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A final investment decision on the second phase development of Azerbaijan's Shah Deniz field was signed on December 17. The agreement paves the way for further investment of around $28bn to expand the field, as well as pipeline infrastructure to carry its output to European markets.

The launch of production at Shah Deniz II is an important step towards creation of the southern energy corridor - a European project to secure supplies of gas directly from the Caspian and the Middle East, thereby reducing the EU's dependence on Russian gas. Shah Deniz is planned to start sending gas to Italian storage facilities in 2019.

BP, the leader of the international Shah Deniz consortium, signed off on the agreement in the presence of several European and regional leaders. Officials including Georgian Prime Minister Irakli Garibashvili, Croatian Prime Minister Zoran Milanovic and Montenegrin President Filip Vujanovic were in Baku, while British Foreign Secretary William Hague also witnessed the ceremony.

"This decision triggers plans to expand the South Caucasus Pipeline (SCP) through Azerbaijan and Georgia, to construct the Trans Anatolian Gas Pipeline (TANAP) across Turkey, and to construct the Trans Adriatic Pipeline (TAP) across Greece, Albania and into Italy," explains a statement from the Shah Deniz Consortium. "Together these projects will create a new Southern Gas Corridor to Europe. The total cost of the Shah Deniz Stage 2 and SCP Expansion projects will be around $28bn."

"Very few projects have the ability to change the energy map of an entire region," BP CEO Bob Dudley told the gathered officials, noting also that the project represents the largest ever foreign investment to Azerbaijan. "Shah Deniz 2 and the Southern Corridor pipelines will not only change the energy map, but will give customers in Europe direct access to the gas resources of Azerbaijan for the first time."

Shah Deniz II will add around 16bn cubic metres (cm) of gas per year to the 9bn cm currently being produced by the first phase, and send it westwards. The planned Trans-Anatolian Pipeline (TANAP) will carry the gas to Turkey, which will take 6bn cm and send the rest onwards to the Bulgarian border. From there, it will be transported through the Trans-Adriatic Pipeline (TAP) to Italy. TAP was selected over rival pipeline Nabucco West in June 2013. As well as building TAP and TANAP, the existing South Caucasus Pipeline will also be expanded.

The consortium - which aside from BP features Azeri state energy company SOCAR, France's Total, Norway's Statoil, Russian Lukoil, Iran's NIOC and Turkish TPOA - has already signed contracts worth $100m with nine companies from Bulgaria, Greece and Italy, to export 10 bcm a year of gas to European customers. The consortium currently expects to export the first gas from the field to Georgia and Turkey in 2018, with the first shipments to arrive in Europe around a year later.

However, Total and Statoil have decided not to take part in construction of TANAP. Following an increase in the estimated costs from $7.5bn to around $12bn, the pair has decided against exercising their options to take stakes. Statoil was entitled to take a 12% stake and Total 5%. Their shares will instead distributed among the other existing shareholders, which include SOCAR, BP, and Turkey's Botas and TPAO.

Norway's state-controlled Statoil also announced it has agreed to sell a 10% stake - out of its 25.5% holding - in Shah Deniz and the South Caucasus Pipeline. SOCAR (6.7%) and BP (3.3%) will buy the assets for a total of $1.45bn, the company said in a statement, with the deal set to close on January 1. Statoil maintains a 20% share in TAP

Meanwhile, SOCAR and the Shah Deniz partners also agreed terms for extending the Shah Deniz Production Sharing Agreement (PSA) until 2048. The consortium has agreed to undertake exploration and appraisal work on prospects within the PSA area.

Dudley also expressed his hope that Shah Deniz will continue to expand. "I am particularly pleased that we have agreed terms for extending the Shah Deniz Production Sharing Agreement up to 2048," he noted. "This enables BP and our partners to work in partnership with Azerbaijan in appraising future stages of Shah Deniz. BP's discovery of the new Shah Deniz Deep field in 2007 demonstrates the potential in this area beyond Shah Deniz Stage II."