Caspian realities

Nov. 2, 1998
The Clinton administration has dropped its push, at least for now, to get an alternative pipeline built to export Caspian Sea production. After meeting with executives of U.S. oil companies active in the Caspian, U.S. officials conceded it is not presently economic to build a $3.5 billion, 1,800-mile pipeline from Baku in Azerbaijan to Ceyhan on Turkey's Mediterranean coast. The U.S. has been trying to encourage construction of an export line that bypassed both Russia and Iran (OGJ, Oct.
Patrick Crow
Washington, D.C.
[email protected]
The Clinton administration has dropped its push, at least for now, to get an alternative pipeline built to export Caspian Sea production.

After meeting with executives of U.S. oil companies active in the Caspian, U.S. officials conceded it is not presently economic to build a $3.5 billion, 1,800-mile pipeline from Baku in Azerbaijan to Ceyhan on Turkey's Mediterranean coast.

The U.S. has been trying to encourage construction of an export line that bypassed both Russia and Iran (OGJ, Oct. 26, 1998, pp. 29 and 32).

Azerbaijan International Oil Co. (AIOC), a consortium led by British Petroleum Co. plc and Amoco Corp., soon will recommend a route to the Azerbaijan government for a major export pipeline.

But the prospective pipeline's economics have been hurt by low prices during the past year, and more recently, by some key dry holes in the Caspian region.

Studies

U.S. officials stressed the Baku-Ceyhan line should be built when Caspian production increases in the future.

And to underscore the point, the U.S. Trade and Development Agency announced an $823,000 grant to help Turkey study pipeline options.

Stuart Eizenstat, undersecretary of state, said, "We believe the Baku-Ceyhan pipeline is still very much alive. We believe it is the preferred option of all the relevant countries in the Caspian."

Meanwhile, Russia may soon approve the Caspian Pipeline Consortium's plan to build a major line from Tengiz field in southwestern Kazakhstan to Russia's Black Sea port of Novorossiisk.

Construction of the $2.3 billion, 1,000-mile line would take more than 2 years. Completion would come in early 2001.

Tengiz has reserves of 6 billion bbl but is only producing 215,000 b/d. The pipeline would allow production of 1.34 million b/d.

Legislation

Before adjourning, the U.S. Congress approved $10 million to help Turkmenistan develop its energy infrastructure, including a major gas export pipeline.

Turkmenistan is believed to have the world's fourth-largest gas reserves.

The appropriation came in the $520 billion budget bill, which Congress passed in its final hours, and President Bill Clinton signed.

Congress said, "The development of energy resources in the Caspian Sea region is important to the economic development of the countries involved, as well as (to) regional stability.

"It is important to facilitate the development of alternatives to a pipeline through Iran and support an East-West energy corridor to assist in developing the region's energy resources."

The U.S. has been promoting a line from Turkmenistan across the Caspian Sea, continuing across Azerbaijan and Georgia to Turkey.

Legislators also flip-flopped on the issue of U. S. aid to Azerbaijan, which was banned in a 1992 law due to Azerbaijan's blockade of Armenia.

Congress decided to exempt the U.S. Export-Import Bank and the Overseas Private Investment Corp. from the law so that they could help U.S. firms investing in Azerbaijan, without repealing the law itself.

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