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Shah Deniz consortium awards $1.5 billion subsea production contract

LONDON (Reuters) - The consortium developing the second phase of Azerbaijan's Shah Deniz gas field has awarded a $1.5 billion (1.02 billion pound) subsea production contract to a consortium involving Saipem , BOS Shelf and Star Gulf FZCO, it said on Tuesday.

The group has won a contract to operate a Subsea Construction Vessel (SCV) to transport and install a deepwater subsea production system, said the Shah Deniz consortium, led by British oil major BP .

The consortium said the Shah Deniz 2 project was on track to deliver its first gas in 2018.

In a separate statement Saipem said its share of the contract was worth $1.3 billion.

The Italian oil services group said the contract would last five years with a possible extension for another five.

"This award also further strengthens Saipem's key role in the construction of the southern gas corridor," Saipem CEO Stefano Cao said.

Saipem shares retraced earlier losses and were down 1.6 percent at 1026 GMT while the European oil and gas index <.SXEP> was down 2.3 percent.

In April Saipem won an order to lay the subsea Trans Adriatic Pipeline (TAP) that will bring Azeri gas into Italy.

The 870-km TAP pipeline, part of the so-called southern corridor that will link Azerbaijan's giant Shah Deniz II field with Italy, is the largest project to bring new gas supplies to European consumers.

(Reporting by Karolin Schaps and Stephen Jewkes, editing by Louise Heavens and David Evans)