Shah Deniz Gets Waiver from Iran Sanctions
The Southern Gas Corridor (SGC) project to export 16bn m3/yr Azerbaijani Shah Deniz phase 2 gas to Turkey and the EU around 2020 has received a US waiver from newly-imposed sanctions on Iran.
Iran’s state-run Naftiran Intertrade (Nico) – part of Iranian state producer NIOC – has long held a 10% share in Shah Deniz phases one and two, as well as the Azerbaijani and Georgian parts of the SGC, named the Southern Caucasus pipeline (SCP) and its expansion (SCPX).
Without citing the project by name, the executive order signed by US president Donald Trump Aug.6 provides exemption for “a project described in subsection (a) of section 603 of TRA”, which refers to a section in the sanctions list imposed on Iran in 2012 and says that the sanction will not be applied to “the development of natural gas and the construction and operation of a pipeline to transport natural gas from Azerbaijan to Turkey and Europe.”
A source at BP, operator of Shah Deniz and shareholder of SGC confirmed to NGW that the overall project has received a waiver.
US has always demonstrated strong support for SGC, which helps the EU to reduce its dependence on Russian gas, and granted it a waiver from pre-2015 sanctions regimes against Iran.
The mechanism for how Iran receives payments is unclear. During 2012-2015 sanctions regime, Statoil (re-named Equinor in 2018) was commercial operator of the SGC project, and Iran’s revenues from SD1 had been deposited to a bank account in Norway and blocked there. Statoil left the project in 2014 and Azerbaijan Gas Supply Company, operated by state-run Socar. replaced it.
SD1 is now producing 10bn m3/yr gas as well as 54,000 b/d gas condensate.
Second well of Shah Deniz-2 due to start up
A BP source has also told NGW that during the current week the second well of SD2 will become operational; the first SD2 well officially started flowing gas July 31.
Under an agreement with Turkey’s Botas, SD2 will provide 2bn m3 gas until July 1 2019. Deliveries to Turkey will increase gradually to the full contractual level of 6bn m3/yr in 2021, and a further 10bn m3/yr is to be delivered to EU markets (primarily Italy, via Greece). SGC is expected to complete in mid-2020.
The first stage of the 2,000-km (SGC) project, from the Caspian shores in the east to the northwest Turkish city of Eskiseher, started flows (using SD1 gas) on May 29, while an opening ceremony for Tanap was also held at its Eskisehir offtake point June 12.
As of June 30, about 95.3% of the Trans Anatolian pipeline (Tanap) and 76.4% of the TransAdriatic pipeline (TAP) was completed. SGC is expected to reach its final 31bn m3/yr capacity in the mid-2020s.
The SD2 offshore project includes 26 subsea wells, 500km of subsea pipes, and two new bridge-linked platforms. As at June 30, 2018 operator BP and its partners have spent $31.2bn on SGC, including SD2.