BP: Southern Gas Corridor costs set to come in under $40 billion

BP: Southern Gas Corridor costs set to come in under $40 billion

Baku, Azerbaijan, Nov.22

By Leman Zeynalova – Trend:

The cost of building the Southern Gas Corridor -- designed to bring gas to Europe from Azerbaijan -- is set to come in at under $40 billion after savings were made across the value chain, S&P Global Platts quoted a senior BP official as saying.

Joseph Murphy, BP's vice president for the Southern Gas Corridor, said in an interview in London that BP's own operated costs were set to be 20 percent under budget.

"The savings have come first -- and most importantly -- from remaining on schedule," Murphy said.

“Often these kinds of mega-projects fall behind schedule. But the way the projects have maintained the schedule has meant that your traditional overspend, or utilization of contingency, has not occurred," he said.

Murphy said there was still work to do to complete the project, with TAP and parts of TANAP still to be finished.

Murphy said other factors had helped push down the expected final cost of the Southern Gas Corridor including the industry downturn that hit in 2014.

"We started this project just as oil prices dropped," he said, adding though that work began in January 2014 "so we weren't getting the immediate cost benefit from a lower supply chain."

He said the parts of the corridor further to the west were the ones that benefited from a market that had decreased activity, in particular TANAP.

"In a softer project market, being a single-country project with Turkish contractors and the benefit of scale probably helped," he said.

He also said TANAP had "surpassed" expectations given that that part of the corridor was one of the key concerns when the project was created.

Southern Gas Corridor envisages transportation of 10 billion cubic meters of Azerbaijani gas from the Caspian region through Georgia and Turkey to Europe.

On May 29, Baku hosted the launch ceremony of the first phase of the Southern Gas Corridor project.

The gas from the Azerbaijani Shah Deniz field has already gone through the first segment of the Southern Gas Corridor - from the Sangachal terminal to the expanded South Caucasus Pipeline. The next stage is the commissioning of the TANAP gas pipeline, through which gas will flow into Turkey and further to Europe.

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Follow the author on Twitter: @Lyaman_Zeyn

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