KUALA LUMPUR (Feb 19): Petroliam Nasional Bhd (Petronas) has completed the sale of a 9.99% stake in the Shah Deniz natural gas project within the Azerbaijan sector of the Caspian Sea to Russian oil and gas company LUKOIL for approximately US$1.45 billion (about RM6.07 billion) following a revision of the original planned deal which involved the sale of Petronas’ entire 15.5% stake in the Shah Deniz project to LUKOIL for US$2.25 billion.

LUKOIL announced in a statement on Friday (Feb 18) that the company had completed the acquisition of the 9.99% stake in the Shah Deniz project from Petronas.

"LUKOIL announces completion of the transaction of buying a 9.99% interest in the Shah-Deniz gas project from Petronas. The transaction value is approximately US$1.45 billion.

"Following the completion of the deal, LUKOIL increased its share in the project from 10% to 19.99%. 

"Other parties to the project are BP (29.99%, the operator), TPAO (19%), SOCAR (14.35%), NICO (10%) and SGC (6.67%)," LUKOIL said.

At US$1.45 billion, the Malaysian national oil company's sale of its 9.99% stake in the Shah Deniz project values the entire project at about US$14.51 billion.

Meanwhile, the status of Petronas’ remaining 5.6% stake in the Shah Deniz project could not be immediately ascertained.

At the time of writing on Saturday, Petronas had not issued a statement in response to LUKOIL’s announcement.

LUKOIL in a Dec 10, 2021 statement said the revision of the originally-planned deal with Petronas for the Shah Deniz project stake "resulted from negotiations with the Shah Deniz project partners on the implementation of pre-emptive rights”.

LUKOIL, however, did not explain in the statement as to how the implementation of pre-emptive rights related to the project led to the revision of the proposed Petronas-LUKOIL transaction.

In corporate terminology, pre-emptive rights offer shareholders of a company the ability to acquire new shares in the firm in proportion to their current stakes in the company to prevent ownership dilution.

According to LUKOIL's statement on Friday, the Shah Deniz gas condensate field is located in the Azerbaijan sector of the Caspian Sea, 70km south-east of Baku.

LUKOIL said gas from the Shah Deniz  project is sold in Azerbaijan, Georgia and Turkey and that since December 2020, it is also delivered to Europe.

"The project is implemented under a PSA (production sharing agreement); commercial production there began in 2006. In 2021, the Shah Deniz consortium extracted 22.7 bcm (billion cubic metres) of gas and 4.2 million tonnes of oil and 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 oil and gas condensate,” LUKOIL said.