Statoil with our Participation in ACG, Shah Deniz, BTC and SCP is Proud to Have Contributed to these Developments
An interview with Lars T. Sorensen President, Statoil Azerbaijan.
AT: Statoil has been functioning in Azerbaijan since 1992. How much have you invested in exploration, production and infrastructure projects in Azerbaijan as the participator of all important energy projects of Azerbaijan during all these years?
Statoil investments in Azerbaijan total 5 billion USD and with the good progress on the Chiraq Oil project and if we progress as planned on the second phase of the Shah Deniz field as well as the transport solutions around it, this amount is due to more than double in the years to come. Apart from that in 2009 Statoil along with other license partners invested more than 3 million USD on Regional Development Initiative (RDI) and Community Investment Projects (CIP), our stand alone Corporate Social spend including sponsor ships in Azerbaijan and Georgia in 2009 totaled about 2 million USD.
AT: When Statoil decided to participate in projects in Azerbaijan it obviously took the possible risks into consideration. People who made decision at the time were sagacious strategists. What is Statoil’s opinion about the future of energy projects of Azerbaijan in 10 years?
We in Statoil are proud to be part of the development of the energy industry in Azerbaijan since 1992, led by SOCAR. The projects that were planned then have turned into successful world scale projects though which Azerbaijani oil is trading in the world markets, and the country re-emerged as an energy producer. Statoil with our participation in ACG, Shah Deniz, BTC and SCP is proud to have contributed to these developments. The full field development of Shaz Deniz require new investments on a very large scale both upstream and midstream. Together with major investments in ACG, Azerbaijan will be on top of StatoiTs international investment program in the coming years. These investments will confirm Azerbaijan’s role as a major energy producer and exporter for many years to come, and will not least reinforce Azerbaijan’s role as a gas exporter. Production from our partnerships in Azerbaijan today constitutes a large part of Statoil’s oil and gas production outside Norway. With increased production from the Chiraq Oil project and production from the Shah Deniz phase II, production from Azerbaijan will be an important contributor to Statoil’s future growth towards 2020.
AT: Statoil is the commercial operator of “Shah- Deniz” project From this point of view we would like to direct your attention to gas export issues. Of course European experts still think about direction of Azerbaijani gas: will it flow to the West or will it be branched out and only part of it will reach European markets?
The decision on the direction of gas exports is a commercial issue and should be taken based on comparison of the competitive offers made by the potential buyers. The negotiations are ongoing and it`s difficult to make any predictions at this stage. Statoil operates the largest, integrated pipeline system in the world already and we have decades of experience in establishing processing and transport solutions to markets. Both Europe and Asia look to increase their need for imported natural gas, and our task is, together with our partners in Shah Deniz 2, to establish the most commercially attractive solution.
AT: “Phase-2” project of Shah Deniz is very complicated one: it is planned to produce 16 billion m3 gas in a year out of wells which are in 7000 meters’ depth of the Caspian Sea. 20$ billion capital investment is needed for this project. How much time in your opinion will the participators of Shah Deniz project need to extract the mentioned volume of gas? Some foreign experts think that production within the frame of “Phase-2” project will be available in 2020 and the pay back of investments will be possible only in 2028. In what extent can these plans be considered successful from the commercial point of view?
The question you are asking is very technical and should be rather addressed to the operator BP. As you probably know the Shah Deniz PSA was concluded in 19%. And the first gas became available in 2006. For the gas industry this is not a long time. BP as operator estimates Shah Deniz Stage 2 gas to be on stream from 2017.
AT: Today Statoil actually functions only in Azerbaijan in the Caspian Sea. A lot of Western companies have big interests for Turkmenistan. What does the management of Statoil think about it?
Statoil follows developments in Turkmenistan closely. We opened an office in the country in 2009. There are opportunities in creation of gas value chains from Turkmenistan, that Statoil would be interested in taking part in. But challenges remain both with regard to the commercial terms offered and with regard to transport options to markets. We are hopeful that that progress can be made on both aspects. Being the largest off shore operator in the world in water depths deeper than 100 meters, Statoil has the experience and the technological capabilities to work with the development of offshore projects in the Caspian.