BP Agrees to Join Tanap Gas Pipeline Project by Taking 12% Stake

BP Plc (BP/) will join the Trans-Anatolia project developed by State Oil Co. of Azerbaijan to deliver gas from the Caspian field of Shah Deniz to Europe along a pipeline that will extend as far as Turkey’s western border.

BP signed a “framework” accord to take 12 percent of the Tanap pipeline, BP Azerbaijan Vice President for Shah Deniz Al Cook said today in the Azeri capital of Baku. The deal follows Chief Executive Bob Dudley’s Dec. 18 visit to the city.

“BP is very committed to Tanap,” Cook said, adding a commercial agreement will be signed in the next few months.

Azerbaijan and Turkey agreed in June to build the 2,000- kilometer (1,300 mile) pipeline for an estimated $7 billion to $10 billion. Socar holds 80 percent. Turkish government pipeline company Boru Hatlari Ile Petrol Tasima AS and Turkiye Petrolleri AO have a combined 20 percent. Socar plans to sell 12 percent to Statoil ASA and 5 percent to Total SA, the company said in 2012.

Socar, in an agreement with BP, will set up a company to sell Shah Deniz gas to Europe, Cook said. Socar has the right to expand gas exports beyond a planned 25 billion cubic meters through the BP-operated South Caucasus pipeline connecting Baku to Turkey’s eastern town of Erzurum through Georgia, he said.

“This means in future the South Caucasus pipeline can carry not only Shah Deniz gas but all gas from Azerbaijan,” Cook said. “Socar will take the leadership role in gas exports from Azerbaijan to Europe for the first time.” BP will remain the technical operator of the pipeline, he said.

BP and the Azeri government cleared the second phase of the Shah Deniz project last year to expand the field’s production.

Shah Deniz 2, including a planned expansion of the South Caucasus pipeline from the current 9 billion cubic meters a year to 25 billion cubic meters, is estimated to cost $25 billion, Cook said. The final decision on the Shah Deniz investment is scheduled for the second half, Cook said.

Shah Deniz 2, the South Caucasus pipeline expansion, Tanap and either the Nabucco West or Trans-Adriatic pipeline is estimated to cost about $40 billion in total, he said. The Shah Deniz group will choose between Nabucco West and TAP by June after the pipelines submit plans by April 1, Cook said. In the next 18 months, it plans to commit to $10 billion of contracts and orders after spending more than $1 billion so far, he said.

To contact the reporter on this story: Zulfugar Agayev in Baku at zagayev@bloomberg.net

To contact the editor responsible for this story: Hellmuth Tromm at htromm@bloomberg.net

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