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ADB and EBRD USD 1 billion financing for Shah Deniz stage 2

We advised a consortium of international financial institutions led by the Asian Development Bank (ADB) and the European Bank for Reconstruction and Development (EBRD) on the Cyprus law aspects of a USD1 billion project financing for the second stage of the of the Shah Deniz gas development project in Azerbaijan. The borrower is Lukoil Overseas Shah Deniz Ltd (LOSD), a subsidiary of Lukoil PJSC, Russia's second largest oil company.

EBRD and ADB were appointed by Lukoil as the lead arrangers for the transaction, which is aimed at financing the company's 10 percent share in the project. EBRD has already disbursed USD 380 million to LOSD to finance the first phase of development.

Around half of the stage 2 loan has been syndicated to other lenders including Bank of China Limited London Branch, Black Sea Trade and Development Bank, ING Bank NV, Société Générale and Unicredit Bank Austria AG.

Shah Deniz, Azerbaijan's biggest gas field, is in the Caspian Sea, 70 km south-east of Baku. One of the largest gas developments in the world, it is being developed by BP, Azeri state energy firm SOCAR and others including Lukoil, and is estimated to contain 1.2 trillion cubic metres of gas. The first stage of the project has been producing gas since 2006 and has an annual production capacity of approximately 10 billion cubic metres (bcm) of natural gas. The second stage development, which began in December 2013, has a total estimated cost of USD 28 billion, excluding the construction of the export pipeline systems. It is expected to produce an additional 16 bcm of gas per year from 2019-2020, with 10 bcm earmarked for Europe and 6 bcm for Turkey.