movements, but also the fact that the detailed design concept was not fully reflected in the original sanctioned cost of the development," Woodward said.

Woodward also said new test wells and seismic mapping have revealed the field holds as much as 20 % more gas and gas condensate that originally thought. First gas deliveries are expected in fall 2006.
Woodward also told that British Petroleum Azerbaijan was negotiating with the Russian joint venture TNK-BP to pump Russian oil through the 1,760 km (1,100-mile) Baku-Tbilisi-Ceyhan pipeline. The joint venture is British Petroleum PLC’s largest investment in Russia’s oil industry. The $ 3.6 bn pipeline, which BP operates, is set to begin pumping in 2005.

Source: BakuSun
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