This year marks the 25th anniversary of the Shah Deniz project, which allowed Azerbaijan to become an exporter of natural gas and enter European markets. Bakhtiyar Aslanbayli, bp’s Vice President for the Caspian region, Communications and Advocacy, has spoken in an interview with Report about the significance of the project, the achievements with which its anniversary is celebrated.
- What does the 25th anniversary of Shah Deniz mean and why is it so important?
We all know that Shah Deniz is Azerbaijan’s biggest gas project. However, not everyone knows that as a project it is one of the largest and most complex endeavours ever undertaken by the global oil and gas industry. This is truly a giant field and an amazing development project.
Anything about Shah Deniz is nothing less than amazing. When signing the PSA 25 years ago nobody could guess that just three years later - in 1999, the project would discover one of the biggest gas-condensate fields in the world. With its world-class reservoir containing over 1 trillion cubic metres of gas and 2 billion barrels of condensate initially in place, it represents the largest gas discovery in bp’s over 110-year history.
And more than that. Very few projects have the ability to define the future of a country and change the energy landscape of a region. Shah Deniz is among them.
After ACG, Shah Deniz is the second largest foreign direct investment made in Azerbaijan and as such it has further strengthened the country’s economy. I would even say ACG and Shah Deniz have played an equal role in Azerbaijan’s proud history of energy leadership bringing a tremendous boost that has underpinned the unprecedented revival, development and growth of the nation and the entire region over past two decades.
These two projects together in fact opened a new chapter in the country’s history laying the secure foundation of the economic renaissance which Azerbaijan experienced after regaining independence.
The 25th anniversary is also a historic milestone as it marks the first ever connection of Azerbaijan’s resources directly to European markets. Azerbaijan has been producing oil and gas for the world for almost two centuries and in fact is the birthplace of the world oil industry, but it is the first time that it is directly linked to Europe and this has become possible through Shah Deniz as the gateway to the Southern Gas Corridor.
What is its global significance?
Indeed, the project is not only significant for the country and the region. It has a huge global significance.
President Ilham Aliyev once said about the Southern Gas Corridor that it would change the energy map of Europe and open up additional opportunities for Azerbaijan and the countries in the region. This is absolutely true for the entire Shah Deniz project. Shah Deniz has been pivotal for many countries to shape up as energy hubs, particularly for Turkey as a regional energy hub and for some of the European Union countries.
As we know, the EU has relatively little in the way of gas reserves. In fact, Azerbaijan alone has gas reserves equivalent to more than 75% of the total gas reserves of Europe. So, it made sense for Europe to get access to Azerbaijan’s gas supplies and today Shah Deniz is the main source of those supplies making Azerbaijan a reliable energy partner of Europe that significantly contributes to EU’s energy security.
We have heard many times that Shah Deniz also represents a technological boost. What is this boost about?
Indeed, Shah Deniz can also be described as a technological revolution for the Caspian, so big is its significance to the industry. It is not only a large, flagship project but also a ground-breaking one in terms of technology.
In particular, I mean the numerous industry firsts in the technology deployed at Shah Deniz 2.
For example, there is a very large subsea production system consisting of 500 kilometres of flow-lines connecting 10 subsea manifolds and 26 subsea wells.
In addition, across the five flanks, the subsea production hub uses foundation base structures, numerous tie-ins and interconnectors, control line umbilicals and three export pipelines. These subsea structures are at the top of the technology. They are specifically designed and built to operate in what is known as one of the most demanding and challenging drilling environments in the world. They are capable to handle the extremely complex nature of the field’s high pressures and flow rates.
Another example is what we call the HIPPS valve - High Integrity Pressure Protection System. On the Shah Deniz seabed, geohazards such as active mud volcanoes and soft soil make operations extremely challenging. And beneath the seabed, the environment is even tougher. So, HIPPS addresses the fact that the reservoir is six kilometres below sea level with some of the highest pressures in the world. The HIPPS valve is capable of shutting in just 15 seconds and so makes an important contribution to the safety of the operation.
There’s also, for instance, the Waste Heat Recovery technology that helps Shah Deniz improve the carbon footprint of its plant at the Sangachal terminal contributing to the clean environment efforts. It consists of innovative units that are physically attached to the gas turbines of the compressors to collect exhaust gas, recycle it and use to provide heat for the terminal. In terms of numbers, this technology reduces annual Shah Deniz plant emissions by around 110,000 tonnes of CO2. And this is equivalent to two flights between London and Baku every day during one year.
These are just a couple of examples of ways in which Shah Deniz is a leader in the global energy industry. There are many more that are efficiently operating and I believe many more that we will see over time.
How is Shah Deniz doing today?
We are really proud that today the Shah Deniz story continues even more rapidly and successfully. The project is well positioned to deliver all of its commitments to the regional and European markets.
Despite the pandemic, Shah Deniz is firmly progressing towards further ramp-up of production to its plateau level. We are currently focused on the remaining subsea construction activities and the wells programme to start up new flanks within Shah Deniz 2. Just a few months ago the project achieved its biggest milestone planned for 2021 - the start-up of production from the East South flank at 540m water depth. This milestone was delivered safely, on schedule and within the budget. The flank reached its full production rates in the third quarter of 2021. As a result of the production ramp-up from the East South flank, in July 2021, the daily production rates of the Shah Deniz Bravo platform reached the Shah Deniz Alpha rates for the first time.
Currently, Shah Deniz can produce about 70 million standard cubic metres of gas per day which makes more than 25 bcma meaning that we are close to the total plateau production from stages one and two - 26 bcma of gas and over 100,000 barrels of condensate a day.
Looking to the future, the Shah Deniz production sharing agreement has been extended up to 2048 which allows the investors to further expand the development of the field undertaking further exploration and appraisal work on the prospects in this giant field. So, Shah Deniz is set to carry on delivering energy for many decades to come.
How does bp feel as operator in this 25th anniversary year?
Well, the fact that in its 25th year Shah Deniz has delivered all that it promised at the start makes us feel immensely proud to be part of this great project which is so much important for the world and so much strategic for Azerbaijan.
The success of Shah Deniz is a joint achievement of all parties involved and most importantly the achievement of the government of Azerbaijan and personally that of President Aliyev. This is a project that could only be undertaken collectively because of its scale and complexity. It was realised only through the huge efforts of the President of Azerbaijan, the Azerbaijan government, other regional and European governments, SOCAR, other national and international organisations, co-venturer and contractor companies, communities, tens of thousands of people involved in the operations and the construction works along the Southern Gas Corridor across many countries.
So, it wouldn’t have been possible for us alone as operator to progress this huge undertaking to where it is now without the support of all these parties involved. Together, we have made this project one of the most successful partnerships in the world that delivers value to all stakeholders and will continue to bring benefits for many years to come. This great project has brought together the experience and resources of all parties involved and in this 25th year of successful delivery we would like to thank all of them for their support, partnership and participation.