EBRD funding plans in the pipeline

The European Bank for Reconstruction & Development (EBRD) is planning to lend up to $100mn to Lukoil Overseas Shah Deniz, a wholly-owned subsidiary of Russia’s Lukoil, helping it take part in developing Azerbaijan’s Shah Deniz gas field. This investment is a rare EBRD financing of a Russian company. Since Russia’s annexation of the Crimea and support for pro-Russian rebels in Ukraine, the bank has refused to take on new clients in Russia. Lukoil, however, had an established relationship, writes Keith Nuthall.

Lukoil currently holds a 10% stake in the Shah Deniz natural gas field, whose development is managed by BP. 

Assuming the EBRD board backs the plan, the money would help Lukoil install two additional bridge-linked offshore gas platforms, 26 subsea wells, 500 km of subsea pipelines, and expand its gas plant at the Sangachal terminal, south of the Azeri capital Baku. The total cost of this work is estimated at $400mn. An EBRD note said that the project could have long-term impact through ‘the demonstration of new products to the region (hub-linked gas sales agreements) and innovative subsea E&P [exploration and production] technologies’.

At the same time, the EBRD is developing a possible $500mn finance package to help build the Trans-Anatolian Natural Gas Pipeline (TANAP), which would carry Azeri gas across Turkey between its borders with Georgia and with Greece. The money would be lent to the Azerbaijan government-controlled Southern Gas Corridor Closed Joint Stock Company, which owns 58% of the pipeline operator TANAP. The pipeline is already under construction.

Meanwhile, the EBRD is planning to offer $5mn in debt financing to Romanian oil field services company Expert Petroleum, which enhances mature oil and gas fields to make them safer, cleaner, more productive and economic to exploit.

For more on oil and gas developments in Azerbaijan, see Petroleum Review’s May 2017 issue.