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Petronas acquires Caspian Sea oil assets

Petronas has announced it is buying a share in the huge Shah Deniz oil field in the Caspian Sea, in a deal worth more than $2.25 million.

The deal will see Norway’s largest energy company, Statoil, hand over its share of the oil field, as well as a pipeline in the Caucasus, to Malaysia’s state-owned oil and gas company.

Statoil’s stake in the field, which is located close to Azerbaijan capital Baku, is now 15.5 percent, which is equal to its share of the South Caucasus Pipeline Co, from where gas is shipped to Turkey and Georgia.

Major moves

Statoil is also selling its 12.4 percent share in the Azerbaijan Gas Supply Co - a move confirmed in a statement by Lars Christian Bacher, Statoil’s executive vice president for international development and production.

He said the divestment "optimises Statoil's portfolio" and strengthens its financial flexibility to prioritise industrial development and high-value growth.

Analysts note that Statoil has followed the lead of other large energy companies and begun selling its assets to shore up profit margins to safeguard against rising operating costs and declining oil prices.

Changing dynamic

The sale is expected to close early in 2015, once it receives regulatory approval, and will change the dynamic of the Shah Deniz oil field, which was originally discovered in 1999, with production beginning in 2006.

In the second quarter of 2014, Statoil’s share of the recovered assets from the field was the equivalent of 38,000 barrels of oil a day, though its withdrawal echoes that of France’s Total SA, which sold its 10 per cent share in the project in May, in order to cut back on capital investments and make up for the lower price of oil and increasing operational costs.

Over the last four years, Statoil has sold assets for prices totaling more than $22 billion, including a 10 per cent share in Shah Deniz in 2013, and has also cut back on planned investments for 2015 in a bid to increase returns for its shareholders.

Multiple developments

A number of imminent developments are underway in the second phase of the Shah Deniz project, with the next big step to export gas through new pipelines to Italy in an effort to reduce Europe’s dependence on the Russian gas giant Gazprom - a phase expected to cost in the region of $28 billion.

The latest deal now means Britain’s BP is the largest investor in Shah Deniz, owning 28.8 percent of its extracted oil, with investors including Russia’s LUKoil; the Naftiran Intertrade Co; Azerbaijan’s State Oil Co; and the Turkish energy company Turkiye Petrolleri Anonim Ortakligi.

For Petronas, it represents yet another acquisition to add to its production and exploration efforts, which bridge 22 countries across Africa, Asia and Latin America, accounting for a quarter of its total oil and gas reserves. With further interests in Mexico, Argentina and Canada, the Malaysian giant will continue to expand its operations in the months and years ahead.

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