Turkey's TPAO Acquires Total's 10% Stake in Shah Deniz Natural Gas Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--Turkey's state-owned oil company Türkiye Petrolleri Anonim Ortakligi (TPAO) (Ankara, Turkey) has acquired French energy company Total S.A.'s (NYSE:TOT) (Paris, France) 10% share in the Shah Deniz field and the South Caucasus Pipeline in Azerbaijan. According to a company statement, the transaction is valued at $1.5 billion and is subject to customary approvals.

"With this agreement, we will become a partner in all projects in the Caspian," Turkish Energy Minister Taner Yildiz said at a signing ceremony in Istanbul.

With the deal, TPAO's share increased to 19% from 9%, which makes Turkey the second-biggest partner in the Caspian gas pipeline project after BP plc (NYSE:BP) (London, England). Oil giant BP leads the Shah Deniz operations, which include the State Oil Company of Azerbaijan Republic (SOCAR) (Baku, Azerbaijan), Norway's Statoil (PINK:STOHF) and Russia's OAO Lukoil (PINK:LUKOY) (Moscow, Russia). Russia supplies more than one-third of the European Union's natural gas consumption, making it the biggest energy provider to the 28-nation bloc.

The consortium also announced plans to build pipelines to ship the gas 3,500 kilometres across Turkey, Greece and Albania into Italy, making the project a crucial plank of Europe's strategy to diversify energy supplies. Turkey plans to become an energy hub that will link Caspian gas and oil resources to European customers via pipelines.

"The sale of our interest in Shah Deniz is in line with Total's active portfolio management and the focus of its investment capability on more strategic assets," said Michael Borrell, Total's senior vice-president for Continental Europe and Central Asia, in a statement. "This sale is another step forward in achieving our asset sale program. Following this operation, the Group will have sold nearly $16 billion worth of assets since 2012, in line with its $15 billion to $20 billion asset sale target."

Separately, Turkey's state pipeline company BOTAS bought an additional 10% stake in the Trans Anatolian Pipeline (TANAP) from SOCAR. With the agreement, BOTAS' share in TANAP increased to 30% from 20%. TANAP will ship Azeri gas to Turkey's western border.

The yearly volume of gas supplied from the Shah Deniz field will be 16 billion cubic meters, with Turkey diverting 6 billion cubic meters for domestic consumption and the rest to Europe. The pipeline's capacity can be further expanded to 31 billion cubic meters of gas per year. TANAP shareholders plan to lay the pipeline's foundation in the second quarter of 2014 and commission it in 2018. The TANAP project's cost is estimated to be between $10 billion and $11 billion.

The agreements were signed in Istanbul in the presence of Turkish Prime Minister Recep Tayyip Erdogan. Speaking at the signing ceremony, Erdogan said that TANAP will build a bridge between Azerbaijan and Europe via Turkey.

"TANAP is a project for the future," Turkish Prime Minister Erdogan said. "Recent developments led by those in Ukraine once again demonstrate the importance of pipelines that are in harmony."

SOCAR President Rovnag Abdullayev said that the implementation of the Shah Deniz development project and the TANAP project will prove highly profitable to Azerbaijan and Turkey. Shah Deniz is among the largest gas fields in the world, with nearly 1.4 trillion cubic meters of natural gas. Apart from Azerbaijan, gas extracted from the Shah Deniz field is exported to Georgia and Turkey.

At the same time, Azerbaijan's Energy Minister Natig Aliyev said the signing of the documents is an important event in the history of bilateral relations between Azerbaijan and Turkey. According to Azeri Trend News Agency, Aliyev said that the Southern Gas Corridor project, which requires investments worth $45 billion (particularly in TANAP), are the largest energy projects of the Caspian and Mediterranean seas. Aliyev said that the Southern Gas Corridor is a project that will allow Europe to diversify its hydrocarbon sources and strengthen its energy security, while allowing Azerbaijan to obtain a new market in Europe.

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