The Shah Deniz consortium announced in a press release the final investment decision for the Stage 2 development of the Shah Deniz gas field in the Caspian Sea, offshore Azerbaijan. This decision triggers plans to expand the South Caucasus Pipeline through Azerbaijan and Georgia; to construct the Trans Anatolian Gas Pipeline across Turkey; and to construct the Trans Adriatic Pipeline across Greece and Albania and into Italy. Together, these projects as well as gas transmission infrastructure to Bulgaria will create a new southern gas corridor to Europe.

The Shah Deniz project entails several elements. Offshore it includes drilling and completion of 26 subsea wells and construction of two bridge-linked platforms, and onshore there will be new processing and compression facilities at Sangachal, according to the press release.

The total cost of the Shah Deniz Stage 2 and South Caucasus Pipeline expansion projects will be around US $28 billion. An estimated 16 Bcm (565 Bcf) per year of gas produced from the giant Shah Deniz field will be carried some 3,500 km (2,175 miles) to provide energy for millions of consumers in Georgia, Turkey, Greece, Bulgaria, and Italy. First gas is targeted for late 2018, with sales to Georgia and Turkey; first deliveries to Europe will follow approximately a year later, according to the release.

Condensate production from the Shah Deniz field is expected increase to 120,000 b/d, from current levels of about 55,000 b/d. In the shorter term, the Shah Deniz partners have agreed to terms with SOCAR for expanding production through the existing facilities by 1.4 Bcm (49 Bcf) per year. The production increase is already in progress and is expected to be complete by year-end 2014, according to the release.

SOCAR and the Shah Deniz partners also have agreed to terms for extending the Shah Deniz production-sharing agreement (PSA) up to 2048. The Shah Deniz partners have agreed to undertake exploration and appraisal work on prospects within the PSA area, according to the release.

The official signing of the Shah Deniz Stage 2 final investment decision took place in a ceremony at the Heydar Aliyev Centre in Baku, Azerbaijan. It was witnessed by President Ilham Aliyev of the Republic of Azerbaijan who was joined by leaders from nations along the Southern Corridor, as well as from the European Commission and other countries. Today's decision means that gas sales contracts with nine European companies will now come into effect, according to the release. As a result some 10 Bcm (353 Bcf) per year of Shah Deniz gas are expected to be delivered for 25 years to customers in Italy, Greece, and Bulgaria.

In addition, some 6 Bcm (212 Bcf) per year of Shah Deniz Stage 2 gas will be delivered to consumers in Turkey. All gas sales and transportation contracts will be managed by the Azerbaijan Gas Supply Co. established by Shah Deniz coventures under the operatorship of SOCAR, according to the release.

Coinciding with the final investment decision, SOCAR purchased 6.7% equity in Shah Deniz and the South Caucasus Pipeline from Statoil, and BP purchased 3.3% equity in Shah Deniz and the South Caucasus Pipeline from Statoil. Both of these transactions are subject to conditions that are expected to be satisfied in 2014, according to the release.