Statoil Sells 10% of Shah Deniz, Caucasus Pipeline to Curb Costs

Statoil ASA (STL), the biggest Norwegian energy company, sold 10 percent of Azerbaijan’s Shah Deniz gas project and South Caucasus Pipeline for $1.45 billion to BP Plc (BP/) and the Azeri state oil business as it seeks to curb expenses.

The Stavanger-based company will reduce its stake to 15.5 percent, selling 6.7 percent to the State Oil Co. of Azerbaijan and 3.3 percent to operator BP Plc, it said in a statement. The partnership announced plans to spend $28 billion to expand Shah Deniz in the Caspian Sea and extend the pipeline.

The transaction is part of the company’s plan for “rigid prioritization of future investment,” Statoil’s Chief Executive Officer Helge Lund said in the statement.

Statoil, expanding abroad to counter falling output from aging fields off Norway, has said it will be more selective in investments as record spending and rising costs put pressure on its free cash flow and ability to pay higher dividends. The 67 percent state-owned company delayed investment in its Bressay field in the U.K. and Johan Castberg project in Norway’s Arctic Barents Sea as it seeks cheaper ways to develop the sites.

Statoil also said today it won’t invest in the planned Trans-Anatolian pipeline bringing gas from the Shah Deniz expansion through Turkey. It owns 20 percent of a second project, the Trans-Adriatic pipeline, linking Turkey to Italy.

Investment in Shah Deniz 2 and the two pipelines will total $45 billion, BP said. Expansion of Shah Deniz will increase the project’s production by 16 billion cubic meters a year. The sale of the Statoil stake is effective Jan. 1.

To contact the reporter on this story: Mikael Holter in Oslo at mholter2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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