MVM Group to acquire stake in Azerbaijan’s Shah Deniz field from Southern Gas Corridor

MVM Group, a Hungarian energy company, has entered into an agreement to purchase a 5% stake in the Shah Deniz gas-condensate field located offshore Azerbaijan from Southern Gas Corridor (SGC), a state-owned entity of Azerbaijan. This deal, which was formalized during the Baku Energy Week, marks a significant step in MVM Group’s strategy for diversification and growth, aligning with both the European Union’s energy diversification efforts and Hungary’s national energy strategy.

Strategic Acquisition in European Energy Security

In addition to acquiring a stake in the Shah Deniz field, MVM Group will also obtain a 4% stake in Azerbaijan Gas Supply (AGSC), a special-purpose entity responsible for the marketing and sales of natural gas from Shah Deniz. This acquisition not only enhances MVM Group’s portfolio but also strengthens its position in the European energy market, reflecting the company’s strategic intent to expand its energy assets outside of Hungary.

The Shah Deniz field, operated by BP and situated approximately 70km southeast of Baku on the deepwater shelf of the Caspian Sea, is one of the world’s largest natural gas-condensate fields. Discovered in 1999, it has a capacity to produce up to 29 billion cubic meters of natural gas and about 60 million barrels of condensate annually.

Current and Future Stakeholders

Before the transaction, the field’s ownership was distributed among several major global energy companies, including BP (29.99%), SGC (21.02%), Lukoil (19.99%), TPAO (19%), and NICO (10%). Following the completion of this transaction, which is expected to close in the third quarter of 2024 pending customary regulatory approvals, SGC will retain a 16.02% interest in the asset.

SGC highlighted the deal’s significance, stating, “The transaction is a further testament to Azerbaijan’s key role in European energy security aimed at long-term cooperation and marks the entry of a new energy player in Azerbaijani oil and gas market.”

Implications for European Energy Supply

The Shah Deniz field plays a pivotal role in the energy supply chain to Azerbaijan, Georgia, Turkey, and European markets, facilitated by long-term gas sales and transportation agreements with AGSC. The addition of MVM Group as a stakeholder promises to bring a fresh perspective and potentially more robust energy cooperation between Hungary and Azerbaijan.

The strategic importance of this acquisition cannot be overstated as it enhances the security of energy supply to Europe, a region increasingly looking to diversify its energy sources amid geopolitical shifts. MVM Group’s investment in Shah Deniz is a clear indication of the growing interconnectivity of European energy markets with major production regions in the Caspian area.

In summary, this acquisition by MVM Group not only diversifies its investment portfolio but also reinforces the broader strategy of energy security and cooperation within the European Union. It symbolizes a significant alignment in energy strategy between Hungary and Azerbaijan, potentially paving the way for further investments and collaborations in the energy sector.