Shafag solar plant and Sangachal terminal electrification projects sanctioned, supporting reduction of operational emissions in Azerbaijan VIDEO
Baku, June 2, AZERTAC
The shareholders of Shafag (Jabrayil) Solar Limited (SJSL) – a joint venture between bp, SOCAR Green and Azerbaijan Business Development Fund (ABDF) – today announced the final investment decision for the Shafag solar project.
This decision will enable commencement of construction of a 240MW AC solar plant in the Jabrayil district of Azerbaijan.
In parallel, the investors in the Sangachal terminal – bp, SOCAR, TPAO, LUKOIL, SGC, NICO, MOL, INPEX, ExxonMobil, ITOCHU, ONGC Videsh, Eni, MVM and TotalEnergies – today sanctioned the Sangachal terminal electrification (STEL) project. The project will enable the terminal to connect with the national grid operated by AzerEnerji OJSC, via new facilities to be built both within and outside the terminal, including a new 220/110 kV electricity substation.
The two projects are closely linked via a new commercial structure called ‘virtual power transfer arrangement,’ based on which the Shafag plant would produce power and deliver it to AzerEnerji in the Jabrayil district, while AzerEnerji would deliver an equivalent quantity of electricity to the Sangachal terminal near Baku. Together, the Shafag and STEL projects are expected to support the reduction of operational emissions by around 50% over the future life of the Sangachal terminal, based on the current outlook and plans.
The terminal currently uses seven gas turbines to generate the power it needs. Following the electrification, the turbines will be removed in phases, freeing up the fuel gas for export.
In support of the investment decisions, a number of agreements were also signed today in respect of both projects.
For the Shafag project, these agreements include a utility power purchase agreement between SJSL and AzerEnerji; and a transmission connection agreement between SJSL and AzerEnerji.
For the STEL project, the agreements include a package of engineering, procurement and construction contracts, an energy supply agreement and an operations and maintenance agreement between AzerEnerji and bp as the Sangachal terminal operator.
In addition, two agreements were signed to support both the Shafag and STEL projects - a balancing agreement between SJSL, AzerEnerji and bp as the operator of the Sangachal terminal and a power purchase agreement between SJSL and bp as the operator of the Sangachal terminal.
The official signing of both FIDs and the agreements took place today at a ceremony held in Baku Expo Centre on the sidelines of Baku Energy Week.
“Within the framework of President Ilham Aliyev’s policy of promoting the use of green energy, the completion of this important phase by both the Shafag and Sangachal terminal electrification projects opens a new chapter in our country’s strategic energy partnership with bp.
The projects that encompass such key elements as the construction of a 240MW solar plant in the 'Green Energy Zone' and the electrification of the Sangachal terminal, one of the world's largest oil and gas terminals, exemplify our joint, innovative approach to energy security and emissions reduction. As the largest investor in Azerbaijan's oil and gas sector, bp's increased efforts to invest in renewables further strengthen the long-term strategic foundation of our partnership. Together with bp, we are not only ensuring a reliable energy supply but also laying the foundation for a sustainable, low-carbon future," said Parviz Shahbazov, Minister of Energy of Azerbaijan.
“It has become a tradition in Azerbaijan’s energy sector, embraced by President Ilham Aliyev’s personal dedication and unwavering support, to frequently witness new milestones. The Shafag solar power plant and the Sangachal terminal electrification project, implemented in partnership with the world-renowned company bp, are the latest examples of these milestones. Along with significantly contributing to energy security and efficiency, they also serve to embrace green energy. At the same time, they open up new cooperation horizons for Azerbaijan, which has already achieved energy security in the region. In addition to contributing to energy production and transmission, the projects will strongly support efforts to reduce carbon emissions," Baba Rzayev, Chairman of the board of AzerEnerji OJSC said.
“Today’s decisions mark a new stage in both our cooperation with Azerbaijan and our regional business. The Shafag project starts a new dimension of our successful energy collaboration as it marks our first investment in the development of solar energy in the country. We are excited by the new innovative approach that links these two projects. It will enable us to reduce the operational emissions from the biggest facility we operate in Azerbaijan. We welcome this new development in our long-standing partnership with Azerbaijan, which is focused on oil and gas, and are confident that it can help to pave the way for further sustainable energy developments in the region,” said Gordon Birrell, bp’s executive vice president, production and operations.
Construction activities for around $200 million Shafag solar plant are expected to commence this year and continue through mid-2027, utilizing primarily local resources. It is expected that, at peak, construction activities will create up to 400 jobs.
The Shafag project will be developed and managed by Lightsource bp, a company fully owned by bp. The shareholding interests in SJSL are: bp 50.01%, SOCAR Green 39.99%, and ABDF 10%.
The $230 million STEL project will be developed and managed by bp as operator of the Sangachal terminal. Construction activities for STEL are planned to commence this year with completion expected in two stages – Stage 1 in mid-2027, and Stage 2 by the end of 2028.
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