|
The key source of transition impact potential of the Shah Deniz project is
expected to be:
Setting standards of governance and business conduct
The
Government of Azerbaijan has recently endorsed the Extractive Industries
Transparency Initiative (“EITI”), with which the Bank is also co-operating
closely, in particular in Azerbaijan and in Kyrgyzstan. As part of this
transaction, appropriate covenants will be put in place to require Lukoil to
comply with the revenues and payments disclosure in accordance with the EITI
principles, not only for the Shah Deniz field, but also for Lukoil’s other and
future oil & gas properties in Azerbaijan (including the Yalama property).
This transition-related covenant is important also because –given the early
stages of EITI implementation- there does not yet appear to be clear sanctions
for oil companies refusing to comply with EITI-related disclosure requirements
in Azerbaijan.
Also, as project participants, LOSD and LOSDM will be required to adhere to
the highest international technical, health and safety and environmental
standards as determined by BP, being the SCP Operator. In addition, all
contractors used by the consortium will be required to adhere to BP’s
corporate code.
Greater competition in destination gas markets
By virtue of the
lack of a destination clause, the Shah Deniz gas may be on-sold in other South
Eastern European markets, in direct competition with other gas producers.
Market expansion
The SCP and SD project will increase business
development and competition among the local suppliers that will be
sub-contracted by SCPC and the Shah Deniz consortium members. This should also
serve to increase business standards among these local enterprises.
|
