BP is at the centre of one of the world's biggest gas sales agreements, worth up to $100bn (£62bn) over 25 years, after signing a deal to supply energy from a Caspian Sea project that could reduce Europe's reliance on Russian fossil fuels.
Over 10bn cubic metres of gas a year will be produced via a $40bn scheme – the biggest ever undertaken by BP – to unlock new reserves from the huge Shah Deniz field located in the territorial waters of Azerbaijan. The nine buyers of gas from the BP-operated project include European energy groups Shell, E.ON and Enel.
But the project will involve a massive new transport network of three new pipelines to move a total of 16bn cubic metres a year of offshore gas through Georgia, Greece and under the Adriatic Sea to Italy. One leading human rights campaigner argued last night that a campaign in Britain and elsewhere was growing to halt dependence on the Caspian "carbon corridor" that has brought disruption to populations that live along the route.
The next phase of Shah Deniz is expected to be given the go-ahead before Christmas by BP, which operates the project and has a 25% stake in it alongside Statoil of Norway, which owns a further 25%.
The project will bolster European gas security and reduce dependency on Russia but it also enhances the position of Azerbaijan, a country whose president, Ilham Aliyev, is accused by Amnesty International of presiding over a human rights "crisis". Al Cook, vice president of BP in Azerbaijan, said the deal – on the back of a summer deal with BOTAS of Turkey – was another "vital milestone" in developing the project.
He added: "We are confident we can take a final investment decision at the end of the year for a scheme that will open up the southern corridor and bring gas direct to Europe for the first time from Azerbaijan." Asked whether the scheme could enhance the reputation of a controversial regime, Cook pointed out that the project was supported by the European Union and would only proceed as a "sound economic proposition".
The first phase of the Shah Deniz project brought 8bn cubic metres of gas out of the Caspian Sea, which was sold to Azerbaijan as well as Georgia and Turkey. Shah Deniz 2 involves 16bn more going to Bulgaria, Greece, and Italy.
The second phase will involve drilling 26 new wells at a cost of more than $5bn, 500km of subsea pipelines and 3,500km of onshore links including a Trans Adriatic Pipeline. BP and its partners, which includes the local Azerbaijan state-owned oil group, SOCAR, will also need to construct two new giant pumping stations in Georgia which will each be the size of 50 football pitches.
Despite its 25% stake, BP said it would be wrong to assume that it would obtain a quarter of the expected $100bn worth of revenues. For instance, the British-based company, still recovering after the financial traumas triggered by the Deepwater Horizon accident in 2010, owns only 20% of the Trans Adriatic Pipeline which will be built alongside extensions to the South Caucusus link from the Caspian to Turkey and a third, the Trans-Anatolian Pipeline. The building of these corridors to Europe, especially an earlier one constructed by BP known as the Baku Tsibilisi Ceyhan pipeline, has attracted criticism from environmentalists and human rights organisations such as the Corner House and Platform.
And this latest signing of the gas sales deal comes as Aliyev runs for a third consecutive term as the country's president after changing the constitution in 2009 to allow him to serve an unlimited number of years. Aliyev, who succeeded his father as president in 2003, is alleged by Amnesty to have "presided over a deepening human rights crisis" in the Caspian state.
James Marriott of Platform and co-author of The Oil Road, a critical study of pipelines from the Caspian, said that the construction and operation of a Euro-Caspian "mega-pipeline" would disrupt thousands of villages from Azerbaijan to Italy.
"For much of its length it would become a militarised zone. It has already silenced EU criticism of Azeri human rights abuse and led to plans for election monitoring to be shelved. But there are many who recognise that our energy needs should not be met through projects that increase the insecurity of other peoples lives and threaten a myriad of environments. Opposition to this scheme is growing in the UK and across Europe."
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