Petronas selling entire 15.5% stake in Shah Deniz gas project to LUKOIL for over RM9b

Petronas selling entire 15.5% stake in Shah Deniz gas project to LUKOIL for over RM9b
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KUALA LUMPUR (Oct 8): Petroliam Nasional Bhd (Petronas) is selling its entire 15.5% stake in the Shah Deniz natural gas project in the Azerbaijan sector of the Caspian Sea to Russian oil and gas company LUKOIL for US$2.25 billion (about RM9.41 billion).

LUKOIL said in a statement on Thursday (Oct 7) the transaction's completion was subject to fulfilment of conditions precedent, including approval by SOCAR, the State Oil Company of Azerbaijan.

"Following completion of the sale, LUKOIL's interest in the project will increase from 10% to 25.5%. The other parties to the project are BP (operator, 28.8%), TPAO (19%), SOCAR (10%), NICO (10%), and SGC (6.7%)," LUKOIL said.

According to news reports, Petronas in 2014 bought the 15.5% stake in the Shah Deniz natural gas project from Norway-based Statoil, which is now known as Equinor ASA, for US$2.25 billion.

According to the LUKOIL statement, LUKOIL president Vagit Alekperov said increasing LUKOIL's share in the Shah Deniz project creates new opportunities for synergy in future-oriented economic sectors of both Russia and Azerbaijan.

"Around thousand (of) Russian businesses, including LUKOIL, are involved in implementation of the Action Plan for Development of Key Vectors of Cooperation between Russia and Azerbaijan, which was signed in 2018 during the meeting of the two national leaders.

"Over 25 years, LUKOIL accumulated enormous experience in the Caspian region, which we perceive as strategically important, as well as created extensive production and transport infrastructure. We are proud of the confidence placed in our competences by Caspian countries, which are among leaders of oil and gas production, regarding implementation of high priority international projects," Alekperov said.

The Shah Deniz gas condensate field is located in the Azerbaijan sector of the Caspian Sea, about 70 kilometres south-east of Azerbaijan's capital Baku, according to LUKOIL's statement.

"The project is implemented under a PSA (production sharing agreement); commercial production there began in 2006. In 2020, Shah Deniz consortium extracted 18.1 billion cubic metres (bcm) of gas and 3.6 million tonnes of gas condensate."

"In 2018, the second stage of the project was launched, with annual production expected to reach 26 bcm of gas and five million tonnes of gas condensate. The gas is sold on the markets of Azerbaijan, Georgia, and Turkey. Since December 2020, it has also been delivered to Europe via a pipeline system," LUKOIL said.

At the time of writing on Friday (Oct 8), Petronas has yet to issue a statement in response to LUKOIL's statement on the US$2.25 billion transaction between both companies.

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Chong Jin Hun