The funding includes a $500m private sector loan to the Southern Gas Corridor Closed Joint Stock Company (SGC) and a $500m sovereign-counter guaranteed partial credit guarantee.
SGC is 51% owned by the Azerbaijan government and 49% by the State Oil Company of the Azerbaijan Republic.
The ADB funding will be used for Shah Deniz field expansion project, Shah Deniz II, which is expected to cost $26bn.
Located offshore in the Caspian Sea, about 70km from Baku, the Shah Deniz II project will add a further 16 billion cubic meters per year (bcma) of gas production to the approximately 9 bcma produced by Shah Deniz.
The additional gas produced from the field will be exported through a chain of pipelines known as the Southern Gas Corridor through Georgia and Turkey on to Greece, Albania, and Italy.
ADB Private Sector Operations Department director general Michael Barrow said: “ADB, through its private sector window, has already demonstrated strong support to the Shah Deniz gas field expansion through its direct assistance to this project in 2015.
“The proposed assistance to Southern Gas Corridor is a continued testament to ADB’s belief in the development impact of this important project, and the importance of crowding in commercial capital to support Azerbaijan’s funding needs for the project.”
Production from the expansion project is scheduled to commence in 2018. It is expected to create over 19,000 jobs during construction phase and 1,800 permanent jobs.
ADB Central and West Asia Department director general for Sean O’Sullivan said: “The expansion of the Shah Deniz gas field is key for Azerbaijan’s economy, providing the country a long-term revenue stream and diversifying its gas exports to Europe.”
Image: The Shah Deniz II field development project offshore Azerbaijan will create over 19,000 construction jobs. Photo: courtesy of Asian Development Bank.
