Partners mark major progress on Baku-Ceyhan pipeline project

Aug. 14, 2002
Partners, led by BP PLC, in the proposed $2.8 billion Baku-Tbilisi-Ceyhan pipeline to carry Caspian Sea region crude oil from Azerbaijan to Turkey's Mediterranean Sea coast have taken major steps toward the long-embattled project's fruition.

By OGJ editors
HOUSTON, Aug. 14 -- Partners, led by BP PLC, in the proposed $2.8 billion Baku-Tbilisi-Ceyhan pipeline to carry Caspian Sea region crude oil from Azerbaijan to Turkey's Mediterranean Sea coast have taken major steps toward the long-embattled project's fruition.

The project would be another critical piece in the puzzle that has formed over the dilemma of how best to deliver to market the vast oil and gas resources of the landlocked and geopolitically crucial Caspian Sea region.

It would join the Caspian Pipeline Co. project, a $2.65 billion, 900 mile crude oil pipeline from Kazakhstan to the Russian Black Sea port of Novorossiysk, which started up last year and is expected to be running at its 600,000 b/d capacity by midyear (OGJ, Feb. 4, 2002, p. 64)

As proposed, the 1,082 mile, 42-in., 1 million b/d capacity pipeline would extend from Azerbaijan's capital, Baku, to the Georgian capital of Tbilisi and then to Ceyhan on Turkey's Mediterranean coast. Initial throughput would entail crude oil produced from the Azeri-Chirag-Gunashli (ACG) giant fields complex in the Caspian Sea off Azerbaijan. Ultimately, Azerbaijan expects to export as much as 1 million b/d of its crude oil to world markets by 2015.

The project got a boost earlier this year when President George W. Bush conditionally waived a decade-old sanction that had blocked official US aid to oil-rich Azerbaijan (OGJ Online, Jan. 31, 2002).

Project update
Project partners early this month formed the Baku-Tbilisi-Ceyhan Pipeline Co. (BTC) to construct, own, and operate the pipeline, a key step enabling the pipeline owners to enter the full construction phase—which can occur only after the BTC board "has been assured of the completion of the few remaining preconstruction activities," BTC said in a statement issued by BP.

At the same time, BTC awarded initial, lump-sum contracts for the construction phase. Greece's Consolidated Contractors International Co. will handle pipelaying in Azerbaijan, while a joint venture of France's Spie-Capag SA and Petrofac Ltd., London, will handle pipelaying in Georgia and related facilities work in both Azerbaijan and Georgia.
The BTC partners approved the contractor tender list in late 2001, and BP conducted bid evaluations.

US-based Bechtel Group will continue as the project's engineering, procurement, and construction management services contractor. BOTAS, Turkey's state pipeline contractor, will continue as the lump-sum turnkey contractor for the Turkish section of the pipeline.
BTC said the project remains on schedule to be completed in time for first oil from Phase 1 development of ACG, currently slated for early 2005.

Ownership
Pipeline operator BP holds a 38.21% interest in BTC, with other interests held by State Oil Co. of the Azerbaijan Republic (SOCAR) 25%, Statoil ASA 9.58%, Unocal Corp. 8.9%, Turkish state oil company TPAO 7.55%, ENI SPA 5%, Japan's Itochu Corp. 3.4%, and Amerada Hess Corp. 2.36%. Many of these companies are also interest owners in the ACG complex, also operated by BP.

TotalFinaElf SA has acquired the right to purchase a 5% stake in BTC, a deal expected to be finalized soon.

SOCAR's president is chairman of BTC. Azerbaijan recently issued decrees in support of the project and disclosed its intent to to participate with an equity stake in the pipeline.