Caspian finish line

Aug. 16, 2002
Even a pessimist would concede that the US has won a major energy policy victory in Central Asia.

Maureen Lorenzetti

Even a pessimist would concede that the US has won a major energy policy victory in Central Asia. After years of political wrangling, a consortium of eight oil companies will soon break ground on a 1,100 mile oil export pipeline from Azerbaijan and the Caspian region through Georgia to Ceyhan on the Turkish Mediterranean coast (OGJ Online, Aug. 14, 2002).
The US, beginning with the Clinton administration, resisted industry attempts to build a shorter, less expensive pipeline through Iran. The US also successfully discouraged other possible routes, fearing the Russians or someone else might manipulate what could become a vital crude source for Western markets.
Pipe for the $2.9 billion system will be laid early next year, with construction finished in early 2005, according to Baku-Tbilisi-Ceyhan Pipeline Co. (BTC). The consortium has spent about $175 million so far on engineering, with the big checks still to be written.
Earlier this month in London, BTC said that Greece's Consolidated Contractors International Co. will build the 276-mile section of the pipeline within Azerbaijan. A joint venture between France's Spie Capag SA and Petrofac of the US and UK will lay the 155-mile Georgia section. And BOTAS, the state-owned pipeline company of Turkey, will continue with previously announced plans to build the 670-mile section within its borders, BTC said. All contracts were awarded on a lump sum basis.

Key players
The US and Japan governments are also expected to play a key role by offering loan guarantees to suppliers eager to associate themselves with the project but nervous about possible risk. BTC is expected to announce winning bids this fall, officials said. Meanwhile, the US engineering company Bechtel Group is continuing to act as the engineering, procurement, and construction management services contractor.
BTC shareholders currently include BP PLC 38.21%, SOCAR (State Oil Co. of Azerbaijan 25%, Statoil ASA 9.58%, Unocal Corp. 8.90%, TPAO (Turkey's state oil company) 7.55%, ENI SPA 5%, Itochu Corp. 3.40%, and Amerada Hess Corp. 2.36%. TotalFinaElf SA recently acquired the right to purchase a 5% interest in BTC Co; that transaction will be finalized shortly, pipeline owners say.

Money sources
BTC officials expect to finance about 70% of the 1 million b/d project through private loans. The World Bank and the European Bank for Reconstruction and Development are expected to lend around $300 million.
BP, Statoil, and Unocal are guaranteeing Socar's $735 million share of the pipeline costs; the Azeri government could not secure financing on its own, even though there is about $700 million in various oil-related accounts being held in its national bank. In return, the three companies will receive 2 million bbl of crude from the Azeri-Chirag-Gunashli fields complex, a project managed by BP and owned by several of the same companies that will build and run the export line.
Most crude shipped through the pipeline is expected to come from that Azeri complex for about 10 years. Then around 2015, officials expects crude from Kazakhstan's offshore Kashagan field to dominate shipments.