The Asian Development Bank (ADB) is planning to provide $1bn to expand the operations of Azerbaijan’s Shah Deniz II gas field.
The funding includes a $500m private sector loan to the Southern Gas Corridor Closed Joint Stock Company (SGC) and a $500m sovereign-counterguaranteed partial credit guarantee.
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The guarantee will support $526m in commercial loans made by an international bank consortium to SGC.
The Azerbaijan Government holds a 51% interest in SGC, while the remaining interest is with the State Oil Company of the Azerbaijan Republic.
The financing will help the country's oil and gas-dependent economy to increase social spending.
ADB private sector operations director general said: “ADB, through its private sector window, has already demonstrated strong support to the Shah Deniz gas field expansion through its direct assistance to this project in 2015.
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By GlobalData“The proposed assistance to Southern Gas Corridor is a continued testament to ADB’s belief in the development impact of this important project, and the importance of crowding in commercial capital to support Azerbaijan’s funding needs for the project.”
Located offshore in the Caspian Sea, Shah Deniz is expected to increase its annual production from ten billion cubic metres (bcm) to 26bcm.
The additional produced gas is to be exported to Europe through the Southern Gas Corridor, which will run through Georgia and Turkey, as well as serve as an alternative of gas delivery to Europe from this region.
ADB Central and West Asia director general Sean O’Sullivan said: “The expansion of the Shah Deniz gas field is key for Azerbaijan’s economy, providing the country a long-term revenue stream and diversifying its gas exports to Europe.
“ADB’s support will help generate economic opportunities for the private sector, create thousands of jobs, and help boost Azerbaijan’s ties with neighbouring countries and Europe.”
The expansion programme of Shah Deniz II is estimated to be $26bn. BP will be building and operating the project facilities.
Project construction will employ around 19,000 people, creating permanent jobs for 1,800 workers. Production is expected to start in 2018.
ADB claims that its participation will facilitate commercial financing from international banks to participate in this and upcoming projectsat Azerbaijan.
Image: The ADB funding will provide additional revenues to the Azerbaijan Government and help to diversify the economy. Photo: courtesy of ADB.
