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Tuesday, 17 September, 2002, 19:35 GMT 20:35 UK
Caspian pipeline dream becomes reality
Baku-Tbilisi-Ceyhan and Baku-Supsa pipelines
Baku-Tbilisi-Ceyhan pipeline will run through territory of 3 countries
After years of being considered a white elephant, a pipeline project, to carry Caspian oil to the world markets, is becoming a reality.

The Baku-Tbilisi-Ceyhan (BTC) pipeline will start a few kilometres south of Baku, the capital of Azerbaijan, and will run through the territory of neighbouring Georgia to the Turkish Mediterranean coast.

A special ceremony on Wednesday will be attended by the presidents of Azerbaijan, Georgia and Turkey.

The US has sent its energy secretary to join the celebrations.

Commercial doubts

Not so long ago, after offshore wells found insignificant amounts of oil, western companies were questioning the commercial viability of the BTC project.

The existing pipelines to the Georgian port of Supsa and Russian terminal in Novorossiysk, both on the Black Sea seemed to be enough.

Then, two years ago, the oil companies working in the region decided to commission new seismic and engineering investigations.

As a result, the known reserves of a major offshore oil field, Azeri-Chirag-Guneshli, operated by a British Petroleum (BP) led consortium were reassessed.

According to Tamam Bayatly, BP's Communications Manager in Baku, the reserves are now put at 5.4 bn barrels.

She says this is enough to make the pipeline commercially viable.

Strategic importance

This pipeline is of strategic importance not only to Azerbaijan, but to the other new independent states as well. This is a reliable way to the world markets."

Ilham Shaban, oil analyst

The 1,737 km-long pipeline will have the capacity of 1m barrels a day, and cost of transportation $3.2 per barrel.

BTC is said to be an effective alternative to Russia's pipeline network.

Ms Bayatly says the BTC is not going to compete with the Russian pipelines but rather enhance the existing network.

However, oil experts believe political considerations played a major role in the choice of the route.

American officials prefer a route that would weaken Russia's stranglehold on regional pipeline network and leave Iran on the sidelines. Local governments want less dependency on big regional powers, too.

"This pipeline is of strategic importance not only to Azerbaijan, but to the other new independent states as well", says Ilham Shaban, oil analyst in Baku. "This is a reliable way to the world markets."

Regional benefits

"Take Turkmenistan with its huge resources of natural gas and no access to the world markets," says Mr Shaban.

"As a result, The Turkmens have to sell their gas 2.5 times cheaper than the world price."

Turkmenistan could join a gas pipeline which is likely to be built alongside BTC to the Turkish town of Erzurum.

Kazakhstan is said to benefit from the BTC project as well.

Italian oil company ENI and French multinational TotalFinaElf which are taking part in the exploration project of Kazakhstan's Kashagan oil field, considered one of the biggest known in the world, have decided to join the BTC project, too.

According to BP's Tamam Bayatly, both companies have purchased 5% each.

Disagreement

Azerbaijan oil well
The oil will be pumped to the Mediterranean
Earlier this year, a group of international non-governmental organisations called on international financial institutions not to finance the BTC project.

They questioned environmental and social impact of the project on the region.

NGOs believe that the operator of the project, BP, has struck special contracts with the governments of three nations whose territory is used for the pipeline, giving it too much power.

Barry Holton, regional affairs director for the BTC company disagrees.

He says, "the agreements with the host countries assure that the project is carried to the highest standards. To suggest that they undermine or circumvent the national legislation is completely wrong. The agreements have been negotiated for quite a long time and ratified by national parliaments."

If everything goes according to plan, the BTC pipeline would become operational in 2005.

 WATCH/LISTEN
 ON THIS STORY
Centre for Global Energy Studies's Julian Lee
"It's taken almost eight years from the signing of the deal to the opening of the pipeline"
See also:

21 Jun 01 | Business
30 Sep 01 | Europe
12 Mar 01 | Europe
25 Jul 01 | Business
05 Jun 01 | Business
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