BP shuts down production at offshore platform, Azerbaijan cuts off gas supplies to Bulgaria and Serbia

A pipeline malfunction has forced BP, the UK-headquartered energy giant, to temporarily stop production from a platform in the Caspian Sea at one of the world’s largest gas-condensate fields and the company’s largest gas discovery ever. The pipeline issue is said to be connected to Azerbaijan’s decision to halt natural gas supplies to Serbia.

BP’s affiliate in Azerbaijan disclosed on January 10, 2025, that it had suspended operations at its Shah Deniz Alfa (SDA) platform following a technical issue that was found at a subsea pipeline used to handle the transport of gas condensate between the platform and the Sangachal terminal.

While confirming that the subsea pipeline’s technical malfunction did not cause environmental damage or compromise the safety of the platform and pipeline, the company underlined: “The platform, its personnel, and associated facilities are completely safe.”

BP also confirmed that it was working to resolve the issue and resume normal operations “as quickly as possible.” Aleksandar Vučić, President of Serbia, confirmed that Azerbaijan informed Serbia of a suspension in daily gas deliveries of 1.7 million cubic meters because of technical issues.

This comes only a day after a new raft of sanctions that the U.S. imposed against Russia targeted Naftna Industrija Srbije (NIS), Serbia’s oil and gas company, due to its Russian ties. The lion’s share of the firm (56.15% interest) is owned by Russia’s Gazprom and Gazprom Neft.

The Balkan country’s government holds a 29.8% stake in NIS. The U.S. Treasury’s latest set of financial sanctions targets Russia’s energy sector. However, Serbia’s NIS has a way out, and all it has to do is stop doing business with Russia by March 12 and change its ownership structure.

While the solution seems simple, the bonds between Russia and Serbia go way beyond the energy sector; thus, this is not a straightforward decision for Vučić, who describes the action the U.S. has taken as “the most severe sanctions ever affecting a company in Serbia.”

While Serbia’s President is likely hoping to get some sort of deal with the new U.S. administration, once President-elect Donald Trump returns to the White House, it is not certain what this will entail as the sanctions can only be revoked with the blessing of the Congress.

Regardless of what he may hope to get from Trump, Vučić underlined: “Moscow and Washington are dear to us, as is everyone in the world. We have nothing against anyone, but Serbia is our dearest. We will protect Serbia’s interests at all costs. Citizens have no reason to worry. There will be no shortages, and there will be no economic disaster.”

While the Serbian President could not specify when the supplies would resume, he outlined his hope that the resumption would be in a month or two. In the meantime, the Balkan country, which lowered its dependence on Russian gas in 2023 by inking a deal with Azerbaijan, will use its gas reserves.

Azerbaijan’s decision to cut off gas supplies to Serbia comes on the heels of a recent halt in gas supplies to Bulgaria, which were also suspended because of technical reasons from January 7, 2025. Unlike Serbia, Bulgaria severed its gas ties to Russia in April 2022.

According to Bulgargaz Energy Company, gas supplies are expected to resume on January 11, 2025. As the halt in gas deliveries coincided more or less with BP’s confirmation of the Shah Deniz pipeline issue, these events are believed to be related, but official confirmation or denial either from BP or Azerbaijan has yet to come.

“Reports of a two-month suspension of gas supplies from Azerbaijan to Serbia are inaccurate. While gas flow has been temporarily reduced due to a technical issue at the Shah Deniz Alpha platform, they assured that the Shah Deniz Bravo platform remains fully operational, ensuring continuity of exports. Supplies are expected to resume very soon,” reported AnewZ, citing undisclosed “reliable government sources,” who also confirmed the resumption of gas supplies to Bulgaria.

Located in the Azerbaijani sector of the Caspian Sea, Shah Deniz is one of the world’s largest gas and condensate fields, which was discovered in 1999. The agreement on the exploration, development, and production sharing for the Shah Deniz prospective area, signed on June 4, 1996, came into force on October 17, 1996.

The field’s reserves are estimated at 1 trillion cubic meters of gas and 243 million tons of condensate. As it was developed in two phases, Shah Deniz Phase 1 (SD1) includes the drilling of 11 wells, the construction of platforms, Sangachal Terminal, and the 692-kilometer South Caucasus Pipeline (SCP) to Türkiye.

The gas produced in Shah Deniz is transported via underwater pipelines to Sangachal terminal, 55 kilometers south of Baku on the Caspian coast. While part of this gas is delivered from Sangachal terminal to SOCAR’s pipeline connected to Azerbaijan’s national gas grid, another part is exported via SCP.

After the first gas sales began in 2006, the commissioning of the Baku-Tbilisi-Erzurum pipeline occurred in 2007, enabling Azerbaijan to start gas exports to Georgia and Türkiye. The full development of Shah Deniz, or Shah Deniz Phase 2 (SD2), is said to be one of the largest and most complex gas projects.

The SD2 added 16 bcm of gas and 105,000 barrels of condensate to SD1’s annual capacity of 11 bcm of gas and 60,000 barrels of condensate, respectively. The Shah Deniz consortium signed contracts with nine European companies in September 2013, and the final investment decision came in December 2013.

The first commercial gas was exported to Türkiye on June 30, 2018, followed by Europe on December 31, 2020. The field’s ownership structure encompasses BP (operator, 30%), Lukoil (20%), TPAO (19%), SGC (16%), Iran’s NICO (10%), and Hungary’s MVM (5%).

In the first three quarters of 2024, BP and its co-venturers spent around $1.78 billion in operating expenditure and around $582 million in capital expenditure on Shah Deniz activities, the majority of which was associated with the Shah Deniz 2 project.

In the first nine months of 2024, the field produced 20 billion standard cubic meters of gas and more than 3 million tons (around 26 million barrels) of condensate from the Shah Deniz Alpha and Shah Deniz Bravo platforms.

The existing Shah Deniz facilities’ production capacity is about 80.7 million standard cubic meters of gas per day or approximately 29.5 billion standard cubic meters per year. In total, 21 wells have been drilled for Shah Deniz 2.

These include five wells on the North flank, four on the West flank, the same number on the East South flank, five on the West South flank, and three on the East North flank. In the third quarter of 2024, Shah Deniz 2 progressed towards the start-up of the third well on the East North flank.

BP is actively working on bolstering the hydrocarbon arsenal from assets in Azerbaijan. To this end, the firm started production from its 48-slot production, drilling, and quarters platform in the Caspian Sea at its giant oil field in April 2024.