Azerbaijan approves terms for export pipeline

Azerbaijan has signed an pact that sets terms for the proposed 1 million b/d Baku-Ceyhan Caspian region oil export pipeline.

The Azerbaijan government agreed with Turkey and Georgia to the legal, commercial, and regulatory formula for the Baku-Tbilisi-Ceyhan project. The pipeline would begin moving oil from Azerbaijan and the eastern Caspian Sea to the port of Ceyhan on Turkey's Mediterranean Coast in 2004-05.

Next, a "sponsor's group" of governments, oil companies, and international lending institutions will be formed to arrange project financing.

The signing occurred during the "Tale of Three Seas" conference on energy projects in the Caspian, Black, and eastern Mediterranean seas. Sponsors of the Istanbul meeting were Cambridge Energy Research Associates, the Black Sea Economic Cooperation Business Council, and Turkey's Foreign Economic Relations Board.

Daniel Yergin, CERA chairman, said the signing was "a historic event for the world energy industry and one that opens a new chapter for the world oil industry. It provides the commercial framework for Caspian development to go big time."

Laurent Ruseckas, CERA associate director for Caspian research, said, "One of the toughest details, and one of the most important aspects of the agreement, is the establishment of very reasonable tariff rates that will help make Caspian oil highly competitive in terms of price and thus will encourage more rapid development of new resources in the region. The next big challenge will be to achieve [pipeline] throughput commitments and work out the actual details of the financing package."

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