BP Group Cuts Out Russia With New EU Gas Deal
International groups have found a way to avoid the scope of Russian power. According to a report by Bloomberg, energy giant BP (NYSE:BP) has negotiated a deal to bring natural gas directly to European Union countries from the Shah Deniz gas fields of Azerbaijan with a group of buyers, including Royal Dutch Shell (NYSE:RDSA) spending hundreds of billions dollars on the contract. The deal represents a blow to Russian energy providers.
The Shah Deniz group includes BP, the State Oil Company of Azerbaijan (SOCAR), and other energy players with control to plentiful natural gas resources in the country located to the north of Iraq. Statements from SOCAR said the deal could be worth $200 billion to the group as a whole, a figure that has yet to be confirmed by BP representatives. According to multiple sources, the deal spans a 25-year period and includes 10 billion cubic meters of natural gas.
The European unit of Royal Dutch Shell joined Enel SpA of Italy and Suez SA of France in the nine-member purchasing group, according to a Wall Street Journal report. The news agency reports the first of the natural gas reserves will head from Azerbaijan to Greece and Bulgaria in coming years as well as Italy and other EU markets. The deal was both a sign of the huge resources to be found in Azerbaijan and the diminished need for reliance on Russian supplies.
The next big project for Azerbaijan is Shah Deniz II, which has extensive oil and gas supplies, according to the Journal report. In order to close the natural gas deal at Shah Deniz’s first phase, plans must be submitted to account for pipeline that will carry the gas from the Middle East and Georgia into Mediterranean countries.
BP and company’s big deal with the Royal Dutch Shell and Suez SA group came on the heels of news the British energy giant would not bid on the Libra project in Brazil. Once considered a site of limitless potential for oil companies, the biggest U.S. players have dropped out of the bidding, according to Reuters. Companies interested in Libra would have to deal with more strenuous regulations as well as a rising tide of inflation in Brazil, industry analysts told the news agency.