First leg of BTC pipeline inaugurated in Azerbaijan

June 6, 2005
The first leg of the Baku-Tbilisi-Ceyhan (BTC) oil export pipeline was inaugurated May 25 in an official ceremony at the head pump station in the Sangachal terminal near Baku.

The first leg of the Baku-Tbilisi-Ceyhan (BTC) oil export pipeline was inaugurated May 25 in an official ceremony at the head pump station in the Sangachal terminal near Baku.

BTC Co. shareholders are BP PLC, 30.1%; AzBTC, 25%; Unocal Corp., 8.9%; Statoil ASA, 8.71%; TPAO, 6.53%; Eni SPA and Total SA, 5% each; Itochu, 3.4%; INPEX and ConocoPhillips, 2.5% each; and Amerada Hess Corp., 2.36%.

The inauguration ceremony follows the commissioning of the BTC head pump station at the Sangachal terminal and officially marks the commencement of the first line-fill phase (OGJ, May 16, 2005, p. 32).

A total of 10 million bbl of crude oil is required to fill the 1,760-km, 34-46-in. pipeline, extending from the Sangachal terminal via Georgia to the Ceyhan terminal on the Mediterranean coast of Turkey.

The oil will come largely from the Azeri-Chirag-Gunashli (ACG) complex of fields off Azerbaijan in the Caspian Sea. The staged filling of the pipeline along its entire route could take more than 6 months. Loading of the first tanker at Ceyhan is expected in the fourth quarter.

The project’s biggest economic benefits will go to Azerbaijan because the pipeline will serve mainly as a conduit for oil from the ACG fields. With oil at $25/bbl, the government could earn $50 billion over 20 years. Georgia and Turkey are expected to earn about $600 million and $2.5 billion respectively, mainly from transit fees.

Kazakhstan also expects to profit from the new pipeline. Officials on May 24 signed a long-discussed agreement on transporting Kazakh oil through the new pipeline.

Political questions

While officials of companies involved in the pipeline and officials of countries it crosses hailed the benefits to global oil supply, political questions about the BTC line remain.

The pipeline received strong support from the US as a way to link Caspian oil to international markets without transiting Russia or Iran.

Vafa Guluzade, a former foreign affairs adviser to the Azerbaijan government, said the project “will completely change the economic situation in Azerbaijan, and in the political sense it will influence the rest of the Caucasus and Central Asia.”

The pipeline, he told the Associated Press, “will carry a huge volume of oil, and Russia is nervous that it is being deprived of big money and also the possibility to dictate its terms to these states.”

But Mikhail Margelov, chairman of the Russian Federation Council’s International Affairs Committee, dismissed that view, saying, “In the modern world, Moscow approves the development of healthy competition and economic partnership among its [Commonwealth of Independent States] neighbors and colleagues.”

But he stressed that political uncertainties arise from the fact that the pipeline represents a potential security risk.

“This pipeline is virtually golden, and someone certainly must protect it,” Margelov told Russia’s Interfax news agency. “Russia’s attitude to proposals made by some politicians that this task should actually be delegated to the United States is firmly negative. Russia will always be negative about the appearance of any foreign military contingents within the boundaries of the CIS.”

Margelov wondered why Russia is not being asked to help protect the pipeline.

“Russia has huge experience of [military] presence in the region. We all are partners in the antiterrorist coalition, and it makes attempts to use the new pipeline as a pretext for enhancing a foreign military presence in the region doubly outrageous,” he said.

Terrorist threat

The pipeline does represent a potential terrorist target, as noted by Azeri authorities who last year reported on possible sabotage attempts by militants linked to al-Qaeda. Other potential threats could come from Turkey’s Kurdish militants and Armenians angry at their country’s unresolved conflict with Azerbaijan over the disputed territory of Nagorno-Karabakh.

But steps have been taken to ensure the security of the line. BTC says the installations are monitored by electronic surveillance and company guards, while the armed forces of Azerbaijan, Georgia, and Turkey have agreed to joint exercises to coordinate pipeline protection.

The Georgian Defense Ministry reported on May 24 that Azerbaijani, Turkish, and Georgian troops will conduct joint exercises in August to ensure the security of the pipeline.

It said the military will be trained to prevent terror attacks, acts of sabotage, and environmental catastrophes along the pipeline route. In case of sabotage or an environmental catastrophe on the territory of one of the transit countries, the military of the other two countries would provide assistance.