Banks are arranging USD 1B in financing for, a key offshore gas field project in Azerbaijan seen as crucial for Europe’s energy security, the European Bank for Reconstruction and Development (EBRD) has said.

The EBRD and the Asian Development Bank (ADB), with the participation of the Black Sea Trade and Development Bank, BSTDB, are arranging the financing package for the project, the EBRD said in a statement.

The remainder will be provided by Bank of China, ING Bank, Societe Generale and Unicredit Bank Austria as well as one more commercial bank which will join the syndicate at a later stage.

“The development of the gas field will bring gas to south-eastern Europe, a region substantially dependent on coal and on gas from a single source of supply,” the EBRD said.

The gas will be transported through several pipelines  including the existing South Caucasus Pipeline, which will be extended under the project, as well as the planned Trans-Anatolian and Trans-Adriatic pipelines. These pipelines will carry the gas from Azerbaijan via Georgia and Turkey to Greece and Bulgaria and on to Italy, from where it can reach wider Europe.

EBRD Managing Director for Energy and Natural Resources Riccardo Puliti commented that the project is among the EU’s highest priorities for the energy sector.

“It is key for energy security because it diversifies routes and sources of gas supply,” Puliti said.

The EBRD and ADB will each lend USD 250M to the project and BSTDB will lend USD 60M.

The total cost of the Shah Deniz II development by the operating consortium is expected to exceed USD 47B. Production from the project is expected to begin in 2018.

Shah Deniz II will add a further 16 billion cubic meters (bcm) per year of gas production to the approximately 9 bcm produced by Shah Deniz I.

Around USD 28B in capital investment will be needed to produce the gas and transport it to the Georgia-Turkey border. From there, additional pipeline systems will deliver 6 bcm per year of gas to Turkey and a further 10 bcm to markets in Europe, in a route known as the Southern Gas Corridor.