Bank of China contributes $105 million to $1 billion syndicated loan for Second Stage of Shah Deniz Gas Field Project

Project narrative

In 2015, a syndicate of banks (including Bank of China) issued a $1 billion loan to Lukoil Overseas Shah Deniz Limited (LOSD) — a special purpose vehicle (SPV) — for the Second Stage of the Shah Deniz Gas Field Project. The European Bank for Reconstruction and Development (EBRD) and the Asian Development Bank (ADB) each contributed $250 million. The Black Sea Trade and Development Bank (BSTDB) contributed $60 million. ING Bank contributed $125 million. Bank of China, Societe Generale, and Unicredit Bank Austria each contributed $105 million. The loan had a maturity period of 12 years. Its other borrowing terms are unknown. Lukoil Overseas Shah Deniz Limited, a wholly-owned subsidiary of the PJSC Lukoil Oil Company (a Russian multinational energy corporation headquartered in Moscow), has a 10% equity stake in the production sharing agreement (a "PSA") relating to the Shah Deniz field (the "Shah Deniz PSA”). The Shah Deniz field was discovered in 1999 and is considered one of the world's largest gas-condensate fields, with over 1 trillion cubic meters of natural gas and approximately 2 billion barrels of condensate in place. Total production from the Shah Deniz field during the period from 2007 to 2045 is expected to reach 458.8 billion cubic meters of natural gas and 616.1 million barrels of condensate. The proceeds of the syndicated loan were to be used to finance the second stage of the development of the Shah Deniz field, with the intention to significantly increase production, which will feed a southern transportation corridor through Georgia and Turkey for delivery to Greece, Bulgaria and Italy. More specifically, stage 2 involved the following upstream gas operations: two new bridge-linked offshore platforms; 26 gas producing wells; 500 km of subsea pipelines; upgrades to the offshore construction facilities; and expansion of the Sangachal Terminal (ST). The ultimate objective of the project was to increase gas production from the field by 16 billion cubic meters per year. BP was the contractor responsible for project implementation. The project officially commenced on May 29, 2018. Commercial gas deliveries to Turkey from the Shah Deniz 2 [via the South Caucasus Pipeline Expansion (SCPx) Project and the Trans Anatolian Pipeline (TANAP) Project] commenced on June 30, 2018. The fixed Shah Deniz Bravo (SDB) platform subsequently began exporting gas and condensate to the onshore terminal at Sangachal. The project was officially completed and handed over in March 2019. Then, on April 2, 2019, Bank of China signed a $400 million loan agreement with Lukoil Overseas Shah Deniz Limited for the Shah Deniz II Oil Field. The borrowing terms and purpose of the loan are unknown. Bank of China's contribution to the $1 billion syndicated loan is captured via Record ID#66946. Its $400 million bilateral loan is captured via Record ID#108706. The Second Stage of Shah Deniz Gas Field Project is part of a larger Southern Gas Corridor Project. The other components of the Southern Gas Corridor Project are the South Caucasus Pipeline Project, the Trans-Anatolian Natural Gas Pipeline Project (see Record ID#65848), and the Trans-Adriatic Pipeline Project (see Record ID#65855).